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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission File Number 33-60714
IVEX PACKAGING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 76-0171625
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
100 TRI-STATE DRIVE
LINCOLNSHIRE, ILLINOIS 60069
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone number, including area code: (847) 945-9100
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
Aggregate market value of the voting stock held by non-affiliates of the
registrant at March 26, 1997. None.
At March 26, 1997, 1,072,246 shares of common stock with a par value of
$0.01 were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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TABLE OF CONTENTS
<TABLE>
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PAGE
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PART I
<S> <C> <C>
Item 1. Business ................................................................... 1
Item 2. Properties ................................................................. 10
Item 3. Legal Proceedings .......................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders ........................ 11
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters .. 12
Item 6. Selected Financial Data .................................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations .............................................................. 14
Item 8. Financial Statements and Supplementary Data ................................ 22
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial
Disclosures ............................................................. 43
PART III
Item 10. Directors and Executive Officers of the Registrant ......................... 43
Item 11. Executive Compensation ..................................................... 45
Item 12. Security Ownership of Certain Beneficial Owners and Management ............. 50
Item 13. Certain Relationships and Related Transactions ............................. 52
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ........... 53
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PART I
ITEM 1. BUSINESS
Ivex(R) Packaging Corporation, a Delaware corporation (the "Company" or
"Ivex(R)"), owns all of the outstanding common stock of IPC, Inc., a Delaware
corporation ("IPC").
THE COMPANY
The Company is a vertically integrated, specialty packaging company
engaged in the manufacturing and marketing of plastic and paper products to
consumer and industrial packaging markets. The Company's businesses may
generally be categorized under the following two product groups:
- CONSUMER PACKAGING, an integrated manufacturer of plastic and paper
products used primarily in food packaging applications, represented
approximately 52% of the Company's net sales and 54% of the Company's
earnings before interest, taxes, depreciation, amortization and
nonrecurring charges ("EBITDA") during the 12 months ended December 31,
1996. Plastic packaging produced from Company manufactured oriented
polystyrene ("OPS") sheet, includes hinged and two-piece containers and
trays for deli foods, salads, cookies, berries, cakes and other food
products. The Company's paper products consist of single face corrugated
paper liners for cookies and candy, susceptor materials for microwave
applications, fluted cups for baking and other specialty paper
products. The Company markets its products under its Ivex(R) brand name
to national wholesale bakeries, supermarket chains, foodservice
distributors, fast food chains and major agricultural growers. In August
1996, the Company expanded its plastic packaging product offering to
include medical and electronics packaging made from a variety of plastics
including high impact polystyrene("HIPS") sheet, polyethylene
terephthelate ("PET") sheet, polyvinyl chloride ("PVC") sheet and high
density polyethylene ("HDPE") sheet with the acquisition of Plastofilm(R)
Industries, Inc. ("Plastofilm(R)"). During the first quarter of 1997, the
Company increased its OPS plastic packaging capabilities in North America
and Europe through the acquisition of M&R(TM) Plastics, Inc. ("M&R(TM)")
located in Laval, Quebec and the acquisition of the OPS business of Viskase
Limited located in Sedgefield, England (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Recent
Developments").
As part of its integrated operating strategy, the Company manufactures
OPS sheet and film, HIPS sheet, PET sheet and polystyrene resin. The
Company is the largest producer of OPS sheet in North America, using
approximately 43% for its own production and selling the balance to third
party converters. The Company enhanced its OPS extrusion capacity in
North America with the acquisition of M&R and established its first OPS
extrusion capacity in Europe with the acquisition of the Sedgefield,
England OPS operations. In addition, as a result of the Company's
acquisition of Plastofilm and Trio Products, Inc. ("Trio") during the
third quarter of 1996, the Company expanded the range of its extruded
product offering to include sheet made from HDPE, PVC and polypropylene
("PP"). The Company's film and sheet are marketed under its Kama(R) brand
name.
- INDUSTRIAL PACKAGING, an integrated manufacturer and coater of a variety
of film, paper and foil products for protective packaging and a
manufacturer of various grades of paper, represented approximately 48% of
the Company's net sales and 46% of the Company's EBITDA during the 12
months ended December 31, 1996. Protective packaging products include
paper and film maskings, self-sealing coated packaging papers, films and
corrugated paper and heavy-duty mailing envelopes. The Company is one of
the largest producers of industrial protective masking materials in North
America and uses customized formulations of adhesive and cohesive
materials in its masking and self-sealing packaging products. Customers
for industrial protective masking papers and films include manufacturers
of metal, plastic, glass, wood and marble products. Typical end-users for
its self-sealing products include major U.S. automotive parts
manufacturers and book publishers. Additionally, the Company is one
of the largest producers in North America of single face corrugated paper
products used to protect goods during shipment such as glassware,
furniture, automobile
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parts, light bulbs and cosmetics. The Company's mailing envelopes and
padded envelopes are marketed under the brand names Jet-Cor(TM),
Jet-Lite(R) and Jet-Pak(R). The Company's coated papers include coated
water-activated gummed papers, release papers and laminations. The
Company's water activated gummed printing papers are used in labels,
postage stamps and business forms.
As part of its integrated operating strategy, the Company manufactures
a variety of recycled kraft papers made from post-consumer and
post-industrial fibers and specialty lightweight papers made primarily
from virgin pulp. Products include kraft paper for grocery and food bags;
golden brown paper for envelopes such as the Company's Jet-Pak(R) mailers;
creped kraft paper for bag closures used in packaging pet food, seed, feed
and fertilizer; and specialty lightweight papers suitable for waxing,
polycoating and foil laminating for use in fast food applications and
candy wrappers. A portion of the Company's recycled papers are used
internally in the production of single face corrugated paper, cohesive
coated paper and mailing envelopes. Customers for the Company's specialty
papers include large, integrated paper producers as well as packaging
companies.
The Company's principal operating subsidiary is IPC and IPC's principal
operating subsidiaries are Ivex Corporation, Kama of Illinois Corporation, Ivex
Paper Mill Corporation, IPMC, Inc., Ivex Holdings, Ltd. and Plastofilm
Industries, Inc. The following trademarks used in this Form are owned by the
Company or one of its affiliates: Ivex(R), Kama(R), Plastofilm(R), M&R(TM),
Jet-Pak(R), Jet-Lite(R) and Jet-Cor(TM). IPC was formed in December 1992 to
hold the businesses of the Company and IPMC, Inc., companies owned by Acadia
Partners, L.P. ("Acadia") and certain related investors. As a condition to and
concurrently with IPC's December 1992 offering of $158.0 million of 12-1/2%
Senior Subordinated Notes due 2002 (the "12-1/2% IPC Notes" or the "Notes"),
the Company acquired all of the common stock of IPMC, Inc. and transferred all
of the Company's then existing operating subsidiaries and IPMC, Inc. to IPC in
exchange for all of the shares of IPC's common stock and the assumption by IPC
of certain debt obligations of the Company. As a result, the Company's
operating subsidiaries and IPMC, Inc. became wholly-owned subsidiaries of IPC.
In March 1993, the Company issued $160.0 million of 13-1/4% Senior Discount
Debentures due 2005 (the "13-1/4% Company Discount Debentures" or the "Discount
Debentures") for an aggregate consideration of approximately $65.0 million.
The Company used a portion of the $65.0 million of proceeds from the Discount
Debentures to redeem certain securities of Acadia and certain related investors
and the Company contributed the remaining portion of the proceeds from the
13-1/4% Company Discount Debentures to IPC.
The Company's principal executive offices are located at 100 Tri-State
Drive, Suite 200, Lincolnshire, Illinois 60069, and its telephone number is
(847) 945-9100.
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GENERAL DESCRIPTION
The following table summarizes the net sales, products, customers and end
product uses of the Company's two product groups:
<TABLE>
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1996 % OF
NET SALES NET
PRODUCT GROUP (000) SALES PRODUCTS CUSTOMERS END PRODUCT USES
- --------------------- --------- ----- -------------------- -------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Consumer Packaging .... $234,584 52% Plastic containers, Supermarkets, Plastic hinged and
corrugated paper foodservice two-piece containers,
liners and specialty distributors, fast trays for deli foods,
paper products, OPS food chains, bakery salads, cookies, berries
sheet and film, HIPS and confectionery and cakes, film for
sheet, PET sheet, PP companies, food envelope and box
sheet, PVC sheet, processors, plastic windows, plastic trays
HDPE sheet converters, envelope for medical packaging,
and folding carton protective plastic
manufacturers, medical packaging for electronics
device and supply applications, paper liners
companies and for cookies, susceptor
electronics materials for microwave
manufacturers applications, fluted
bakery cups and
specialty paper products
Industrial Packaging .. 217,223 48% Protective packaging, Automotive Paper and film
including coated paper companies, protective masking
and plastic, single face consumer durables materials, cohesive
corrugated paper and manufacturers, self-sealing packaging
shippers and mailers other industrial papers, coated papers
manufacturers, for stamps, labels and
paper distributors business forms, and
and manufacturers single face corrugated
of postage stamps paper for packaging,
and business forms shippers and mailers
Manufactured paper, Paper converters Grocery and food
including kraft bags, specialty
papers and specialty lightweight papers for
lightweight virgin fast food and candy
papers wrappers
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Total ................. $451,807 100%
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</TABLE>
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CONSUMER PACKAGING
General. Consumer Packaging is an integrated manufacturer of plastic and
paper products for use in a wide array of food applications and, since its
acquisition of Plastofilm, medical and electronics packaging applications. The
food packaging products are typically used to package food products sold in
supermarkets, wholesale and retail bakeries, fast-food restaurants and
institutional foodservice outlets. Plastofilm's medical packaging products are
typically used by the major medical supply companies for sterility packaging
and the electronics packaging products are generally used as cushioning
materials.
Products. Consumer Packaging's products consist primarily of thermoformed
plastic containers used in food, medical and electronics markets and single
face corrugated paper liners and other paper products used in food packaging
applications. Thermoformed plastic packaging includes hinged and two-piece
containers, trays for deli foods, salads, cookies, cakes and other
items, trays for medical applications and cushioning products for the
electronics industry. Paper products consist of single face corrugated paper
liners for cookies and candy, susceptor materials for microwave applications,
fluted cups for baking and other specialty paper products.
As part of its integrated operations, the Company is the largest
manufacturer of OPS sheet in North America, and also produces OPS film, HIPS
sheet and PET sheet, and since its acquisition of Plastofilm and Trio, PP
sheet, HDPE sheet and PVC sheet. OPS sheet is widely used in packaging
applications where clarity, rigidity and material yield are significant
considerations. HIPS sheet is used in similar applications where clarity is
not as important, but where additional stress or crack resistance is required.
PET, PP, HDPE and PVC sheet are also typically used in applications that
require stress or crack resistance. The Company's OPS sheet and film, HIPS
sheet, PET sheet, PP sheet, HDPE sheet and PVC sheet are marketed under the
Company's Kama(R) brand name.
Markets. The principal markets for the Company's food packaging products
include supermarkets, particularly in-store bakery, delicatessen, and prepared
food sections; national wholesale bakeries; and foodservice outlets,
particularly fast-food restaurants and institutions such as schools, hospitals
and corporate cafeterias. Customers include major wholesale bakeries, major
national supermarket chains, institutional foodservice distributors, and fast
food chains. The Company holds a leading position in the wholesale bakery
market. The Company's position in this market results from the quality of its
OPS sheet, its customized product development capabilities, its ability to
provide both plastic and paper products and its long-term relationships with
key accounts. The supermarket and food service segments have been two of the
fastest growing markets for food packaging products over the past several
years. This growth has been fueled by the expansions of bakery, deli and
take-out departments and by increased merchandising efforts by supermarkets in
other areas such as produce and floral. Growing customer demand for freshness
and convenience has increased the use of plastic packaging. In addition, in
the food service area, the Company's historical relationships with fast food
operators enable it to leverage its reputation as new packaging opportunities
arise in this market segment.
The principal markets for Plastofilm's medical and electronics packaging
include medical device and supply manufacturers and electronics manufacturers.
The Company is also a manufacturer of OPS film, a thinner gauge version of
OPS sheet, with applications primarily in windows for envelopes and folding
cartons as well as labels. The Company and Dow Chemical Company are the major
producers of OPS film in North America. Management believes that it is the
only company in North America to manufacture OPS film to a thickness of
one-thousandth of an inch.
The Company employs a national sales force to service each of the specific
market segments that it targets. Approximately half of the packaging customers
are serviced through distributors, with the balance serviced directly by the
Company's national account sales representatives. The Company markets to
end-users served by its distributors, such as small and regional supermarkets
and convenience food outlets, in order to establish "pull-through" demand
through this distribution channel. Brokers are also used to penetrate further
specific geographic markets and access prospective customers.
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Manufacturing. The OPS utilized in the Company's plastic packaging
products is manufactured internally at the Company's two polystyrene
polymerization, four extrusion and eight thermoforming facilities (not
including the facilities acquired during the first quarter of 1997).
Polystyrene polymerization is the process of converting liquid styrene monomer
into polystyrene through heat and agitation under high pressure. The Company
produces high quality polystyrene as measured by the polystyrene's low residual
monomer levels. The Company believes that its low residual monomer OPS affords
it a quality advantage in certain areas of the food packaging industry where
undesirable odor and taste transfer associated with high residual monomer
levels are a concern.
Extrusion is the process of converting plastic resin into plastic sheet
and film used in the thermoforming process. In 1996, the Company produced
approximately 79 million pounds of polystyrene and purchased approximately 107
million pounds of polystyrene and approximately 15 million pounds of other
plastic resin from third-party sources. The Company is one of only two OPS
producers that have polystyrene polymerization manufacturing facilities. This
capability results in a competitive cost and quality advantage. Because of the
Company's vertical integration and the technology employed in its extrusion
operations, the Company believes it is one of the industry's lowest cost
producers of OPS in North America.
The Company's plastic thermoforming and paper converting operations are
principally conducted in ten facilities located throughout North America and
Europe (not including the facilities acquired during the first quarter of
1997). The Company's broad geographic coverage enables the Company to provide
better customer service and reduce transportation costs. The Company's
flexible manufacturing and engineering capabilities enable it to work
cooperatively with its customers to design custom packages. The Company
believes that it has advantages in the specialty packaging industry through its
strategically located manufacturing facilities, flexible manufacturing
capabilities, in-house product engineering services and quality production
expertise.
Competition. The Company's main competitor in the supermarket and
foodservice segments is Tenneco Packaging. In the bakery area, the Company
competes primarily with Detroit Forming, Inc. in plastic products and James
River Corporation of Virginia in paper products. The Company competes with
several manufacturers of OPS sheet, including Detroit Forming and Plastic
Suppliers, Inc. In the medical and electronics markets, the Company competes
with many regional thermoformers, including Prent Corporation, Placon and
Crystal Thermoplastics, Inc.
INDUSTRIAL PACKAGING
General. Industrial Packaging is an integrated manufacturer and coater of
a variety of film, paper and foil products for protective packaging and a
manufacturer and coater of various grades of papers.
Products. Protective packaging products include protective paper and film
maskings; self-sealing coated packaging papers, films and corrugated paper; and
heavy-duty mailing envelopes marketed under the brand names Jet-Lite(R),
Jet-Cor(TM) and Jet-Pak(R). The Company's manufactured papers include
post-consumer and post-industrial recycled paper products (including
lightweight kraft paper for grocery and food bags and heavyweight crepe kraft
paper for bag closures), and specialty lightweight papers from virgin pulp used
in the flexible packaging and food packaging industries, and the Company's
coated papers include water-activated gummed papers used for postage stamps,
labels, and envelopes, release papers used for high-pressure decorative
laminates, and laminations used for lottery ticket stock and decorative
labels.
Markets. The Company's industrial packaging products are used in a wide
variety of commercial and industrial applications.
The Company believes that it is one of the largest producers of industrial
protective masking materials in North America. Management believes its strong
position within the industrial protective masking market is a result of its
chemical adhesive formulations and production technology. The Company's
products in this market range from adhesive coated paper and films to
coextruded films with adhesive properties. These paper and film maskings are
used to protect surfaces during fabrication, handling, storage and shipping.
The Company's products must meet
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specifications for a broad array of surfaces requiring protection, including
glass, plastic, wood, polished and painted metals, automotive trim, plastic
laminates, furniture and marble.
The Company applies adhesive and cohesive coatings to paper, films and
single face corrugated paper products for high-speed, high-volume self-sealing
packaging applications. A cohesive package is designed to stick to itself and
not to the contents. The Company uses proprietary formulations of adhesive and
cohesive materials to meet specialized customer requirements. Typical
end-users of self-sealing packaging systems are the major U.S. automotive parts
manufacturers and book publishers. The Company also produces water-activated
gummed printing papers used for labels, commercial and postage stamps and
business forms and release papers that are used in the manufacture of high
pressure decorative laminates.
The Company produces mailing envelopes and padded envelopes marketed under
the brand names Jet-Lite(R), Jet-Cor(TM) and Jet-Pak(R). Jet-Lite(R) is a
lightweight nylon-reinforced kraft paper mailer. Jet-Cor(TM) is a single face
corrugated mailer with a self-sealing closure. Jet-Pak(R) is a heavyweight,
padded mailer manufactured entirely from recycled materials, and includes a
self-sealing Jet-Pak(R) mailer line. The Jet-Cor(TM) and Jet-Pak(R) mailers
can be customized with printed addresses and other decorative items.
The Company believes that it is one of the largest producers in North
America of single face corrugated paper products. Single face corrugated paper
is used primarily as shock absorbing packaging to protect goods such as
glassware, furniture and automobile parts during shipment, and for a variety of
consumer goods applications such as light bulb and cosmetics packaging.
All of the Company's low density polyethylene film is used internally
in the production of its film masking and self-sealing packaging products and a
portion of the Company's post-consumer and post-industrial recycled paper is
used internally in the production of single face corrugated paper, cohesive
coated paper and mailing envelopes. Principal third-party markets for the
Company's manufactured paper products are food packaging, industrial packaging,
bag converting and industrial converting, including grocery and food bags;
envelopes; bag closures in pet food, seed, and fertilizer packaging; and
fast-food and candy wrappers. These markets require high service levels,
including fast delivery and the ability to produce a variety of colors, weights
and formulations. Customers for the Company's manufactured paper products
include large, integrated paper producers as well as packaging companies.
Manufacturing. The Company's primary raw materials for protective
packaging products, principally low density polyethylene, specialty chemicals
and paper, are obtained from external sources as well as from the Company's low
density polyethelyne extrusion facility and recycled paper mill operations.
The Company's coating and paper converting operations are conducted at ten
facilities throughout the U.S. and Canada (not including the facilities
acquired during the first quarter of 1997). The Company believes that its
extensive geographic coverage reduces transportation costs and contributes to
the cost competitiveness of the Company's packaging products.
All of the paper produced at three of the Company's paper mills is made
entirely from post-consumer and post-industrial fibers, including old
corrugated containers ("OCC") and doublelined kraft clippings ("DLK"). The
Company was among the first to use 100% recycled post-industrial fibers at one
of its mills. Recycled paper accounts for approximately 65% of the total
output of the Company's paper operations. The products at the Company's fourth
mill in Detroit, Michigan are principally produced from virgin pulp and
post-industrial recycled fiber. The Company has installed recycling equipment
at its mill in Detroit, Michigan which enables the mill to substitute recycled
material for a portion of the higher-cost virgin pulp.
The Company's four paper mills are located in the Midwestern U.S. The
recycled paper mills' central location represents a competitive advantage for
the Company because the majority of their raw material needs (comprised of
post-consumer OCC, DLK, reject envelopes and office waste) comes from the
Chicago metropolitan area and because many of their customers for recycled
paper are located in the Chicago area and the Midwest. Thus, the Company
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believes that it enjoys certain freight advantages over some of its competitors
in both purchasing its raw material and selling its products. Additionally,
the Company believes that its equipment provides greater flexibility than many
larger competitors' machinery enabling it to serve a large number of relatively
small, niche markets.
Competition. The Company believes that its technologies, application
engineering capabilities, manufacturing expertise, national sales and
distribution coverage and flexible production capacity have enabled it to
achieve strong positions in a number of its industrial product markets.
Principal competitors include a joint venture between Minnesota Mining and
Manufacturing Company and Sealed Air Corporation, American Biltrite, Inc. and
Main Tape Company, Inc. (protective masking); Nashua Corporation and
Brown-Bridge (water-activated gummed papers); Sealed Air Corporation and AVI
Products, Inc. (mailing envelopes); and S.D. Warren Company (release papers).
COMPETITION
The Company operates in markets that are highly competitive and faces
substantial competition throughout all of its product lines from numerous
national and regional companies. Many of these competitors are considerably
larger and more established than the Company and have substantially greater
financial and other resources than the Company, while others are significantly
smaller with lower fixed costs and greater operating flexibility. In addition
to price, competition for many of the Company's products is based on quality,
supplier response time, service and timely and complete order fulfillment. See
"Business--Consumer Packaging--Competition" and "--Industrial
Packaging--Competition" for a more detailed discussion of the Company's
competitors.
EMPLOYEES
As of December 31, 1996 the Company had 26 employees at its Lincolnshire,
Illinois corporate headquarters and had 2,603 employees at plant locations, of
which 580 were salaried and 2,023 were hourly. Of the hourly workers,
approximately 898 were members of unions. The Company has collective
bargaining agreements with seven unions in effect with respect to certain
hourly employees at the Company's Joliet, Peoria, Chagrin Falls, Detroit, Troy,
Newton, Avenel, Grove City and Elyria facilities. There have been no
significant interruptions or curtailments of operations due to labor disputes
since 1986 and the Company believes that relations with its employees are
satisfactory. The collective bargaining agreements at the Company's Newton,
Chagrin Falls and Avenel facilities will expire in 1998; the collective
bargaining agreement at the Company's Troy facility will expire in 1999; the
collective bargaining agreements at the Company's facilities in Joliet, Peoria
and Elyria will expire in 2000; and the collective bargaining agreement at the
Company's facilities in Grove City and Detroit will expire in 2001. The
employees at the Company's Grant Park, Illinois facility recently voted against
union representation at this facility.
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RAW MATERIALS
Styrene monomer, polystyrene, polyethylene, polypropylene, polyvinyl
chloride and various paper-based commodities (including recycled and virgin
fiber) constitute the principal raw materials used in the manufacture of the
Company's products. Generally, these raw materials are readily available from
a wide variety of suppliers. Costs for all of the significant raw materials
used by the Company tend to fluctuate with various economic factors which
generally affect the Company and its competitors. The availability of raw
materials was adequate in fiscal 1996 and is expected to remain generally
adequate throughout fiscal 1997, although prices for certain items such as
styrene monomer, polystyrene, OCC, DLK and virgin fiber have been volatile and
may continue to fluctuate, in some instances adversely to the Company.
TRADEMARKS, PATENTS AND LICENSES
While the Company has registered and unregistered trademarks for many of
its product lines, these trademarks, other than the Company's rights to the
trademarks "Ivex(R)", "Plastofilm(R)" and "Kama(R)", are not considered
material to the conduct of the Company's business. The Company owns or
licenses a number of patents but such patents and licenses are not considered
material to the conduct of the Company's business and the Company does not
believe that any of its businesses are substantially dependent on patent
protection.
CUSTOMERS, SALES AND BACKLOG
No material portion of the Company's business is dependent upon a single
or very few customers, except that the Company's extruded OPS film is sold
principally to one customer with which the Company believes that it has a
satisfactory relationship. No one customer accounted for more than 10% of the
Company's aggregate net sales. In general, the backlog of orders is not deemed
by the Company to be significant or material for an understanding of the
Company's businesses.
ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION
The past and present business operations of the Company and the past and
present ownership and operations of real property by the Company are subject to
extensive and changing federal, state, local and foreign environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposition of wastes (including solid and hazardous wastes) or
otherwise relating to the protection of the environment. As is the case with
manufacturers in general, if a release of hazardous substances occurs on or
from the Company's properties or any associated offsite disposal location, or
if contamination from prior activities is discovered at any of the Company's
properties, the Company may be held liable. From time to time the Company is
involved in regulatory proceedings and inquiries relating to compliance with
environmental laws, permits and other environmental matters.
The Company is currently involved with environmental remediation at
certain of its facilities. The Company believes that the costs of such
remediation have been adequately reserved for and that such costs are unlikely
to have a material adverse effect on the Company. No assurance can be given,
however, that additional environmental issues relating to the presently known
remediation matters or identified sites or to other sites or matters will not
require additional investigation, assessment or expenditures. The Company has
a reserve of approximately $2.1 million as of December 31, 1996 for its known
future environmental remediation costs. Because an environmental reserve is
not established until a liability is determined to be probable and reasonably
estimable, all potential future remedial costs may not be covered by this
reserve. The Company has made and will continue to make capital expenditures
to maintain compliance with environmental requirements. The Company does not
expect its 1997 spending on environmental capital projects to be material.
During 1993, the Company was named a potentially responsible party ("PRP")
at the Delta Chemicals, Pennsylvania Superfund site and in 1995 the Company
paid a de minimis settlement of less than $20,000 at that site. The Company
also has responded to an information request regarding the Global Landfill, New
Jersey site and believes
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that any Superfund liability it may have at that site will be de minimis. Over
the past few years, the Company has also received notices of potential
liability relating to three other Superfund sites for which the Company
believes a former owner of the facilities subject to such notices will be
responsible. The Company forwarded such notices to such former owner and has
had no further involvement at those sites. In addition, during 1996 the
Company answered a complaint regarding the Huth Oil, Ohio Superfund site and
believes that any liability at this site will be minimal. Although the Company
endeavors to carefully manage its waste, because Superfund liability is strict
and retroactive, it is possible that in the future the Company may be
identified as a PRP with respect to other waste disposal sites.
The plastics industry, in general, and the Company also are subject to
existing and potential federal, state, local and foreign legislation designed
to reduce solid wastes by requiring, among other things, plastics to be
degradable in landfills, minimum levels of recycled content, various recycling
requirements, disposal fees and limits on the use of plastic products. In
addition, various consumer and special interest groups have lobbied from time
to time for the implementation of these and other such similar measures.
Although the Company believes that the legislation promulgated to date and such
initiatives to date have not had a material adverse effect on the Company,
there can be no assurance that any such future legislative or regulatory
efforts or future initiatives would not have a material adverse effect on the
Company.
The Food and Drug Administration (the "FDA") regulates the content of
direct-contact food containers and packages, including containers and packages
made from recycled OPS and paper products. The FDA currently limits the amount
of recycled materials that can be used in such containers and packages. To
comply with these regulations, the Company has instituted various compliance
programs.
9
<PAGE> 12
ITEM 2. PROPERTIES
The Company and its subsidiaries use various owned and leased plants,
warehouses, and other facilities in their operations. The facilities are
considered to be suitable and adequate for the conduct of the businesses
involved although the machinery, plant and equipment at such facilities are,
from time to time, subject to scheduled and unscheduled maintenance. As of
December 31, 1996, the Company had twenty-two non-warehouse facilities,
nineteen of which are located in the U.S., two in Canada and one in the United
Kingdom and, except as noted below, all are owned by IPC or a subsidiary of
IPC. With certain limited exceptions, all of the owned real estate is subject
to mortgages securing IPC's indebtedness under its senior credit facility.
<TABLE>
<CAPTION>
LOCATION FUNCTION SQUARE FOOTAGE
- ------------------------------------ ---------------------------------- --------------
<S> <C> <C>
Avenel, NJ(1) ...................... Extrusion 55,000
Bellwood, IL(2) .................... Paper and Film Converting, Coating 56,000
Bellwood, IL(3) .................... Paper Converting 41,000
Bridgeview, IL ..................... Paper Converting 115,000
Chagrin Falls, OH .................. Paper Mill 120,000
Detroit, MI ........................ Paper Mill 255,000
Elyria, OH (4) ..................... Extrusion 80,000
Enniskillen, Northern Ireland (5) .. Thermoforming 16,000
Grant Park, IL ..................... Thermoforming/Engineering 184,000
Grove City, PA(6) .................. Thermoforming/Paper Converting 236,000
Hazleton, PA(7) .................... Polymerization/Extrusion 166,000
Joliet, IL ......................... Paper Mill 410,000
Madison, GA ........................ Thermoforming/Paper Converting 141,000
Manteno, IL ........................ Extrusion 105,000
Newton, MA(8) ...................... Paper and Film Converting/Coating 225,000
Peoria, IL ......................... Paper Mill 234,000
Sparks, NV(9) ...................... Thermoforming 40,000
Troy, OH ........................... Paper Converting/Coating 320,000
Visalia, CA ........................ Thermoforming/Paper Converting 144,000
Longueuil, Quebec .................. Thermoforming/Paper Converting 32,000
Toronto, Ontario ................... Paper Converting 54,000
Wheaton, IL ........................ Thermoforming 120,000
</TABLE>
- -----------------
(1) Leased facility, with its lease expiring on December 31, 2003, subject to
IPC's right to extend the lease for two successive 5 year periods upon
IPC's written notice to the lessor thereof not more than 12 nor less than 6
months prior to the end of the then current lease term.
(2) Leased facility, with its lease expiring on December 31, 1997, subject to
IPC's right to extend the lease for an additional two year period until
December 31, 1999, subject to landlord's right to terminate under certain
circumstances on or after July 1, 1997 upon six months prior written
notice.
(3) Leased facility, with its lease expiring on December 31, 1997, subject to
IPC's right to extend the lease for an additional two year period until
December 31, 1999.
(4) Leased facility, with its lease expiring on September 30, 2001, subject to
IPC's right to extend the lease for an additional 5 year period and,
upon specified terms and conditions, to purchase the property.
(5) Leased facility, with its lease expiring on May 10, 2016.
10
<PAGE> 13
(6) This facility is held subject to an installment sales contract with
Pennsylvania Industrial Development Authority that holds title to the
facility.
(7) Leased facility, with its lease expiring on October 4, 1998, subject to
IPC's right to extend the lease for two successive 5 year periods upon
IPC's written notice to lessor not more than 24 nor less than 6 months
prior to the end of the then current lease term.
(8) Leased facility, with its lease expiring on December 5, 2001 with three one
year options to extend.
(9) Leased facility, with its lease expiring on December 31, 1999.
ITEM 3. LEGAL PROCEEDINGS
From time to time the Company and its subsidiaries are involved in various
litigation matters arising in the ordinary course of business. The Company
believes that none of the matters in which the Company or its subsidiaries are
currently involved, either individually or in the aggregate, is material to the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
11
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock, par value $0.01 per share, is owned entirely
by Acadia Partners, L.P. ("Acadia"), certain related investors and certain
executive officers. In addition, certain executive officers also hold options
exercisable into shares of IPC's common stock that are exchangeable for
shares and options of the Company's common stock. Therefore, there is no
established public trading market for the Company's common stock. See
"Security Ownership of Certain Beneficial Owners and Management." The Company
has never paid cash dividends on its common stock. Any payment of cash
dividends in the future will be at the discretion of the Company's Board of
Directors and will depend upon the financial condition, capital requirements
and earnings of the Company as well as other factors that the Company's Board
of Directors may deem relevant. The indenture under which the Company's
13-1/4% Company Discount Debentures were issued restricts the payment of
dividends on the Company's capital stock or any other distributions of any sort
in respect to the Company's capital stock.
IPC's common stock, par value $0.01 per share, is owned entirely by the
Company (other than the options exercisable into IPC's common shares held by
certain of the Company's executive officers) and therefore there is no
established public trading market for IPC's common stock. IPC has never paid
cash dividends on its common stock. Any payment of cash dividends in the future
will be at the discretion of IPC's Board of Directors and will depend upon the
financial condition, capital requirements and earnings of IPC as well as other
factors that IPC's Board of Directors may deem relevant. IPC's senior credit
facility prohibits and the indenture under which the 12-1/2% IPC Notes were
issued (the "12-1/2% Subordinated Note Indenture") restricts, the payment of
dividends on IPC's capital stock or any other distributions of any sort in
respect of IPC's capital stock.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below for, and as of the end of,
each of the years in the five year period ended December 31, 1996, are derived
from the consolidated audited financial statements of the Company. The
selected financial data should be read in conjunction with the consolidated
financial statements and notes thereto.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
(dollars in thousands)
STATEMENT OF OPERATIONS DATA:
Net sales ....................... $ 451,807 $ 451,569 $ 390,975 $ 366,851 $367,649
Net income (loss) before
extraordinary item ............. 8,668 (22,125) (9,293) (129,098) (24,840)
BALANCE SHEET DATA:
Total assets .................... $ 315,901 $ 294,911 $ 304,246 $ 297,674 $423,051
Long-term debt .................. 352,893 353,717 330,768 330,201 278,369
Redeemable preferred stock ...... - - - - 50,313
Stockholders' equity (deficit) .. (127,344) (136,332) (111,266) (101,579) 23,899
</TABLE>
SUPPLEMENTAL FINANCIAL DATA
The unaudited supplemental financial data below are presented to
illustrate the historical results of operations and selected financial data of
the Company for, and as of the end of, each of the years in the three year
period ended December 31, 1996 for the purposes of the statement of operations
and other operating data, and as of the dates presented below for the purposes
of the balance sheet data.
12
<PAGE> 15
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
-------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales ................................................. $451,807 $451,569 $390,975
Gross profit .............................................. 100,383 85,160 74,271
Selling and administrative ................................ 47,462 42,567 41,662
Amortization of intangibles (1) ........................... 621 1,904 1,140
Write-off of goodwill (1) ................................. - 13,471 -
Special charges (2) ....................................... - 4,960 -
-------- -------- --------
Income from operations .................................... 52,300 22,258 31,469
Interest expense .......................................... 42,732 43,270 39,820
-------- -------- --------
Income (loss) before income taxes and extraordinary item .. 9,568 (21,012) (8,351)
Income tax provision ...................................... (900) (1,113) (942)
-------- -------- --------
Income (loss) before extraordinary item ................... 8,668 (22,125) (9,293)
Extraordinary item (3) .................................... - (2,359) -
-------- -------- --------
Net income (loss) ......................................... $ 8,668 $(24,484) $ (9,293)
======== ======== ========
OTHER OPERATING DATA:
EBITDA (before nonrecurring charges)(4) ................... $ 75,024 $ 63,089 $ 53,658
EBITDA (before nonrecurring charges) margin(4) ............ 16.6% 14.0% 13.7%
Depreciation and amortization (1) ......................... $ 22,724 $ 35,871 $ 22,189
Capital expenditures ...................................... $ 17,633 $ 19,385 $ 16,769
<CAPTION>
DECEMBER 31,
------------
1996 1995 1994
--------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(5) ........................................ $ 32,539 $ 38,090 $ 32,853
Total assets .............................................. 315,901 294,911 304,246
Long-term debt ............................................ 352,893 353,717 330,768
Stockholders' deficit ..................................... (127,344) (136,332) (111,266)
</TABLE>
- --------
(1) Depreciation and amortization for the year ended December 31, 1995 includes
the accelerated write-off of goodwill associated with a portion of the
Company's Industrial Packaging product group of $13,471 and the accelerated
write-off of a non-compete agreement of $1,139.
(2) Operating results for the year ended December 31, 1995 include the
following special charges: $2,250 associated with IPC's special incentive
agreement with certain executive officers, $1,950 of costs related to an
attempted initial public equity offering and a reduction of land value
of $760 associated with a donation of certain land to the Village of Chagrin
Falls, Ohio.
(3) In connection with the refinancing of IPC's credit facility, the Company
wrote-off deferred financing costs of $2,359.
(4) EBITDA (before nonrecurring charges) includes income from operations
adjusted to exclude depreciation and amortization expenses, goodwill
write-off and special charges. The Company believes that EBITDA (before
nonrecurring charges) provides additional information for determining its
ability to meet future debt service requirements. However, EBITDA (before
nonrecurring charges) is not a defined term under generally accepted
accounting principles ("GAAP") and is not indicative of operating income or
cash flow from operations as determined under GAAP.
13
<PAGE> 16
(5) Working capital is determined to be the excess of current assets over
current liabilities (including the current portion of long-term debt).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion addresses the information and financial data
contained in "Supplemental Financial Data" presented in Item 6.
The Company is the sole stockholder of its operating subsidiary, IPC. The
Company is a holding company with no operations of its own and is dependent on
the operating cash flow of IPC and its subsidiaries in order to pay principal
and interest on its debt; however, IPC has no contractual obligations to
distribute any such cash flow to the Company. References to the Company or
Ivex herein reflect the consolidated results of Ivex Packaging Corporation.
RECENT DEVELOPMENTS
On January 17, 1997, IPC purchased substantially all of the assets,
excluding accounts receivable, of the OPS business of Viskase Limited located
in Sedgefield, England for approximately $12.5 million and on February 21,
1997, IPC purchased all of the outstanding common stock of M&R Plastics, Inc.
located in Laval, Quebec for approximately $19.5 million. The acquired
businesses were financed through cash flow from operations and revolving credit
borrowings under IPC's senior credit facility. As a result of these
borrowings, IPC amended and restated its senior credit facility on March 24,
1997 to, among other things, increase its revolving credit facility from $55
million to $105 million. As of March 24, 1997, $59.2 million was available
under the revolving credit portion of IPC's amended and restated credit
facility.
RESULTS OF OPERATIONS -- FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Net Sales
The following table sets forth information with respect to net sales of
the Company's product groups for the periods presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
% OF % OF % OF
1996 NET SALES 1995 NET SALES 1994 NET SALES
-------- --------- ---- --------- ----- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consumer Packaging .... $234,584 51.9 $219,806 48.7 $189,089 48.4
Industrial Packaging .. 217,223 48.1 231,763 51.3 201,886 51.6
-------- ----- -------- ----- -------- -----
Total ................ $451,807 100.0 $451,569 100.0 $390,975 100.0
======== ===== ======== ===== ======== =====
</TABLE>
Consumer Packaging's net sales increased by 6.7% in 1996 from 1995 levels
and 16.2% in 1995 from 1994 levels. The increase in 1996 compared to the prior
year is the result of increased unit sales volume of extruded sheet and film
and the third quarter 1996 acquisitions of Plastofilm and Trio partially offset
by a decrease in average selling price of substantially all products (primarily
related to lower raw material costs during 1996). Near the end of 1995,
Consumer Packaging increased OPS extrusion capacity with the completion of a
new extrusion line in Manteno, Illinois. The increased capacity resulted in a
16.9% increase in pounds of extruded sheet and film sold during 1996 over the
prior year. The increases in volume were partially offset by a decrease of
15.5% in the average selling price per pound of OPS in 1996 compared to 1995
(primarily related to lower raw material costs during 1996). Net sales of
converted plastic and paper products were consistent during 1996 compared to
1995 reflecting slightly increased unit volume offset by decreased average
selling price (primarily related to lower raw material costs during 1996).
The 1995 increase from the prior year is the result of increased unit sales
volume of extruded sheet and film and increased selling prices of substantially
all products (primarily related to significantly higher raw material costs
during 1995). During the third
14
<PAGE> 17
quarter of 1994, Consumer Packaging increased OPS extrusion capacity with the
completion of a new extrusion line in Hazleton, Pennsylvania. Principally as a
result of this extrusion capacity expansion, pounds of extruded sheet and film
sold increased 15.4% during 1995 compared to 1994. Compared to the prior year,
the average selling price per pound of extruded sheet increased 12.7% during
1995. Net sales of converted plastic and paper products increased 7.9% during
1995, principally as a result of higher selling prices.
Industrial Packaging's net sales decreased by 6.3% in 1996 from 1995 and
increased by 14.8% in 1995 from 1994. The decrease in 1996 from 1995 is
primarily attributable to a decrease in recycled and specialty lightweight
paper unit sales volume and average selling price and a significant decrease in
net sales of coated paper for stamp applications, partially offset by increased
net sales of protective packaging products. During 1996, the unit sales volume
of recycled and specialty lightweight paper sold decreased 9.1% and the average
selling price decreased 13.0% due to declining raw material costs and
aggressive competitive pricing in the industry. The 1996 decrease in net sales
was partially offset by increased net sales of protective packaging products
primarily associated with the third quarter 1995 acquisition of Packaging
Products, Inc. ("PPI") and increased net sales of masking and cohesive products
for applications in the automotive, housing and mail order industries. The
increase in net sales in 1995 from 1994, in part, is due to the PPI acquisition
and unit sales volume increases of recycled paper and coated paper for stamp
applications. The 1995 increase in net sales also is attributable to increases
during 1995 in the average selling prices (primarily related to significantly
higher raw material costs during 1995) in materials such as polyethylene,
virgin pulp, old corrugated containers ("OCC") and doublelined kraft clippings
("DLK").
Gross Profit
The Company's gross profit increased 17.9% during 1996 compared to 1995
primarily as a result of the increased unit sales volume discussed above, the
increased profitability of the Company's converted plastic and converted paper
operations, the incremental effects of the Trio, Plastofilm and PPI
acquisitions and decreased raw material costs (including styrene monomer,
polystyrene, OCC, DLK and virgin pulp). These increases were offset, in part,
by the decreased profitability of the Company's polymerization operations and
specialty and lightweight paper operations. Gross profit margin increased to
22.2% in 1996 from 18.9% in 1995. The gross profit margin increase during 1996
is primarily attributable to cost decreases for certain of the Company's raw
materials and improved operational efficiencies as a result of greater unit
volume of extruded sheet and film.
The Company's gross profit increased 14.7% during 1995 compared to 1994
primarily as a result of the increased net sales discussed above and the
significantly increased profitability of the Company's polymerization
operations. However, gross profit margin decreased slightly to 18.9% in 1995
from 19.0% in 1994. The gross profit margin decrease during 1995 is primarily
attributable to significant cost increases for the Company's raw materials
(including styrene monomer, polystyrene, polyethylene, OCC, DLK and virgin
pulp). The decrease in the Company's gross profit margin was partially offset
by improved operational efficiencies as a result of greater unit volume of
extruded sheet and film and recycled paper and by the significantly increased
profitability of the Company's polymerization operations due to, among other
things, the Company's favorable styrene monomer purchases during 1995.
Operating Expenses
Selling and administrative expenses increased 11.5% during 1996 compared
to the prior year and as a percentage of net sales increased to 10.5% during
1996 compared to 9.4% in 1995. The increase in selling and administrative
expenses is primarily attributable to the PPI, Plastofilm and Trio
acquisitions. The increase as a percentage of net sales is attributable to the
decreases in the Company's average selling price as discussed above.
Selling and administrative expenses increased 2.2% during 1995 compared to
the prior year but as a percentage of net sales declined to 9.4% in 1995
compared to 10.7% in 1994. The decrease as a percentage of net sales is
attributable to the significant increases in net sales dollars as discussed
above without a comparable increase in operating expenses and a cost reduction
plan implemented by management during the third quarter of 1994.
15
<PAGE> 18
Amortization of intangibles decreased during 1996 as compared to 1995 and
increased in 1995 compared to 1994 as a result of the accelerated write-off of
a non-compete agreement of $1.1 million during 1995.
During 1995, the Company wrote off $13.5 million of the goodwill
associated with a portion of its Industrial Packaging businesses. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations - For the Years Ended December 31, 1996,
1995 and 1994 - Goodwill Write-off."
The $5.0 million of special charges taken in 1995 is comprised of the
following: a $2.3 million charge associated with IPC's long-term special
incentive agreement with senior management; a $2.0 million charge associated
with the costs related to the Company's attempted public equity offering during
the fourth quarter of 1995; and a reduction of land value of $760,000
associated with the Company's donation of a portion of its Chagrin Falls, Ohio
paper mill site to the Village of Chagrin Falls.
Goodwill Write-off
During 1995, a portion of the Industrial Packaging businesses (such
portion having been acquired primarily in the 1989 acquisition of L&CP
Corporation) had experienced less sales volume growth and lower profitability
than anticipated. As a consequence, and in response to dynamic market
conditions, during the second quarter of 1995 the Company realigned the
management of these businesses based on three distinct operating units -
masking, graphics and other protective products.
Consistent with its accounting policy for goodwill and long-lived assets
at that time, the Company made a reassessment of its remaining goodwill, all of
which pertained to the above operating units, during the second quarter of 1995
and revised its projections to more accurately reflect expected future results.
The Company segregated the assets and cash flows of these three operating
units to the lowest level for which cash flows are identifiable and independent
of one another at that time. In order to evaluate its goodwill impairment ,
the Company projected the cash flows allocable to these businesses over the
estimated remaining goodwill amortization periods of approximately 34 years.
The Company then discounted such cash flows at a rate which it believed was
commensurate with the risk involved. The Company selected a pre-tax weighted
average cost of capital (reflective of comparable companies within its
industry) for purposes of discounting its cash flows. The discounted cash
flows of each business were then compared to the sum of the business groups'
working capital and net book value of fixed assets. Impairment of goodwill was
then measured by comparing the remaining discounted cash flow to the net book
value of the business groups' goodwill. Upon comparison, the discounted cash
flows for the graphics and other protective products businesses were
insufficient to recover each of such businesses' goodwill. Accordingly, the
Company recorded an impairment of $13.5 million during the second quarter of
1995.
The 1995 revised projections for this portion of the Company's business
were extrapolated from market conditions and competitive pressures existing at
that time and were based upon, among other things, the assumptions that growth
of operating income before depreciation and amortization would range from 2-6%
per year through 1999, from 1-3% per year from 2000-2010 and 0% per year from
2011-2029. The growth assumptions for the graphics and other protective
products businesses were lower than the masking business. The projections
assumed that capital expenditures would generally be consistent with
depreciation over the long term. The Company believes that its revised
projections based on the June 1995 existing historic financial trends and
market conditions were its best estimate at that time of its future performance
and that the Company's performance at such projected levels will not
substantially detract from the Company's future earnings. However, there can
be no assurances that such estimates will be indicative of future results,
which ultimately may be less than or greater than these estimates.
16
<PAGE> 19
Income from Operations
Income from operations and operating margin were $52.3 million and 11.6%,
respectively, during 1996, compared to $22.3 million and 4.9%, respectively,
during 1995 and $31.5 million and 8.0%, respectively, during 1994. The
increase in 1996 income from operations and operating margin compared to 1995
primarily results from the $13.5 million goodwill write-off and $5.0 million of
special charges recorded during 1995. Without these special charges during
1995, operating income and operating margin would have been $40.7 million and
9.0%, respectively, in 1995. The increase in 1996 income from operations and
operating margin over 1995 income from operations and operating margin (before
the 1995 write-off of goodwill and the special charges) was attributable to the
improved gross profit and gross profit margin discussed above. The 1995
decrease in income from operations and operating margin compared to 1994 is
primarily due to the write-off of goodwill and the special charges recorded
during 1995. The increase in 1995 operating income and margin (before the 1995
write-off of goodwill and the special charges) compared to the 1994 operating
income and margin was attributable to the Company's increased gross profit and
reduced operating expenses as a percentage of net sales.
Interest Expense
Interest expense during 1996 was $42.7 million compared to $43.3 million
and $39.8 million during 1995 and 1994, respectively. The decrease in 1996
from 1995 primarily results from lower interest rates during 1996 as a result
of the Company's refinancing of its senior credit facility during the fourth
quarter of 1995. The increase in 1995 from 1994 resulted from a larger amount
of outstanding indebtedness during 1995 as a result of accretion on the 13-1/4%
Company Discount Debentures and increased borrowings on IPC's revolving credit
facility which were primarily related to the Company's acquisition of the
assets of PPI.
Income Taxes
The Company's tax provisions for 1996, 1995 and 1994 primarily reflect
provisions for federal alternative minimum tax and state taxes.
Extraordinary Item
The extraordinary item in 1995 reflects the write-off of deferred loan
costs of $2.4 million written off in connection with the refinancing of IPC's
existing credit facility with a new $160 million senior credit facility during
the fourth quarter of 1995.
Net Income/Loss
Net income was $8.7 million in 1996 compared to a net loss of $24.5
million in 1995. The improved net income during 1996 is primarily the result
of the Company's improved gross profit during 1996 and the $13.5 million
goodwill write-off and $5.0 million of special charges recorded during 1995.
Net loss increased to $24.5 million in 1995 compared to $9.3 million in
1994. The $15.2 million increase in net loss during 1995 is primarily the
result of the write-off of goodwill and special charges recorded during 1995.
17
<PAGE> 20
EBITDA (before nonrecurring charges)
EBITDA (before nonrecurring charges) includes income from operations
adjusted to exclude depreciation and amortization expenses, goodwill write-off
and special charges. The Company believes that EBITDA (before nonrecurring
charges) provides additional information for determining its ability to meet
future debt service requirements. However, EBITDA (before nonrecurring
charges) is not a defined term under GAAP and is not indicative of operating
income or cash flow from operations as determined under GAAP.
The following table sets forth information with respect to EBITDA (before
nonrecurring charges) of the Company's product groups for the periods
presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
% OF % OF % OF
1996 NET SALES 1995 NET SALES 1994 NET SALES
-------- --------- -------- --------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consumer Packaging .... $43,776 18.7 $36,954 16.8 $34,506 18.2
Industrial Packaging .. 37,694 17.4 31,744 13.7 25,695 12.7
Corporate expenses .... (6,446) - (5,609) - (6,543) -
------- ------- -------
Total ................ $75,024 16.6 $63,089 14.0 $53,658 13.7
======= ======= =======
</TABLE>
The Company's EBITDA (before nonrecurring charges) increased by $11.9
million to $75.0 million in 1996, an EBITDA (before nonrecurring charges)
margin of 16.6%, compared to 1995 EBITDA (before nonrecurring charges) of $63.1
million and an EBITDA (before nonrecurring charges) margin of 14.0%. The
increase in Consumer Packaging's EBITDA (before nonrecurring charges) during
1996 is primarily attributable to the increased gross profit associated with
the extruded sheet and film volume increases, improved operating performance of
converted plastic and paper operations, and incremental EBITDA from Plastofilm.
Such increases were partially offset by decreased profitability of the
Company's polymerization operations. The increase in Industrial Packaging's
EBITDA (before nonrecurring charges) during 1996 is primarily the result of the
incremental EBITDA from PPI and the improved sales volume of protective
packaging products. Corporate expenses increased 14.9% from $5.6 million to
$6.4 million primarily as the result of increased incentive compensation.
The Company's EBITDA (before nonrecurring charges) increased by $9.4
million to $63.1 million in 1995, an EBITDA (before nonrecurring charges)
margin of 14.0%, compared to 1994 EBITDA (before nonrecurring charges) of $53.7
million and an EBITDA (before nonrecurring charges) margin of 13.7%. The
increase in Consumer Packaging's EBITDA (before nonrecurring charges) during
1995 is primarily attributable to the increased gross profit associated with
the extruded sheet and film volume increases and significantly increased
profitability of the Company's polymerization operations. The increase in
Industrial Packaging's EBITDA (before nonrecurring charges) during 1995 is
primarily the result of the increased unit sales of recycled kraft paper and
the incremental EBITDA from PPI during the fourth quarter of 1995. Corporate
expense decreased 14.3% from $6.5 million to $5.6 million as a result of cost
improvement actions taken by the Company in the third quarter of 1994.
Liquidity and Capital Resources
The Company conducts business through IPC and has no operations of its
own. The primary asset of the Company is the common stock of IPC which has
been pledged to secure the Company's guarantee of IPC's obligations under IPC's
senior credit facility. The Company is dependent on the cash flow of IPC and
its subsidiaries in order to pay the principal and interest on the 13-1/4%
Company Discount Debentures; however, IPC has no contractual obligations to
distribute any such cash flow to the Company. In addition, IPC's senior credit
facility contains provisions that (except for certain limited exceptions)
prohibit the payment of dividends and distributions by IPC to the Company.
Moreover, the 12-1/2% Subordinated Note Indenture contains provisions that
limit IPC's ability to pay dividends and make distributions to the Company.
18
<PAGE> 21
The Company's long-term debt, less current installments, decreased to
$352.9 million at December 31, 1996 from $353.7 million at December 31, 1995
primarily reflecting decreases to the revolving credit facility borrowings of
$8.5 million and $5.0 million of scheduled debt reductions offset by $12.8
million of accretion on the 13-1/4% Company Discount Debentures. The Company's
long-term debt consists primarily of the 13-1/4% Company Discount Debentures,
with an accreted value of $106.1 million at December 31, 1996. The long-term
debt, less current installments, of the Company's wholly-owned subsidiary, IPC,
at December 31, 1996 consists primarily of the $157.3 million of the 12-1/2%
IPC Notes , term loans of $49.4 million under IPC's senior credit facility,
$38.3 million of industrial revenue bonds and other debt of $1.8 million
At December 31, 1996, IPC had cash and cash equivalents of $2.8 million
and $52.8 million was available under the revolving credit portion of IPC's
senior credit facility. IPC's working capital at December 31, 1996 was $32.5
million.
The Company's primary long-term cash requirements are for the debt service
relating to the 13-1/4% Company Discount Debentures. Commencing on September
15, 2000, cash interest on the 13-1/4% Company Discount Debentures will be
payable semi-annually, and on March 15, 2005 the 13-1/4% Company Discount
Debentures will mature and the aggregate principal amount then outstanding will
become due and payable. The Company will be dependent on the cash flow of IPC
and IPC's subsidiaries in order to meet its debt service obligations.
Significant contractual and other restrictions exist on the payment of
dividends and the making of loans by IPC to the Company. In addition, as a
result of the goodwill write-offs in 1993 and 1995, IPC's ability to make
distributions to the Company under the 12-1/2% Subordinated Note Indenture has
been impaired; consequently this Indenture will require modification before any
such distributions to the Company can be made. Regardless, IPC and IPC's
subsidiaries may not generate sufficient cash flows to distribute to the
Company in order for the Company to service the cash interest payments on the
13-1/4% Company Discount Debentures that commence in September 2000 or to
retire the $160 million principal amount of 13-1/4% Company Discount Debentures
upon their maturity in March 2005. Consequently, all or a portion of the
13-1/4% Company Discount Debentures may require refinancing prior to such
dates. The Company believes that distributions from IPC and its access to debt
financing in the public and private markets should be sufficient to enable it
to retire all or a portion of the principal amount of the 13-1/4% Company
Discount Debentures and to refinance any remaining principal amount of the
13-1/4% Company Discount Debentures upon their maturity in 2005, although there
can be no assurance that this will be the case. In the event that the Company
is unable to service the cash interest payments on or to retire or refinance
the 13-1/4% Company Discount Debentures or unable to obtain any required
consents from the holders of the 12-1/2% IPC Notes to make interest payments on
the 13-1/4% Company Discount Debentures, the Company may be required to, among
other things, seek appropriate waivers from such creditors or recapitalize its
capital structure. During the period prior to September 15, 2000, the Company
does not expect to have significant cash requirements.
The primary short-term and long-term operating cash requirements for
IPC, the Company's wholly- owned operating subsidiary, are for debt service,
working capital and capital expenditures. The Company expects IPC to rely on
cash generated from IPC's and IPC's subsidiaries' operations, supplemented by
revolving credit facility borrowings under IPC's senior credit facility (at
December 31, 1996, $52.8 million was available under the revolving credit
portion of IPC's senior credit facility), to fund IPC's principal short-term
and long-term cash requirements. The Company believes that IPC and IPC's
subsidiaries should generate sufficient cash flows to service the cash interest
payments on the 12-1/2% IPC Notes from 1996 to their maturity in 2002, although
there can be no assurances that such cash flows, if any, will be adequate to
service these interest payments. However, IPC and IPC's subsidiaries may not
generate sufficient cash flows to retire the $158.0 million principal amount of
the 12-1/2% IPC Notes prior to or upon their maturity in 2002. Consequently,
all or a portion of the 12-1/2% IPC Notes may require refinancing prior to the
maturity thereof. IPC believes that its consolidated cash flow from operations
and access to debt financing in the public and private markets should be
sufficient to enable it to retire all or a portion of the principal amount of
the 12-1/2% IPC Notes and to refinance any remaining principal amount of the
12-1/2% IPC Notes prior to or upon their maturity,
19
<PAGE> 22
although there can be no assurance that this will be the case. In
the event that IPC is unable to retire or refinance the 12-1/2% IPC Notes, IPC
may be required to, among other things, seek appropriate waivers from such
creditors or recapitalize its capital structure. IPC is required to maintain
certain financial ratios and levels of net worth and, among other things,
future indebtedness and dividends are restricted under these facilities.
The 12-1/2% IPC Notes require semi-annual interest payments on June 15 and
December 15 and are subordinated in right of payment to all existing and future
senior indebtedness of IPC. The 12-1/2% IPC Notes are redeemable at the option
of IPC, in whole or in part, on or after December 15, 1997 at the following
redemption prices (expressed in percentages of the principal amount thereof),
plus accrued interest to the date of redemption.
If redeemed during the twelve-month period beginning December 15,
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1997 ................. 106.250%
1998 ................. 103.125%
1999 and thereafter .. 100.000%
</TABLE>
Each holder of the 12-1/2% IPC Notes may require IPC to repurchase such
holders' 12-1/2% Subordinated Notes in the event of a change of control at 101%
of principal amount thereof, plus accrued interest to the date of repurchase.
The indenture under which the 12-1/2% IPC Notes are issued contains certain
covenants that, among other things, will limit the ability of IPC to incur
additional indebtedness, pay dividends or repurchase stock.
Prior to March 24, 1997, IPC's senior credit facility was comprised of
$55.0 million in term loans, a $45.0 million letter of credit facility and a
$55.0 million revolving credit facility of which approximately $52.8 million
was available at December 31, 1996. On March 24, 1997, IPC amended and
restated this credit facility to, among other things, increase the revolving
credit facility to $105.0 million. Currently, IPC's amended and restated
credit facility is comprised of $55.0 million in term loans, a $45.0 million
letter of credit facility and a $105.0 million revolving credit facility of
which approximately $59.2 million was available as of March 24, 1997. The term
loans under the amended and restated credit facility require quarterly payments
of $1.3 million from March 31, 1997 through September 30, 1997; $1.9 million
from December 31, 1997 through September 30, 1998; $3.0 million from December
31, 1998 through September 30, 1999; $3.5 million from December 31, 1999
through September 30, 2000; $4.1 million from December 31, 2000 through June
30, 2001; and $5.4 million on September 30, 2001. At the option of IPC, the
term loans and borrowings on the revolving credit facility accrue interest at
the LIBOR reserve adjusted rate, as defined in IPC's amended and restated
senior credit facility, plus 2.25% or the prime rate plus 1.0%. Such rates are
subject to change based on IPC's ability to achieve certain financial ratios as
defined in IPC's senior credit facility. The Company's actual interest rate on
the term loans and the revolving credit facility at December 31, 1996 was the
LIBOR reserve adjusted rate, as defined, plus 1.75% or prime rate plus 0.75%.
Borrowings are secured by substantially all the assets of IPC and its
subsidiaries and the stock of IPC and IPC's subsidiaries. The revolving credit
facility and letter of credit facility terminate on September 30, 2001. Under
the amended and restated credit facility, IPC is required to maintain certain
financial ratios and levels of net worth and, among other things, future
indebtedness and dividends are restricted.
During 1996, IPC entered into interest rate swap agreements for the term
loans for notional amounts totaling $60.0 million through January 19, 1999.
Such agreements effectively fix IPC's LIBOR base rate at 5.33% and income or
expense related to settlements under the swap agreements are recorded as
adjustments to interest expense in IPC's financial statements.
IPC's industrial revenue bonds require monthly interest payments and are
due in varying amounts and dates through 2009. Certain letters of credit under
IPC's senior credit facility provide credit enhancement for IPC's industrial
revenue bonds.
Primarily as a consequence of the Company's 1993 and 1995 goodwill
write-offs, as of December 31, 1996, the Company's recorded assets are less
than its recorded liabilities by approximately $127.3 million. The Company
20
<PAGE> 23
believes that its negative net worth will not have any material consequences on
its operations or its ability to obtain trade credit or financing.
The Company made capital expenditures of $17.6 million, $19.4 million and
$16.8 million in 1996, 1995 and 1994, respectively. The 1996 spending was
directed, in part, to new stock thermoforming tooling and thermoforming
machines at one of its converting facilities, a coextrusion line at one of the
Company's extrusion facilities, and de-inking equipment at one of the Company's
paper mill facilities. The spending in 1995 and 1994 was directed, in part, to
the Company's new OPS extrusion line at the Company's Hazleton, Pennsylvania
facility that was completed in 1994 and to the construction of a second OPS
extrusion line at its Manteno, Illinois facility that was completed during the
fourth quarter of 1995. The Company was not committed under any material
contractual obligations for capital expenditures as of December 31, 1996.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in "Management's Discussion and Analysis of Financial
Condition And Results of Operations - Liquidity and Capital Resources" and "-
Goodwill Write-Off" constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 (the "Reform Act").
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: raw material
costs and availability (see "Business - Raw Materials"); competition (see
"Business - Competition"); environmental matters and government regulation
(see "Business - Environmental Matters and Government Regulation"); and the
Company's actual performance and highly leveraged financial condition (see "-
Goodwill Write-Off" and " - Liquidity and Capital Resources" above).
21
<PAGE> 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Ivex Packaging Corporation:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 53 present fairly, in all
material respects, the financial position of Ivex Packaging Corporation ("the
Company") and its subsidiaries at December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Chicago, Illinois
January 21, 1997, except as to Notes 5 and 14,
which are as of March 24, 1997
22
<PAGE> 25
IVEX PACKAGING CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents ............................... $ 2,822 $ 4,830
Accounts receivable trade, net of allowance ............. 51,638 46,077
Inventories ............................................. 49,023 44,050
Prepaid expenses and other .............................. 5,395 5,417
--------- ---------
Total current assets .................................. 108,878 100,374
--------- ---------
Property, Plant and Equipment:
Buildings and improvements .............................. 49,038 47,108
Machinery and equipment ................................. 231,526 208,820
Construction in progress ................................ 8,069 4,159
--------- ---------
288,633 260,087
Less - Accumulated depreciation ......................... (123,957) (102,098)
--------- ---------
164,676 157,989
Land .................................................... 8,304 7,504
--------- ---------
Total property, plant and equipment ................... 172,980 165,493
--------- ---------
Other assets:
Goodwill, net of accumulated amortization ............... 20,506 13,938
Miscellaneous ........................................... 13,537 15,106
--------- ---------
Total other assets .................................... 34,043 29,044
--------- ---------
Total Assets .............................................. $ 315,901 $ 294,911
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Current installments of long-term debt .................. $ 5,921 $ 5,128
Accounts payable ........................................ 36,748 31,934
Accrued salary and wages ................................ 8,603 7,781
Self insurance reserves ................................. 7,453 6,339
Accrued rebates and discounts ........................... 3,824 2,817
Accrued interest ........................................ 1,680 1,747
Other accrued expenses .................................. 12,110 6,538
--------- ---------
Total current liabilities ............................. 76,339 62,284
--------- ---------
Long-Term Debt ............................................ 352,893 353,717
--------- ---------
Other Long-Term Liabilities ............................... 5,243 6,472
--------- ---------
Deferred Income Taxes ..................................... 8,770 8,770
--------- ---------
Commitments................................................
---------- ----------
Stockholders' Deficit:
Ivex Packaging Corporation common stock, $.01 par value -
2,000,000 shares authorized; 1,072,246 shares
issued and outstanding ................................ 11 11
Paid in capital in excess of par value .................. 177,375 177,375
Accumulated deficit ..................................... (303,566) (312,234)
Foreign currency translation adjustment ................. (1,164) (1,484)
--------- ---------
Total stockholders' deficit ........................... (127,344) (136,332)
--------- ---------
Total Liabilities and Stockholders' Deficit ............... $ 315,901 $ 294,911
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
23
<PAGE> 26
IVEX PACKAGING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
Gross sales ............................................... $485,039 $483,689 $418,502
Freight out ............................................... 16,229 16,001 15,875
Discounts and returns ..................................... 17,003 16,119 11,652
-------- -------- --------
Net sales ................................................. 451,807 451,569 390,975
Cost of goods sold ........................................ 351,424 366,409 316,704
-------- -------- --------
Gross profit .............................................. 100,383 85,160 74,271
-------- -------- --------
Operating expenses:
Selling .................................................. 20,306 18,027 18,166
Administrative ........................................... 27,156 24,540 23,496
Amortization of intangibles .............................. 621 1,904 1,140
Write-off of goodwill .................................... 13,471
Special charges .......................................... 4,960
-------- -------- --------
Total operating expenses .............................. 48,083 62,902 42,802
-------- -------- --------
Income from operations .................................... 52,300 22,258 31,469
Interest expense .......................................... 42,732 43,270 39,820
-------- -------- --------
Income (loss) before income taxes and extraordinary item .. 9,568 (21,012) (8,351)
Income tax provision ...................................... (900) (1,113) (942)
-------- -------- --------
Income (loss) before extraordinary item ................... 8,668 (22,125) (9,293)
Extraordinary loss ........................................ (2,359)
-------- -------- --------
Net income (loss) ......................................... $ 8,668 $(24,484) $ (9,293)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
24
<PAGE> 27
IVEX PACKAGING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Ivex Packaging
Corporation Paid in Foreign
Common Stock Capital Currency
------------------ In Excess of Accumulated Translation Stockholders'
Shares Amount Par Value Deficit Adjustment Deficit
--------- ------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 ................ 1,072,246 $11 $177,375 $(278,457) $ (508) $(101,579)
Foreign currency translation adjustment .. (394) (394)
Net loss ................................. (9,293) (9,293)
--------- ------- -------- --------- -------- ---------
Balance at December 31, 1994 ................ 1,072,246 11 177,375 (287,750) (902) (111,266)
Foreign currency translation adjustment .. (582) (582)
Net loss ................................. (24,484) (24,484)
--------- ------- -------- --------- -------- ---------
Balance at December 31, 1995 ................ 1,072,246 11 177,375 (312,234) (1,484) (136,332)
Foreign currency translation adjustment .. 320 320
Net income ............................... 8,668 8,668
--------- ------- -------- --------- -------- ---------
Balance at December 31, 1996 ................ 1,072,246 $11 $177,375 $(303,566) $(1,164) $(127,344)
========= ======= ======== ========= ======= =========
</TABLE>
The accompanying notes are an integral part of this statement.
25
<PAGE> 28
IVEX PACKAGING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
-------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ....................................................... $ 8,668 $ (24,484) $ (9,293)
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation of properties ......................................... 22,103 20,496 21,049
Amortization of intangibles and debt issue costs ................... 2,028 19,689 3,058
Deferred income taxes .............................................. (106)
Write-down of property, plant and equipment, net ................... 760
Non-cash interest .................................................. 12,801 11,232 9,916
-------- --------- --------
45,600 27,693 24,624
Change in operating assets and liabilities:
Accounts receivable ................................................. 528 (550) (9,461)
Inventories ......................................................... (743) 4,371 (10,871)
Prepaid expenses and other .......................................... 621 (930) (719)
Accounts payable .................................................... 1,516 (8,486) 10,322
Accrued expenses and other liabilities .............................. 1,680 648 1,752
-------- --------- --------
Net cash from operating activities ................................ 49,202 22,746 15,647
-------- --------- --------
Cash flows from financing activities:
Proceeds from senior credit facilities .................................. 60,000
Payment of senior credit facilities ..................................... (5,000) (59,870) (5,342)
Proceeds from revolving credit facility ................................. 8,500
Payment of revolving credit facility .................................... (8,500)
Payment of debt issue costs ............................................. (296) (2,779) (569)
Other, net .............................................................. 722 (185) (191)
-------- --------- --------
Net cash from (used by) financing activities ...................... (13,074) 5,666 (6,102)
-------- --------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment ............................... (17,633) (19,385) (16,769)
Proceeds from the sale of real estate ................................... 1,034 1,305
Acquisition of CFI Industries, Inc., net of cash acquired ............... (17,262)
Acquisition of the net assets of Trio Products .......................... (3,524)
Acquisition of the net assets of Packaging Products, Inc. ............... (11,735)
Other, net .............................................................. 283 215 2,407
-------- --------- --------
Net cash used by investing activities ............................. (38,136) (29,871) (13,057)
-------- --------- --------
Net decrease in cash and cash equivalents .................................... (2,008) (1,459) (3,512)
Cash and cash equivalents at beginning of year ............................... 4,830 6,289 9,801
-------- --------- --------
Cash and cash equivalents at end of year ..................................... $ 2,822 $ 4,830 $ 6,289
======== ========= ========
Supplemental cash flow disclosures:
Cash paid during the year for:
Interest .............................................................. $ 28,592 $ 30,004 $ 27,740
Income taxes .......................................................... 1,199 1,052 935
Supplemental schedule of non-cash investing and financing activities:
Issuance of non-current note for accounts receivable .................. 1,000 2,000
The Company purchased all of the capital stock of CFI Industries, Inc. In
conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired ....................................... $ 27,127
Cash paid for the capital stock ..................................... (18,423)
--------
Liabilities assumed ................................................. $ 8,704
========
</TABLE>
The accompanying notes are an integral part of this statement.
26
<PAGE> 29
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 - ORGANIZATION:
Ivex Packaging Corporation (the "Company") owns 100% of the common stock
of IPC, Inc. ("IPC"). The Company is a holding company with no operations of
its own and is dependent on the operating cash flow of IPC and IPC's
subsidiaries in order to pay principal and interest on its debt; however, IPC
has no contractual obligations to distribute any such cash flow to the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Nature of operations
The Company's subsidiary, IPC, engages in the business of manufacturing
plastic and paper packaging products for different end-use packaging
applications principally with customers in North America. These applications
include: (i) the integrated production and conversion of oriented polystyrene
sheet and other plastic sheet into thermoformed packaging products and the sale
of such sheet to other packaging thermoformers; (ii) the manufacture and sale
of coated and laminated unbleached kraft paper and plastic materials and single
face corrugated products as protective materials in the packaging of industrial
products; and (iii) the manufacture and sale of unbleached kraft paper and
various lightweight specialty grades of paper for industrial and food service
packaging applications. Accordingly, the accompanying financial data are
reported as a single segment.
Principles of consolidation
All the accounts of the wholly-owned subsidiaries of the Company have been
consolidated. All significant intercompany transactions and accounts have been
eliminated.
Revenue recognition
The Company recognizes revenue upon shipment of products.
Cash and cash equivalents
The Company considers all short-term deposits with initial maturities of
three months or less to be cash equivalents.
27
<PAGE> 30
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accounts receivable
Accounts receivable at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accounts receivable ...................................... $53,718 $48,089
Less - Allowance for doubtful accounts ................... (2,080) (2,012)
------- -------
$51,638 $46,077
======= =======
</TABLE>
Accounts receivable from sales to customers are unsecured.
Inventories
Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method to determine the cost of raw materials and finished
goods.
Inventories at December 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Raw materials ............................................ $26,483 $24,148
Finished goods ........................................... 22,540 19,902
------- -------
$49,023 $44,050
======= =======
</TABLE>
Property, plant and equipment
Depreciation of property, plant and equipment is computed using the
straight-line method over the estimated useful lives of the assets.
Expenditures for maintenance and repairs are charged to operations as incurred;
major improvements are capitalized.
During the first quarter of 1995, IPC revised the estimated remaining
useful lives of certain machinery and equipment to more closely reflect
expected remaining lives. The effect of this change in accounting estimate
resulted in a decrease in IPC's annual depreciation of $1,800 in 1995 and in
each year thereafter until the assets are fully depreciated.
Income taxes
The Company recognizes deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than enactments of changes in the tax law or rates.
Employee benefit plans
IPC and its subsidiaries have defined contribution and defined benefit
plans covering substantially all employees. IPC's contributions to the defined
contribution plans are determined by matching employee contributions and by
discretionary contributions. Defined benefit plan contributions are determined
by independent actuaries and are generally funded in the minimum amount
required by the Internal Revenue Service in a given year.
IPC provides limited post retirement benefits to a select group of
employees. The current period cost and reserves related to these benefits are
not material.
28
<PAGE> 31
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Goodwill and other long-lived assets
Goodwill represents the excess purchase price over fair value of net
assets acquired and is being amortized using the straight-line method over a
forty year period. Accumulated amortization was $18,781 and $18,315 as of
December 31, 1996 and 1995, respectively.
During 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of assets may not be
recoverable. If the expected future cash flows (undiscounted and without
interest charges) is less than the carrying amount of the asset an impairment
loss is recognized. Otherwise, an impairment loss is not recognized. The
effect of adopting this new accounting standard did not have an impact on the
financial position of the Company. Prior to 1996, an impairment was recognized
if it was probable that the present value of expected future cash flows
(discounted and with interest charges) was less than the carrying amounts of
goodwill and other long-lived assets.
Earnings per share
An earnings per share calculation has not been presented because the
Company is wholly-owned by Acadia, the Company's management and certain related
investors.
Foreign currency translation
The financial statements of the Company's foreign subsidiaries are
maintained in local currency which is the functional currency. The balance
sheets of these subsidiaries are translated at exchange rates in effect at the
balance sheet date and the related statements of operations are translated at
weighted average rates of exchange for the year. Translation adjustments
resulting from this process are reflected as a separate component of
stockholders' deficit. Gains and losses resulting from foreign exchange
transactions are recorded in the results from operations. Such amounts were
not significant in 1996, 1995 and 1994.
Fair value of financial instruments
At December 31, 1996, the effective yield of the Company's 13-1/4% Senior
Discount Debentures due 2005 (the "13 1/4 Discount Debentures") was 10.7%. At
December 31, 1996, the effective yield of IPC's 12-1/2% Subordinated Notes due
December 15, 2002 (the "12-1/2% Subordinated Notes") was 9.3%. The carrying
amount of IPC's other financial instruments approximates their estimated fair
value based on market prices for the same or similar type of financial
instruments.
Reclassifications
Certain amounts in the consolidated balance sheets for 1995 have been
reclassified to conform to the 1996 presentation.
29
<PAGE> 32
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 - GOODWILL:
During 1995, a portion of the Industrial Packaging businesses (such
portion having been acquired primarily in the 1989 acquisition of L&CP
Corporation) had experienced less sales volume growth and lower profitability
than anticipated. As a consequence, and in response to dynamic market
conditions, during the second quarter of 1995 the Company realigned the
management of these businesses based on three distinct operating units -
masking, graphics and other protective products.
Consistent with its accounting policy for goodwill and long-lived assets
at that time, the Company made a reassessment of its remaining goodwill, all of
which pertained to the above operating units, during the second quarter of 1995
and revised its projections to more accurately reflect expected future results.
The Company segregated the assets and cash flows of these three operating
units to the lowest level for which cash flows are identifiable and independent
of one another at that time. In order to evaluate its goodwill impairment ,
the Company projected the cash flows allocable to these businesses over the
estimated remaining goodwill amortization periods of approximately 34 years.
The Company then discounted such cash flows at a rate of 16-1/2% which it
believed was commensurate with the risk involved. The Company selected a
pre-tax weighted average cost of capital (reflective of comparable companies
within its industry) for purposes of discounting its cash flows. The
discounted cash flows of each business were then compared to the sum of the
business groups' working capital and net book value of fixed assets.
Impairment of goodwill was then measured by comparing the remaining discounted
cash flow to the net book value of the business groups' goodwill. Upon
comparison, the discounted cash flows for the graphics and other protective
products businesses were insufficient to recover each of such businesses'
goodwill. Accordingly, the Company recorded an impairment of $13,471 during
the second quarter of 1995.
The 1995 revised projections for this portion of the Company's business
were extrapolated from market conditions and competitive pressures existing at
that time and were based upon, among other things, the assumptions that growth
of operating income before depreciation and amortization would range from 2-6%
per year through 1999, from 1-3% per year from 2000-2010 and 0% per year from
2011-2029. The growth assumptions for the graphics and other protective
products businesses were lower than the masking business. The projections
assumed that capital expenditures would generally be consistent with
depreciation over the long term. The Company believes that its revised
projections based on the June 1995 existing historic financial trends and
market conditions were its best estimate at that time of its future performance
and that the Company's performance at such projected levels will not
substantially detract from the Company's future earnings. However, there can
be no assurances that such estimates will be indicative of future results,
which ultimately may be less than or greater than these estimates.
30
<PAGE> 33
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 - MISCELLANEOUS OTHER ASSETS:
Miscellaneous other assets at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred financing costs ................ $13,416 $13,121
Less - Accumulated amortization ......... (4,370) (2,966)
------- -------
9,046 10,155
Other ................................... 4,491 4,951
------- -------
$13,537 $15,106
======= =======
</TABLE>
Deferred financing costs are being amortized over the term of the related
debt. During 1995, IPC recorded a write-off of a non-compete agreement with a
net book value of $1,139.
NOTE 5 - LONG-TERM DEBT:
Long-term debt comprised the following at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Senior credit facility (A) ..................... $ 55,000 $ 68,500
Industrial revenue bonds (B) ................... 38,293 38,293
12-1/2% Subordinated Notes, net
of discount (C) .............................. 157,340 157,229
13-1/4% Discount Debentures, net
of discount (D) ............................... 106,139 93,338
Other .......................................... 2,042 1,485
-------- --------
Total debt outstanding ..................... 358,814 358,845
Less - Current installments of long-term debt .. (5,921) (5,128)
-------- --------
Long-term debt ............................. $352,893 $353,717
======== ========
</TABLE>
A. Senior Credit Facility - IPC's senior credit facility (the "Credit
Facility") is comprised of $55,000 in term loans, a $45,000 letter of credit
facility and a $55,000 revolving credit facility of which approximately $52,798
was available at December 31, 1996. On March 24, 1997, IPC amended the Credit
Facility to, among other things, increase the revolving credit facility to
$105,000. The term loans require quarterly payments of $1,250 from March 31,
1997 through September 30, 1997; $1,875 from December 31, 1997 through
September 30, 1998; $3,000 from December 31, 1998 through September 30, 1999;
$3,500 from December 31, 1999 through September 30, 2000; $4,125 from December
31, 2000 through June 30, 2001; and $5,375 on September 30, 2001. At the
option of IPC, the term loans and borrowings on the revolving credit facility
bear interest at the LIBOR reserve adjusted rate, as defined, plus 2.25% or the
prime rate plus 1.0%. Such rates are subject to change based on IPC's ability
to achieve certain financial ratios as defined in the Credit Facility. The
Company's actual interest rate on the term loans and the revolving credit
facility at December 31, 1996 was the LIBOR reserve adjusted rate, as defined,
plus 1.75% or prime rate plus 0.75%. IPC pays a fee of 0.5% on the unused
portion of the revolving credit facility. The effective interest rate per
annum under the Credit Facility was 7.67% during 1996. Borrowings are secured
by substantially all the assets of IPC and its subsidiaries and the stock of
IPC and IPC's subsidiaries. Under the Credit Facility, IPC is required to
maintain certain financial ratios and levels of net worth while future
indebtedness and dividends are restricted.
31
<PAGE> 34
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Beginning January 6, 1996, IPC entered into interest rate swap agreements
for the term loans for notional amounts totaling $60,000 through January 19,
1999. Such agreements effectively fix IPC's LIBOR base rate at 5.33% and
income or expense related to settlements under the swap agreements are recorded
as adjustments to interest expense in IPC's financial statements.
B. Industrial Revenue Bonds - Industrial Revenue Bonds requiring monthly
interest payments with average effective rates during 1996 and 1995 of 5.8% and
6.2%, respectively, are due in varying amounts and dates through 2009 and are
secured by certain assets of IPC. IPC's letter of credit facility provides
credit enhancement for the Industrial Revenue Bonds.
C. 12-1/2% Subordinated Notes - On December 17, 1992, IPC issued $158,000
of 12-1/2% Senior Subordinated Notes due December 15, 2002 (the "12-1/2%
Subordinated Notes"). The 12-1/2% Subordinated Notes require semi-annual
interest payments on June 15 and December 15 and are subordinated in right of
payment to all existing and future senior indebtedness of IPC. The 12-1/2%
Subordinated Notes are redeemable at the option of IPC, in whole or in part, on
or after December 15, 1997 at the following redemption prices (expressed in
percentages of the principal amount thereof), plus accrued interest to the date
of redemption.
If redeemed during the twelve-month period beginning December 15,
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1997 ................. 106.250%
1998 ................. 103.125%
1999 and thereafter .. 100.000%
</TABLE>
Each holder of the 12-1/2% Subordinated Notes may require IPC to
repurchase such holders' 12-1/2% Subordinated Notes in the event of a change of
control at 101% of principal amount thereof, plus accrued interest to the date
of repurchase. The indenture under which the 12-1/2% Subordinated Notes are
issued contains certain covenants that, among other things, will limit the
ability of IPC to incur additional indebtedness, pay dividends or repurchase
stock.
D. 13-1/4% Discount Debentures - On March 8, 1993, the Company issued
$160,000 of 13-1/4% Series A Senior Discount Debentures due 2005 (the "13-1/4%
Discount Debentures") for an aggregate consideration of approximately $65,000
(the "1993 13-1/4% Discount Debenture Offering"). Commencing on September 15,
2000, cash interest on the 13-1/4% Company Discount Debentures will be payable
semi-annually, and on March 15, 2005, the 13-1/4% Company Discount Debentures
will mature and the aggregate principal amount then outstanding will become due
and payable. The Company is dependent on the cash flow of IPC and IPC's
subsidiaries in order to meet its debt service obligations. Significant
contractual and other restrictions exist on the payment of dividends and the
making of loans by IPC to the Company. In addition, as a result of a goodwill
writeoff in 1993, IPC's ability to make distributions to the Company under the
indenture relating to IPC's 12-1/2% Subordinated Notes has been impaired and
such indenture will require modification before any such distributions to the
Company can be made. Consequently, all or a portion of the 13-1/4% Discount
Debentures may require refinancing prior to the maturity thereof. During the
period prior to September 15, 2000, the Company does not expect to have
significant cash requirements.
32
<PAGE> 35
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-term debt principal maturities are as follows:
<TABLE>
<S> <C>
1997 .......................................... $ 5,921
1998 .......................................... 10,267
1999 .......................................... 15,148
2000 .......................................... 17,279
2001 .......................................... 16,115
Thereafter .................................... 347,945
--------
412,675
Discount on 13-1/4% Senior Discount
Debentures................................... (53,861)
--------
$358,814
========
</TABLE>
NOTE 6 - INCOME TAXES:
The components of the income tax provision shown in the statement of
operations are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ----- ----
<S> <C> <C> <C>
Current provision:
Federal ....................... $ (415) $ (142) $ (106)
State ......................... (485) (971) (942)
Deferred (provision) benefit:
Federal ....................... (9,029) 106
Benefit of net operating loss
carryovers..................... 9,029
------- ------- ------
$ (900) $(1,113) $ (942)
======= ======= ======
</TABLE>
The provision recognized for income taxes differs from the amount
determined by applying the U.S. federal income tax rate of 35% due to the
following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income taxes .......... $ 9,568 $(21,012) $(8,351)
======== ======== =======
Computed expected (provision) benefit at the
statutory rate ............................ $ (3,349) $ 7,354 $ 2,923
Adjustments to the computed expected
(provision) benefit resulting from:
Amortization of goodwill .................. (77) (4,862) (214)
Net operating loss carryover adjustments .. 3,077 (2,701) (3,108)
State income taxes, net ................... (417) (610) (608)
Other, net ................................ (134) (294) 65
-------- -------- -------
$ (900) $ (1,113) $ (942)
======== ======== =======
</TABLE>
33
<PAGE> 36
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Depreciation ............................... $ 33,449 $ 33,581
Basis differences of acquired assets ....... 3,969 4,737
-------- --------
Deferred tax liabilities ................... 37,418 38,318
-------- --------
Environmental reserves ..................... (330) (478)
Non-compete agreements ..................... (613) (963)
Self insurance reserves .................... (1,979) (1,731)
Original issue discount accretion .......... (14,394) (9,921)
Other ...................................... (2,727) (2,709)
Net operating loss carryover ............... (26,795) (37,646)
-------- --------
Deferred tax assets ........................ (46,838) (53,448)
-------- --------
Deferred tax asset valuation allowance ..... 18,190 23,900
-------- --------
$ 8,770 $ 8,770
======== ========
</TABLE>
At December 31, 1996, the Company has net operating loss carryovers,
including the net operating loss carryovers of IPC, for income tax reporting
purposes of approximately $76,556. These carryovers expire between 2005 and
2008. In the event of a change in ownership of the Company these net operating
loss carryovers may be limited. A valuation allowance has been recorded
against certain of the net operating loss carryovers for which utilization is
uncertain.
34
<PAGE> 37
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 - EMPLOYEE BENEFIT PLANS:
Net periodic pension expense related to the defined benefit plans for the
years ended December 31, 1996, 1995 and 1994 is comprised of the following
components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- -----
<S> <C> <C> <C>
Service cost component - benefits earned by
employees for services during this period ...... $ 290 $ 265 $ 274
Interest cost component - increase in projected
benefit obligation due to the passage of time .. 1,208 1,070 1,029
Return on plan assets, net of administrative
expense ........................................ (1,317) (1,926) (79)
Net amortization and deferral ................... 372 1,084 (866)
------ ------ ------
Net periodic pension cost ....................... $ 553 $ 493 $ 358
====== ====== ======
</TABLE>
Plan assets are invested in a deposit administration contract with an
insurance company and money market, equity and bond funds. The following table
sets forth the funded status of these plans as of the date of the latest
available actuarial valuation.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of vested benefit obligation ..... $15,139 $14,228
======= =======
Actuarial present value of accumulated benefit
obligation .............................................. $15,252 $14,333
======= =======
Fair value of the plans' assets .......................... $14,202 $12,873
Actuarial present value of projected benefit obligation .. 15,357 14,417
------- -------
Fair value of the plans' assets less than the projected
benefit obligation ...................................... (1,155) (1,544)
Unrecognized net transition obligation ................... 398 463
Unrecognized prior service cost .......................... 952 1,070
Unrecognized net loss .................................... 650 243
------- -------
Prepaid pension expense .................................. $ 845 $ 232
======= =======
</TABLE>
The following table sets forth significant assumptions utilized in the
actuarial valuation.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Discount rate used to adjust for the time value of money .. 8.5% 8.5%
Expected rate of increase in employee compensation costs .. 0%-5% 0%-5%
Expected long-term rate of return on assets ............... 9.0% 9.0%
</TABLE>
The charge to operations under IPC's defined benefit and defined
contribution plans was approximately $2,351, $2,063 and $1,900 for the years
ended December 31, 1996, 1995 and 1994, respectively.
35
<PAGE> 38
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 - STOCK OPTION AND INCENTIVE PLANS:
IPC and Ivex established a stock option plan (the "Plan") for certain key
executives, effective January 1, 1993. Pursuant to the Plan, IPC irrevocably
granted options to purchase 17,270 shares of its common stock at an exercise
price of $619.56 per share approximating fair market value. The options are
exercisable at any time, once vested and earned, prior to January 1, 2003. At
December 31, 1996, 9,413 of these options were vested and earned by the Plan
participants and 7,857 of the options were canceled. The Plan also provides
IPC and the participants with certain rights to exchange options to purchase
IPC's common stock for options to purchase the Company's common stock.
On January 1, 1996, the option plan was amended and extended to grant an
additional 6,908 options subject to vesting over three years from January 1,
1996, and such options will be available to be earned in 1996 and 1997 based on
EBITDA results. The provisions of the options are substantially the same as
the previously issued options. During 1996, 3,454 of such options were earned.
The Company adopted the disclosure - only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Under the provisions of such
statement, the Company is required to at least disclose the pro forma impact of
recognizing compensation expense for the fair value of those options granted
since January 1, 1996. Under the provisions of SFAS No. 123, the Company has
not recognized any compensation cost for stock option plans. Had compensation
cost for the Company's stock option plan been determined based on the fair
value at the grant date for awards during 1996 consistent with the provisions
of SFAS No. 123, the Company's net income would have been reduced to $8,548.
The Company's pro forma net income was determined under the assumption
that all applicable options were earned when available with equal vesting over
the three years from January 1, 1996. The fair value of the options granted
was estimated on the date earned using the Black-Scholes option-pricing model
and utilized the following weighted-average assumptions for options earned in
1996: dividend yield of 0.00%; expected volatility of 22.63%; risk-free
interest rate of 5.28%; and expected lives of 3 years.
IPC also entered into a special incentive agreement (the "Agreement") with
certain key executives, effective January 1, 1993. The Agreement provided for a
special incentive payment of up to $2,250 upon the occurrence of certain events
as defined in the Agreement. During 1995, management earned all of the special
incentive payment and, accordingly, IPC recorded expense of $2,250. As of
December 31, 1996, all amounts to be paid pursuant to the terms of the
Agreement have been paid. See Note 9 - Special Charges.
NOTE 9 - SPECIAL CHARGES:
During the fourth quarter of 1995, the Company recorded the following
special charges: $2,250 associated with the Agreement (see Note 8 - Stock
Option and Incentive Plans), $1,950 of costs related to an attempted initial
public equity offering and a reduction of land value of $760 associated with a
donation of land to the Village of Chagrin Falls, Ohio.
NOTE 10 - RELATED PARTY TRANSACTIONS:
IPC recorded management fee expense to Acadia of $400 in 1996 which was
unpaid as of December 31, 1996. IPC paid management fees to Acadia of $400 in
1995 and 1994.
36
<PAGE> 39
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11 - COMMITMENTS:
IPC leases certain of its facilities and equipment under non-cancelable
operating leases, some of which contain renewal options, escalation clauses and
requirements that IPC pay taxes, insurance and maintenance costs. Approximate
future minimum annual rental payments under non-cancelable operating lease
agreements are as follows:
<TABLE>
<S> <C>
1997 ........ $4,151
1998 ........ 3,438
1999 ........ 3,163
2000 ........ 2,350
2001 ........ 7,553
Thereafter .. 588
</TABLE>
Rent expense under operating leases included in the accompanying statement
of operations aggregated approximately $4,954, $4,339 and $3,576 during 1996,
1995 and 1994, respectively.
NOTE 12 - EXTRAORDINARY LOSS FROM EXTINGUISHMENT OF DEBT:
Deferred financing costs of $2,359 written off in connection with the
refinancing of IPC's senior credit facility are presented as an extraordinary
item in the consolidated statements of operations for the year ended December
31, 1995.
NOTE 13 - PLASTOFILM ACQUISITION
On August 16, 1996, IPC acquired CFI Industries, Inc. ("CFI" or
"Plastofilm") for an aggregate purchase price of $18,423, including the
repayment of certain indebtedness of CFI and related acquisition fees and
expenses. Through its subsidiary, Plastofilm Industries, CFI is a fully
integrated custom thermoformer of plastic packaging products for the medical,
electronic and personal care industries. The acquisition was accounted for as
a purchase; accordingly, the purchase price was allocated to the specific
assets acquired and liabilities assumed based upon their fair value at date of
acquisition. The Company's 1996 consolidated financial statements include the
results of operations and cash flows of Plastofilm from August 16, 1996.
The following unaudited pro forma summary presents the consolidated
results of operations as if the acquisition of Plastofilm had occurred at the
beginning of 1995, after giving effect for certain adjustments. These
unaudited pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of what would have occurred had the
acquisition been made as of that date or of results which may occur in the
future.
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
Net Sales ..................................... $472,414 $483,259
======== ========
Net income (loss) before extraordinary items .. $ 8,545 $(22,089)
======== ========
Net income (loss) ............................. $ 8,545 $(24,448)
======== ========
</TABLE>
NOTE 14 - SUBSEQUENT EVENTS
On January 17, 1997, IPC purchased substantially all of the assets,
excluding accounts receivable, of the OPS business of Viskase Limited located
in Sedgefield, England for approximately $12,500 and on February 21, 1997, IPC
purchased all of the outstanding common stock of M&R Plastics, Inc. located in
Laval, Quebec for approximately $19,500. The acquired businesses were financed
through cash flow from operations and revolving credit borrowings under IPC's
senior credit facility. As a result of these borrowings, IPC amended and
restated its senior credit facility on March 24, 1997, to, among other things,
increase its revolving credit facility from $55,000 to $105,000.
37
<PAGE> 40
IVEX PACKAGING CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
---------------------
1996 1995
---------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ........................................... $ 27 $ 37
--------- --------
Total current assets ............................................... 27 37
Investment in subsidiary .............................................. 73,418 73,418
Debt issue costs, net ................................................. 2,419 2,683
--------- --------
Total assets ....................................................... $ 75,864 $ 76,138
========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Long-term debt ........................................................ $ 106,139 $ 93,338
--------- --------
Stockholders' deficit:
Ivex Packaging Corporation common stock, $0.01 par value -- 2,000,000
shares authorized; 1,072,246 shares issued and outstanding
at December 31, 1996 and 1995 ...................................... 11 11
Paid in capital in excess of par value .............................. 177,375 177,375
Accumulated deficit ................................................. (207,661) (194,586)
--------- --------
Total stockholders' deficit ........................................ (30,275) (17,200)
--------- --------
Total liabilities and stockholders' deficit ......................... $ 75,864 $ 76,138
========= ========
</TABLE>
See Notes to Consolidated Financial Statements in Item 8.
38
<PAGE> 41
IVEX PACKAGING CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the year ended
December 31,
--------------------------------
1996 1995 1994
--------- ---------- ---------
<S> <C> <C> <C>
Interest expense .......... $ 13,075 $ 11,508 $ 10,217
-------- -------- --------
Loss before income taxes .. (13,075) (11,508) (10,217)
Income tax provision ...... (6)
-------- -------- --------
Net loss .................. $(13,075) $(11,508) $(10,223)
======== ========= ========
</TABLE>
See Notes to Consolidated Financial Statements in Item 8.
39
<PAGE> 42
IVEX PACKAGING CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK PAID IN CAPITAL STOCKHOLDERS'
----------------- IN EXCESS OF ACCUMULATED EQUITY
SHARES AMOUNT PAR VALUE DEFICIT (DEFICIT)
--------- ------ --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 .. 1,072,246 $11 $177,375 $(172,855) $ 4,531
Net loss ...................... (10,223) (10,223)
--------- --- -------- ---------- --------
Balance at December 31, 1994 .. 1,072,246 11 177,375 (183,078) (5,692)
Net loss ...................... (11,508) (11,508)
--------- --- -------- ---------- --------
Balance at December 31, 1995 .. 1,072,246 11 177,375 (194,586) (17,200)
Net loss ...................... (13,075) (13,075)
--------- --- -------- ---------- --------
Balance at December 31, 1996 .. 1,072,246 $11 $177,375 $(207,661) $(30,275)
========= === ======== ========== ========
</TABLE>
See Notes to Consolidated Financial Statements in Item 8.
40
<PAGE> 43
IVEX PACKAGING CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows used by operating activities:
Net loss .................................................................. $(13,075) $(11,508) $(10,223)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of debt issue costs ...................................... 264 264 263
Non-cash interest ..................................................... 12,801 11,232 9,916
-------- -------- --------
Net cash used by operating activities .............................. (10) (12) (44)
-------- -------- --------
Net decrease in cash and cash equivalents .................................... (10) (12) (44)
Cash and cash equivalents at beginning of year ............................... 37 49 93
-------- -------- --------
Cash and cash equivalents at end of year ..................................... $ 27 $ 37 $ 49
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements in Item 8.
41
<PAGE> 44
IVEX PACKAGING CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BEGINNING ENDING
DESCRIPTION BALANCE ADDITIONS DEDUCTIONS BALANCE
----------- --------- --------- ---------- -------
<S> <C> <C> <C> <C>
Accounts receivable -- allowance for
doubtful accounts:
1994 ............................. $ 1,272 $ 594 $ (421)(1) $ 1,445
1995 ............................. 1,445 943 (376)(1) 2,012
1996 ............................. 2,012 281 (213)(1) 2,080
Income Taxes -- valuation allowance:
1994 ............................. $19,563 $ 309 $ - $19,872
1995 ............................. 19,872 4,028 - 23,900
1996 ............................. 23,900 - (5,710) 18,190
</TABLE>
- ----------------
(1) Accounts charged off, less recoveries.
42
<PAGE> 45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names, ages, positions and offices held (as of the
date hereof) and a brief account of the business experience for each director
and executive officer of the Company and IPC.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
George V. Bayly ........ 54 Director, Chairman of the Board, President and Chief
Executive Officer of the Company since January 1991 and of IPC since its
organization in December 1992.
Frank V. Tannura ....... 40 Director of the Company since August 1995 and of IPC since
its organization in December of 1992. Vice President and Chief Financial
Officer of the Company since October 1989 and of IPC since its organization in
December 1992.
Richard R. Cote ........ 45 Vice President and Treasurer of the Company since August
1994 and of IPC since August 1995. Mr. Cote was Assistant Vice President and
Treasurer of the Company from March 1993 to August 1994, Treasurer of IPC from
December 1992 to August 1994 and Assistant Treasurer of IPC from 1991 to 1992.
Donald C. Devine ....... 37 Vice President and General Manager of the Company and IPC since
March 1996. From 1993 to 1996, Mr. Devine was Vice President and General
Manager of the Bag Division of Gaylord Container Corp. and from 1989 to 1993,
General Manager of James River Corporation's Folding Carton Group.
Thomas S. Ellsworth .... 52 Vice President and General Manager of the Company and of
IPC since August 1994. Mr. Ellsworth was Vice President of the Company's paper
mill operations from 1992 to 1994 and Chief Financial Officer of the Company's
paper mill operations from March 1991 to 1992.
Jeremy S. Lawrence ..... 46 Vice President of Human Resources of the Company since
May 1991 and IPC since its organization in December 1992.
G. Douglas Patterson ... 39 Vice President and General Counsel of the Company since
June 1991 and of IPC since its organization in December 1992.
David E. Wartner ....... 30 Corporate Controller of the Company and IPC since October 1994. Mr. Wartner
was previously associated with Price Waterhouse from 1988 to 1994.
Eugene M. Whitacre ..... 41 Vice President and General Manager of the Company since
February 1991 and of IPC since its organization in December 1992.
</TABLE>
43
<PAGE> 46
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Glenn R. August........ 35 Director of the Company since March 1993 and a Managing Director of Oak Hill Partners, Inc.
(Acadia's investment advisor) and its predecessor since 1987. Since August 1996, Mr. August has
served as President of Oak Hill Advisors, Inc., the exclusive advisor to the Oak Hill
Securities Fund, L.P., a $1.75 billion investment partnership.
David G. Offensend..... 43 Director of IPC since its organization in December 1992
to August 1995 and a director of the Company since August 1995. Founder of
Evercore Partners LLC (a private investment firm) since October 1995 and a
Managing Director of Oak Hill Partners, Inc. (Acadia's investment advisor) and
its predecessor from April 1990 to September 1995. Mr. Offensend also is a
director of Specialty Foods Corporation.
Anthony P. Scotto...... 50 Director of IPC since its organization in December 1992 to
August 1995 and a director of the Company since August 1995. Managing
Director of Oak Hill Partners, Inc. (Acadia's investment advisor) and its
predecessor since March 1988. Mr. Scotto is also a director of Specialty Foods
Corporation and Holophane Corporation.
</TABLE>
All members of the Board of Directors of the Company serve until a
successor is elected. All members of the Board of Directors of IPC serve until
a successor is elected by the Company (as the sole stockholder of IPC). All
officers of the Company and IPC serve at the pleasure of the Company's and
IPC's Boards of Directors.
44
<PAGE> 47
ITEM 11. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------
LONG-TERM
COMPENSATION(4)
---------------------
ANNUAL COMPENSATION(3) AWARDS PAYOUTS
----------------------------------- ---------- ---------
NUMBER OF
SECURITIES
UNDERLYING LTIP ALL OTHER
NAME AND OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) SARS(#)(5) ($)(6) ($)(7)
- --------------------------- -------- ------------ ----------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
George V. Bayly ........... 1996 420,000 600,000 2,072 765,938 314,721
President and Chief ...... 1995 400,000 400,000 1,586 237,500 14,938
Executive Officer ........ 1994 400,000 50,000 400 - 5,667
Frank V. Tannura .......... 1996 249,100 290,000 967 282,188 40,368
Vice President and ....... 1995 211,667 235,000 640 87,500 28,885
Chief Financial Officer .. 1994 191,667 25,000 160 - 10,894
Eugene M. Whitacre ........ 1996 236,250 230,000 691 201,563 7,500
Vice President and ....... 1995 225,000 168,750 435 62,500 13,741
General Manager .......... 1994 175,000 100,000 110 - 8,744
Thomas S. Ellsworth ....... 1996 250,000 100,000 691 - 25,813
Vice President and ....... 1995 229,000 168,750 435 - 16,185
General Manager .......... 1994 163,000 20,000 610 - 7,325
Donald C. Devine .......... 1996 195,000 175,000 553 - 2,965
Vice President and
General Manager
</TABLE>
- -----------------
(1) Includes amounts deferred pursuant to IPC's Section 401-k Pension and
Profit Sharing Plan and under IPC's Executive Deferred Compensation Plan.
(2) Includes annual bonus awards for services rendered in 1996, 1995 and 1994
that were paid under IPC's Executive Incentive Compensation Plan. The
Executive Incentive Compensation Plan provides the executive officers of IPC
with annual awards for outstanding individual performance contributing to
the present and future success of the Company. This Plan is administered by
the President in consultation with the Board of Directors and awards are
based upon IPC's achievement of certain predetermined financial objectives
such as minimum EBITDA and cash flow targets. Under the provisions of the
Plan, participants have target incentive compensation of 40% to 50% of that
year's base salary, although the actual incentive compensation paid in any
given year may be significantly less than or greater than the target level
based upon the extent of the Company's under-achievement or over-achievement
of such predetermined financial objectives.
(3) The column designated by the SEC pursuant to applicable regulations for the
reporting of "Other Annual Compensation" has been deleted because the
dollar amount of perquisites and other personal benefits received by the
named executive officers falls below the reporting threshold established by
the Commission.
45
<PAGE> 48
(4) The column designated by the SEC pursuant to the applicable regulations for
the reporting of "Restricted Stock Awards" has been deleted because no
restricted stock was awarded to any of the named executive officers in any
of the reported calendar years. The dollar value of such stock as of
December 31, 1996 is not readily or accurately calculable because there is
no closing market price for such stock as such stock is privately held.
The number of shares of the Company's common stock held by the named
executive officers is as follows: Mr. Bayly - 2,000; Mr. Tannura - 3,375;
Mr. Ellsworth - 1,050; and Mr. Whitacre - 1,350. All of such shares of the
Company's common stock are vested and the Company has no present
intentions to pay dividends on such shares.
(5) The options reported for 1995 and 1994 as specified in this column were
granted under IPC's Stock Option and Purchase Agreement, dated as of
January 1, 1993 (the "Stock Option and Purchase Agreement"), pursuant to
which options exercisable into an aggregate of 17,270 shares of IPC's
common stock were originally granted to certain executive officers of IPC
(including the named executive officers), 9,413 of such options were earned
and vested (the "IPC Options") during 1993, 1994 and 1995 and 7,857 of such
options were not earned during such period and were canceled.
During the first quarter of 1996, the Stock Option and Purchase Agreement
was amended and restated (the "Restated Stock Option and Purchase
Agreement") and pursuant to the terms thereof options exercisable into an
aggregate of 6,908 shares of IPC's common stock (the "IPC Performance
Options") were granted to certain executive officers of IPC (including
the number of options reported for 1996 as specified in the Summary
Compensation Table for the named executive officers), subject to vesting
33-1/3% in each of 1996, 1997 and 1998 and subject to being earned in 1996
and 1997 based upon IPC's attainment of certain growth objectives. During
1996, 3,454 of the IPC Performance Options were earned and as of December
31, 1996, one third of such earned amount, or 1,151, became vested. See
"Executive Compensation - Option/SAR Grants Table" and - "Aggregated
Options/SAR Exercise Table."
(6) The amounts in this column represent the amounts paid to the named
executive officers during the years ended December 31, 1995 and 1996 under
IPC's Special Incentive Plan, dated as of January 1, 1993 (the "Special
Incentive Plan" or the "Plan"). Pursuant to the Special Incentive Plan, upon
the occurrence of certain "Payment Events" (therein defined), IPC was
obligated to pay to certain executive officers an aggregate cash award up
to a maximum amount of $2.25 million. During 1995 and 1996, IPC paid to
certain executive officers (including the named executive officers)
$550,000 and $1.7 million, respectively, under the Plan. The 1995 and the
1996 payments under the Plan were made by IPC notwithstanding the fact that
there was not a Payment Event during 1995 or 1996, this condition having
been waived by IPC.
(7) The 1996 All Other Compensation column reported includes (i) IPC's
contributions (excluding employee earnings reduction contributions) under
the IPC Section 401-K Pension and Profit Sharing Plan and under IPC's
Executive Deferred Compensation Plan during fiscal 1996 as follows: $7,500
to Mr. Bayly; $21,038 to Mr. Ellsworth; $0 to Mr. Devine; $38,314 to Mr.
Tannura; and $7,500 to Mr. Whitacre; (ii) insurance premiums with respect
to IPC's Executive Disability Income Coverage paid by IPC as follows:
$7,221 for Mr. Bayly; $4,775 for Mr. Ellsworth; $2,965 for Mr. Devine; and
$2,054 for Mr. Tannura; and (iii) IPC's payment during 1996 of $300,000 of
non-qualified retirement benefits to Mr. Bayly pursuant to the terms of his
Amended and Restated Employment Agreement, dated as of May 30, 1996.
46
<PAGE> 49
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATE OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
- ------------------------------------------------------------------------------- --------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE
OPTIONS/SARS GRANTED TO OR BASE
GRANTED EMPLOYEES IN PRICE EXPIRATION
NAME (#)(1) FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
- ---------------------- ------------ ------------ -------- ---------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
George V. Bayly ...... 2,072 30.0 619.56 1/1/03 0 436,590 990,475
President and Chief
Executive Officer
Frank V. Tannura ..... 967 14.0 619.56 1/1/03 0 203,756 462,253
Vice President
Eugene M. Whitacre ... 691 10.0 619.56 1/1/03 0 145,600 330,318
Vice President
Thomas S. Ellsworth .. 691 10.0 619.56 1/1/03 0 145,600 330,318
Vice President
Donald C. Devine ..... 553 8.0 619.56 1/1/03 0 116,522 264,350
Vice President
</TABLE>
(1) The portion of the IPC Performance Options specified in this column were
granted during the year ended December 31, 1996 under IPC's Restated
Stock Option and Purchase Agreement pursuant to which options to purchase an
aggregate of 6,908 shares of IPC's common stock were granted to certain
executive officers (including the named executive officers), 3,454 of such
options were earned during 1996 and one third of such earned options (1,151)
became vested during 1996. The 1,151 earned and vested IPC Performance
Options are fully vested and are exercisable at any time, in whole or in
part, prior to January 1, 2003 upon payment of an exercise price of $619.56
per share. The IPC Performance Options vest over a 3-year period, 33-1/3% on
each of December 31, 1996, 1997 and 1998. Upon the occurrence of certain
events (including certain public equity offerings, changes of control and
exercises by management), IPC and the option holders have the right in
certain circumstances to exchange both the IPC Options and the IPC
Performance Options for an equivalent value of the Company's common stock
plus options exercisable for up to 4.0% of the fully diluted common stock of
the Company.
(2) The dollar amounts under these columns are the result of calculations at
0% and of the 5% and 10% rates established by the Commission and
therefore are not intended to forecast possible future appreciation, if
any, of the stock price of IPC.
47
<PAGE> 50
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
---------------------------------------------------
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED FY-END (#) FY-END ($)
ON VALUE
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE(1) UNEXERCISABLE(1)
- ---------------------- -------- -------- ---------------------- ----------------
<S> <C> <C> <C> <C>
George V. Bayly ...... - - 4,151/1,727 $0
President and Chief
Executive Officer
Frank V. Tannura ..... - - 1,696/806 0
Vice President
Eugene M. Whitacre ... - - 1,160/576 0
Vice President
Thomas S. Ellsworth .. - - 1,160/576 0
Vice President
Donald C. Devine ..... - - 92/461 0
Vice President
</TABLE>
- ---------------
(1) The specified portion of the IPC Options and the IPC Performance Options
listed in this table are currently exercisable (subject to IPC's right
to exchange them, in certain circumstances, for an equivalent value of the
Company's common stock plus options exercisable for up to 4.0% of the fully
diluted common stock of the Company). IPC believes that the shares of IPC's
common stock have a value approximating the exercise price as of December
31, 1996 although there can be no assurances that such approximation is
accurate because there is no market price for the stock as such stock is
privately held.
48
<PAGE> 51
DIRECTORS' COMPENSATION
Directors of the Company and IPC do not receive any compensation for
serving as such.
CERTAIN EMPLOYMENT ARRANGEMENTS
Mr. Bayly has an amended and restated employment agreement with IPC,
pursuant to which (i) IPC agrees to employ Mr. Bayly through December 31, 2000
(provided that beginning on January 1, 1998, the term thereof is automatically
extended for one additional day for each day which has then elapsed since
December 31, 1997 unless on or after December 31, 1997 either IPC's Board of
Directors or Mr. Bayly gives notice that the automatic extension shall cease)
as President and Chief Executive Officer, (ii) Mr. Bayly receives a base salary
of $441,000 during 1997, $463,000 during 1998, $486,000 during 1999 and
$510,000 during 2000 (subject to increase at the discretion of the Board of
Directors), (iii) Mr. Bayly will be entitled to an aggregate of $150,000 per
year for life insurance, disability insurance and non-qualified retirement
benefits, (iv) is eligible for an annual performance bonus based upon the
achievement of predetermined financial objectives, and (v) Mr. Bayly will
receive salary protection if his employment is terminated without cause or if
Mr. Bayly terminates the agreement for good reason (including the giving of
notice by the Board of Directors of IPC to stop the automatic extension of the
term thereof and a termination by Mr. Bayly for any reason during the period of
three months which begins six months after a change of control (as therein
defined)) in a lump sum equal to four times the sum of (x) the annual salary
then in effect and (y) the target amount of the annual performance bonus for
the year in which the termination occurs, plus the continuation of all benefits
and supplemental benefits for four years after the date of termination. The
agreement restricts Mr. Bayly from competing with the Company during his
employment. In addition, IPC has agreed to gross-up Mr. Bayly for certain
payments, interest and penalties that may be imposed by certain sections of the
Internal Revenue Code of 1996, as amended.
Mr. Tannura has an employment agreement with IPC, effective January 1,
1993, as amended September 11, 1995, and May 30, 1996 pursuant to which (i) IPC
agrees to employ Mr. Tannura through May 31, 1999 (provided that beginning on
June 1, 1996, the term thereof is automatically extended for one additional day
for each day which has then elapsed since May 31, 1996 unless either the Board
of Directors of IPC or Mr. Tannura gives notice that the automatic extension
shall cease) as Vice President and Chief Financial Officer, (ii) Mr. Tannura is
entitled to receive a base salary of $263,000 per year (subject to increase at
the discretion of the Board of Directors), (iii) Mr. Tannura is eligible to
receive an annual performance bonus based upon the achievement of predetermined
financial objectives, and (iv) Mr. Tannura will receive salary and benefit
protection if his employment is terminated without cause or if Mr. Tannura
terminates the agreement for good reason (including the giving of notice by the
Board of Directors of IPC to stop the automatic extension of the term thereof)
in an amount equal to (i) at Mr. Tannura's option, either (A) his annual salary
for the remaining term thereof or (B) the present value (based upon a 10%
interest rate) of the aggregate unpaid annual salary for the full term thereof,
plus (ii) at Mr. Tannura's option, either (C) an annual bonus for each year
remaining in the term in an amount equal to the target amount of his
performance bonus for the year in which his termination of employment occurs,
or (D) the present value of three times the target amount of his performance
bonus for the year in which the termination of his employment occurs.
Under provisions of their severance agreements with IPC, the other named
executive officers have been afforded salary protection for one year if their
employment is terminated other than for death, disability or cause.
Under the Special Incentive Plan, IPC paid to certain executive officers
an aggregate cash award of $1,687,000 including $1,250,000 to the named
executive officers. See "Executive Compensation Summary Compensation Table."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the Company's Board of Directors did not have a compensation
committee (or other board committee performing equivalent functions). The
members of the Board of Directors of the Company, in consultation with Mr.
Bayly, the President of the Company, performed the functions normally performed
by a compensation committee and participated in deliberations concerning
executive officer compensation. No executive officer of the Company served as
a member of the compensation committee (or other board committee performing
equivalent functions) or as a member of the Board of another entity, one of
whose executive officers served on the Board of Directors of the Company.
49
<PAGE> 52
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 26, 1997, the Company owned 100% of the outstanding capital
stock of IPC (other than the IPC Options and IPC Performance Options
exercisable into IPC's common stock held by certain executive officers -- see
table below), and all issued and outstanding shares of capital stock of the
Company were beneficially owned by Acadia and certain related investors
(including certain members of management). The following tables sets forth
certain information regarding the beneficial ownership of the common stock, par
value $0.01 per share, of IPC and of the common stock, par value $0.01 per
share, of the Company, as of March 26, 1997 by (i) each person known by the
Company to be the beneficial owner of more than 5% of any class of IPC's or the
Company's voting securities, (ii) each of the directors of IPC and the Company,
and (iii) each of the named executive officers listed in Item 11, and (iv) all
executive officers and directors of IPC and the Company as a group.
50
<PAGE> 53
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF IPC'S PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK(1) OF CLASS
----------------------------------------- --------------- ----------
<S> <C> <C>
Ivex Packaging Corporation(2) ........... 120,890 92.0%
George V. Bayly ......................... 4,151(3) 3.2
Frank V. Tannura ........................ 1,696(3) 1.3
Thomas S. Ellsworth ..................... 1,160(3) *
Eugene M. Whitacre ...................... 1,160(3) *
Donald C. Devine ........................ 92(3) *
Glenn R. August ......................... - -
David G. Offensend ...................... - -
Anthony P. Scotto ....................... - -
All directors and officers as a group .. 10,564(3) 8.0
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF THE COMPANY'S PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK(4) OF CLASS
----------------------------------------- --------------- ----------
<S> <C> <C>
Acadia Partners, L.P. ................... 994,676(5) 92.8%
George V. Bayly ......................... 2,000 *
Frank V. Tannura ........................ 3,375 *
Thomas S. Ellsworth ..................... 1,050 *
Eugene M. Whitacre ...................... 1,350 *
Donald C. Devine ........................ - *
Glenn R. August (6)(7) .................. - -
David G. Offensend(8) ................... - -
Anthony P. Scotto(7) .................... - -
All directors and officers as a group .. 12,000 1.1
</TABLE>
- --------------
* Represents less than 1% of such common stock.
(1) Upon the occurrence of certain events (including certain public equity
offerings and changes of control), IPC and the option holders have the
right in certain circumstances to exchange the IPC Options and the IPC
Performance Options for an equivalent value of the Company's common stock
plus options exercisable for up to four percent of the fully diluted common
stock of the Company.
(2) The Company's common stock is beneficially owned by the individuals and
entities listed in the Company's security ownership table.
(3) Represents vested options that are currently exercisable (subject to IPC's
right to exchange them, in certain circumstances, for an equivalent
value of the Company's common stock plus options exercisable for up to four
percent of the fully diluted common stock of the Company.)
(4) To the knowledge of the Company, each of such stockholders has sole voting
and investment power as to the shares shown unless otherwise noted.
51
<PAGE> 54
(5) Includes shares held by Acadia and shares held by Acadia Electra Partners,
L.P. ("Electra"), an affiliate of Acadia. Acadia is the general partner of
Electra. The general partner of Acadia is Acadia FW Partners, L.P. ("Acadia
FW"), the managing general partner of which is Acadia MGP, Inc. ("Acadia
MGP"), a corporation controlled by J. Taylor Crandall, an executive officer
of Keystone, Inc. (an associate of Acadia). As such, Acadia FW, Acadia MGP
and Mr. Crandall may be deemed to beneficially own the shares of the
Company's common stock held by Acadia and Electra. Excludes an aggregate of
65,570 shares (approximately 6.0%) of the Company's Common Stock owned by
FWHY Coinvestments I Partners, L.P. ("FCP-I"), FWHY Coinvestments III
Partners, L.P. ("FCP-III"), Rosecliff-Ivex Packaging 1990 Partners, L.P.
("RIP") and Rosecliff-IPMC 1991 Partners, L.P. ("RIPMC"). Certain
investors in FCP-I, FCP-II, RIP and RIPMC are employees of, or are
otherwise associated with, Acadia or Oak Hill Partners, Inc., which is the
investment advisor to Acadia. The address of Acadia, Electra, Acadia FW,
Acadia MGP, FCP-I, FCP-III and Mr. Crandall is 3100 Texas Commerce Tower,
201 Main Street, Fort Worth, Texas 76102. The address of RIP and RIPMC is
65 East 55th Street, New York, New York 10022-3219.
(6) Mr. August is an officer and director of Acadia MGP (see footnote 5 above).
(7) The address of such individuals is c/o Oak Hill Partners, Inc., 65 East
55th Street, New York, New York 10022-3219.
(8) The address of such individual is c/o Evercore Partners LLC, 1325 Avenue of
the Americas, 20th Floor, New York, New York 10019.
In connection with IPC's December 1995 refinancing of its senior credit
facility, the Company pledged to the lenders under such senior credit facility
all of IPC's common stock, par value $0.01 per share, to collateralize the
repayment of IPC's obligations thereunder.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On or about December 17, 1992, Penobscot-MB Partners (an affiliate of
Acadia) ("Penobscot-MB") and IPC entered into a consulting agreement. Under
this consulting agreement, IPC has agreed to pay Penobscot-MB $400,000 per year
and Penobscot-MB will provide to IPC certain general financial advisory and
other consulting services customarily provided by merchant banks. In addition,
IPC has agreed to pay Penobscot-MB certain customary fees in connection with
future acquisitions, divestitures, credit arrangements and corporate finance
advice and to indemnify Penobscot-MB against certain liabilities in connection
with its services to IPC.
On or about December 17, 1992, IPC, its subsidiaries and the Company
entered into a tax sharing agreement pursuant to which IPC and its subsidiaries
will pay to the Company their respective shares of the Company's consolidated
tax liability.
Mr. Bayly and IPC are parties to an Employment Agreement, which provides
for, among other things, the employment of Mr. Bayly by IPC and a Stock Option
Agreement pursuant to which, among other things, Mr. Bayly has the option to
purchase certain shares of IPC's common stock. See "Executive Compensation -
Summary Compensation Table."
Mr. Tannura and IPC are parties to an Employment Agreement, which provides
for, among other things, the employment of Mr. Tannura by IPC and a Stock
Option Agreement pursuant to which, among other things, Mr. Tannura has the
option to purchase certain shares of IPC's common stock. See "Executive
Compensation - Summary Compensation Table."
52
<PAGE> 55
On October 29, 1996, certain executive officers and directors of the
Company together with certain members of management of Oakhill Partners, Inc.
(Acadia's investment advisor) acquired all of the outstanding common stock of
Nicolaus Paper Inc. ("Nicolaus") after the Company had previously determined
not to proceed with the aquisition of Nicolaus. Pursuant to a consulting
agreement, Nicolaus will pay IPC a performance-based consulting fee in an
annual amount between $250,000 and $500,000 for certain services to be rendered
to Nicolaus by IPC. Also, it is expected that IPC will purchase certain grades
of paper from Nicolaus for use in IPC's paper converting operations at market
prices.
See "Executive Compensation - Compensation Committee Interlocks and
Insider Participation" for certain information relating to Mr. Bayly.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) THE FOLLOWING FINANCIAL STATEMENTS OF THE COMPANY ARE INCLUDED IN
ITEM 8.
- - Report of Independent Accountants
- - Consolidated Balance Sheets at December 31, 1996 and 1995
- - Consolidated Statements of Operations for the years ended December 31,
1996, 1995 and 1994
- - Consolidated Statements of Changes in Stockholders' Deficit for
the years ended December 31, 1996, 1995 and 1994
- - Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994
- - Notes to Consolidated Financial Statements
(a)(2) FINANCIAL STATEMENT SCHEDULES FOR THE YEAR ENDED DECEMBER 31, 1996
ARE INCLUDED IN ITEM 8.
- - Schedule I - Condensed Financial Information
- - Schedule II - Valuation and Qualifying Accounts and Reserves
All other schedules of the Company for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
not required, are inapplicable or have been disclosed in the notes to the
consolidated financial statements and therefore have been omitted.
53
<PAGE> 56
(a)(3) EXHIBITS.
<TABLE>
<CAPTION>
INCORPORATED
BY REFERENCE FROM
------------------------------------
EXHIBIT EXHIBIT REGISTRATION NUMBER
NUMBER DESCRIPTION OF DOCUMENT NUMBER OR REPORT
- ------- ------------------------------------------------------- ------- ---------------------------
<S> <C> <C> <C>
3.1 Certificate of Incorporation of IPC, Inc. ("IPC").......... 3.1 IPC Form S-1
(Registration No. 33-52150)
3.2 By-Laws of IPC............................................. 3.2 IPC Form S-1
(Registration No. 33-52150)
3.3 Form of Amended Certificate of Incorporation of IPC Form S-1
IPC, dated December 8, 1992................................ 3.3 (Registration No. 33-52150)
3.4 Certificate of Amendment of the Certificate of IPC 1992 Form 10-K
Incorporation of IPC, dated as of February 2, 1993......... 3.4 (File No. 33-52150)
3.5 Certificate of Amendment to the Certificate of IPC 9/30/95 Form 10-Q
Incorporation of IPC, dated August 2, 1995................. 3.7 (File No. 33-52150)
3.6 Amended and Restated Certificate of Incorporation Ivex Form S-4
of Ivex Packaging Corporation ("Holdings" or "Ivex")....... 3.1 (Registration No. 33-60714)
3.7 By-Laws of Ivex............................................ 3.2 Ivex Form S-4
(Registration No. 33-60714)
3.8 Certificate of Amendment to Amended and Restated
Certificate of Incorporation of Ivex, dated IPC 9/30/95 Form 10-Q
August 2, 1995............................................. 3.8 (File No. 33-52150)
4.1 Indenture relating to IPC's 12-1/2% Senior Subordinated
Notes (including form of 12-1/2% Senior Subordinated Ivex Form S-4
Notes)..................................................... 4.1 (Registration No. 33-60714)
4.2 Indenture relating to Ivex's 13-1/4% Senior Discount
Debentures (including form of 13-1/4% Senior IPC 1992 Form 10-K
Discount Debentures)....................................... 4.2 (File No. 33-52150)
10.1 Form of Senior Management Incentive Compensation IPC 1994 Form 10-K
Plan for 1996 (1).......................................... (File No. 33-52150)
10.2 Form of Executive Deferred Compensation Plan (1)........... 10.3 IPC 1994 Form 10-K
(File No. 33-52150)
*10.3 Form of Trust Agreement, dated October 17, 1996,
between IPC, Inc. and the trustee thereof relating to
executive deferred compensation (1)........................
</TABLE>
54
<PAGE> 57
<TABLE>
<CAPTION>
INCORPORATED
BY REFERENCE FROM
---------------------------------------------
EXHIBIT EXHIBIT REGISTRATION NUMBER
NUMBER DESCRIPTION OF DOCUMENT NUMBER OR REPORT
- -------- ----------------------- -------- ------------------------------
<S> <C> <C> <C>
10.4 Form of IPC Stock Purchase and Option Agreement,
dated as of January 1, 1993, among IPC, Ivex, Acadia
Partners, L.P. and each of certain senior managers of
IPC with the Ivex Stock Purchase and Option IPC 1993 Form 10-K
Agreement attached thereto (1) .................................... 10.2 (Registration No. 33-52150)
10.5 Form of Amended and Restated IPC, Inc. Stock Option
and Purchase Agreement and Amended Restated Ivex
Packaging Corporation Stock Option and Purchase Ivex 6/30/96 Form 10-Q
Agreement, each dated as of January 1, 1996 (1) ................... 10.16 (File No. 33-60714)
10.6 IPC Retirement Plan and Trust, as amended and IPC Form S-1
Restated May 1, 1992 (1) .......................................... 10.3 (Registration No. 33-52150)
10.7 Form of IPC Special Incentive Agreement, dated as IPC 1993 Form 10-K
of January 1, 1993 (1) ............................................ 10.4 (File No. 33-52150)
10.8 Amended and Restated Employment Agreement, dated as Ivex 6/30/96 Form 10-Q
of May 30, 1996, between George V. Bayly and IPC (1) .............. 10.14 (File No. 33-60714)
10.9 Employment Agreement, dated as of December 31, IPC 6/30/93 Form 10-Q
1992, between IPC and Frank V. Tannura (1) ........................ 10.30 (File No. 33-52150)
10.10 Amendment No. 1, dated as of September 11, 1995,
to the Employment Agreement, dated as of December IPC 6/30/95 Form 10-Q
31, 1992, between IPC and Frank V. Tannura (1) .................... 10.59 (File No. 33-52150)
10.11 Amendment No. 2 to Employment Agreement, dated Ivex 6/30/96 Form 10-Q
May 30, 1996, between IPC and Frank V. Tannura (1) ................ 10.15 (File No. 33-60714)
10.12 Stock Option Agreement, dated as of January 22,
1991, among Ivex, Acadia Partners, L.P. and IPC Form S-1
George V. Bayly (1) ............................................... 10.30 (Registration No. 33-52150)
10.13 Form of Severance Agreement between the Company IPC 1994 Form 10-K
and certain named executive officers (1) .......................... 1.1 (File No. 33-52150)
10.30 Credit Agreement, dated as of December 7, 1995 (the
"1995 Credit Agreement"), among Ivex, IPC, certain
of IPC's subsidiaries, the lenders listed therein, and Ivex 1995 Form 10-K
NationsBank, N.A., as agent ....................................... 10.30 (File No. 33-60714)
10.31 Pledge Agreement, dated as of December 7, 1995,
among Ivex, IPC, IPC's subsidiaries and NationsBank, Ivex 1995 Form 10-K
N.A., as agent .................................................... 10.31 (File No. 33-60714)
</TABLE>
55
<PAGE> 58
<TABLE>
<CAPTION>
INCORPORATED
BY REFERENCE FROM
---------------------------------------------
EXHIBIT EXHIBIT REGISTRATION NUMBER
NUMBER DESCRIPTION OF DOCUMENT NUMBER OR REPORT
- -------- ----------------------- -------- ------------------------------
<S> <C> <C> <C>
10.32 Security Agreement, dated as of December 7, 1995,
among Ivex, IPC, IPC's subsidiaries and NationsBank, Ivex 1995 Form 10-K
N.A., as agent ..................................................... 10.32 (File No. 33-60714)
10.33 Form of Mortgage and Security Agreement in favor of Ivex 1995 Form 10-K
NationsBank, N.A., as agent ........................................ 10.33 (File No. 33-60714)
*10.34 Amendment No. 1 to Credit Agreement, dated as of August
16, 1996, by and among IPC, NationsBank, N.A., as agent,
and the guarantors and lenders identified on the signature
pages thereto ......................................................
*10.35 Amendment No. 2 to Credit Agreement, dated as of November
21, 1996, by and among IPC, NationsBank, N.A., as agent,
and the guarantors and lenders identified on the signature
pages thereto.......................................................
*10.36 Form of Amended and Restated Credit Agreement, dated as
of March 24, 1997, by and among IPC, NationsBank, N.A.,
as agent, and the guarantors and lenders identified on the
signature pages thereto ............................................
*10.37 Form of Amended and Restated Pledge Agreement among IPC,
Ivex, certain of IPC's subsidiaries and NationsBank, N.A., as
agent ..............................................................
*10.38 Form of Amended and Restated Security Agreement among IPC,
Ivex, and certain of IPC's subsidiaries and NationsBank, N.A.,
as agent ...........................................................
10.39 Loan Agreement, dated as of December 1, 1987,
between the County of Kankakee, Illinois and Ivex IPC Form S-1
of Delaware, Inc (n/k/a IPC, Inc.).................................. 10.11 (Registration No. 33-52150)
10.40 Loan Agreement, dated as of June 1, 1988, between
the Development Authority of Morgan County and IPC Form S-1
Ivex of Delaware, Inc (n/k/a IPC, Inc.)............................. 10.13 (Registration No. 33-52150)
10.41 Loan Agreement, dated as of October 1, 1987, IPC Form S-1
between the County of Will, Illinois and LPX, Inc................... 10.15 (Registration No. 33-52150)
10.42 Loan Agreement, dated as of April 1, 1988, between
the Illinois Development Finance Authority and IPC Form S-1
Ivex of Delaware, Inc. (n/k/a IPC, Inc.)............................ 10.17 (Registration No. 33-52150)
</TABLE>
56
<PAGE> 59
<TABLE>
<CAPTION>
INCORPORATED
BY REFERENCE FROM
---------------------------------------------
EXHIBIT EXHIBIT REGISTRATION NUMBER
NUMBER DESCRIPTION OF DOCUMENT NUMBER OR REPORT
- -------- ----------------------- -------- ------------------------------
<S> <C> <C> <C>
10.43 Indenture of Trust, dated as of March 1, 1989,
between Marine Midland Bank, N.A. and Ivex of IPC Form S-1
Delaware, Inc (n/k/a IPC, Inc.).................................... 10.19 (Registration No. 33-52150)
10.44 Loan Agreement, dated November 1, 1985, between
the Village of Bridgeview, Illinois and L&CP IPC Form S-1
Corporation........................................................ 10.21 (Registration No. 33-52150)
10.45 Loan Agreement, dated as of June 1, 1988, between
City of Troy, Ohio and L&CP Corporation IPC Form S-1
(n/k/a IPC, Inc.)................................................. 10.23 (Registration No. 33-52150)
*10.46 Lease Agreement, dated as of December 5, 1996, between
State Street Bank and Trust Company and IPC.......................
10.47 Lease, dated as of October 4, 1988, between
Seymour C. Graham and Kama Corporation IPC Form S-1
(n/k/a IPC, Inc).................................................. 10.33 (Registration No. 33-52150)
10.48 Amendment to Lease, dated as of December 20,
1988, between Seymour C. Graham and Kama IPC Form S-1
Corporation (n/k/a IPC, Inc)...................................... 10.34 (Registration No. 33-52150)
10.49 Lease, dated June 20, 1995, between Howard H.
Gelb and Eunice Gelb and Kama Corporation Ivex 1995 Form 10-K
Corporation (n/k/a IPC, Inc.)..................................... 10.44 (File No. 33-60714)
10.50 Industrial Building Lease, dated October 19, 1992,
between Telegraph Road Properties, Inc. and Ivex 1995 Form 10-K
Packaging Products, Inc........................................... 10.45 (File No. 33-60714)
10.51 Industrial Building Lease, dated October 23, 1985, Ivex 1995 Form 10-K
between IMAC Realty, Inc. and Packaging Products, Inc............. 10.46 (File No. 33-60714)
10.52 Letter Agreement, dated March 10, 1995, between Ivex 1995 Form 10-K
Packaging Products, Inc. and LeWa Company ........................ 10.47 (File No. 33-60714)
10.53 Tri-Party Agreement, dated September 11, 1995,
among Packaging Products, Inc. and Telegraph Ivex 1995 Form 10-K
Road Properties, Inc.............................................. 10.48 (File No. 33-60714)
*10.54 Lease, dated as of September 11, 1996, by and between
Joseph P. Bennett and Trio Products, Inc..........................
</TABLE>
57
<PAGE> 60
<TABLE>
<CAPTION>
INCORPORATED
BY REFERENCE FROM
----------------------------------------
EXHIBIT EXHIBIT REGISTRATION NUMBER
NUMBER DESCRIPTION OF DOCUMENT NUMBER OR REPORT
- -------- ----------------------- ------- -------------------------
<S> <C> <C> <C>
10.55 Installment Sales Agreement, dated as of December
12, 1990, between Grove City Industrial Development IPC Form S-1
Corporation and Ivex Converted Products Corporation (Registration No. 33-52150)
(n/k/a IPC, Inc.)........................................... 10.39
10.56 Consulting Agreement, dated as of December 17, IPC Form S-4
1992, between IPC and Penobscot-MB Partners................. 10.39 (Registration No. 33-60714)
10.57 Tax Sharing Agreement, dated as of December 17,
1992, between Ivex and IPC and certain of IPC's Ivex Form S-4
subsidiaries................................................ 10.40 (Registration No. 33-60714)
10.58 Transfer and Noncompete Agreement, dated as of
October 14, 1992, between Ivex Converted Products IPC Form S-1
Corporation (n/k/a IPC, Inc.) and MaxPack S.A. de C.V...... 10.46 (Registration No. 33-52150)
10.59 Stockholders Agreement, dated as of October 14,
1992, by and among MaxPack S.A. de C.V. and IPC Form S-1
the stockholders thereof.................................... 10.46 (Registration No. 33-52150)
10.60 Agreement and Plan of Merger, dated as of May 17,
1996 (as amended), among IPC, CFI Industries, Inc. CFI Industries, Inc.'s Proxy
and Equity Partners......................................... A-1 Statement dated 7/22/96
*21.1 Subsidiaries of Ivex........................................
*21.2 Subsidiaries of IPC.........................................
*24.1 Powers of Attorney..........................................
27 Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only
and not filed.
</TABLE>
- --------------
* Filed herewith.
(1) Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this report.
(B) REPORTS ON FORM 8-K.
None.
* * * * *
58
<PAGE> 61
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON MARCH 26, 1997.
IVEX PACKAGING CORPORATION
By: /s/ GEORGE V. BAYLY
----------------------------
Name: George V. Bayly
Title: President and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON
MARCH 26, 1997.
Signature Title
--------- -----
/s/ GEORGE V. BAYLY
- ------------------------------
George V. Bayly Director, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
/s/ FRANK V. TANNURA
- ------------------------------
Frank V. Tannura Director, Vice President and Chief Financial
Officer
(Principal Financial Officer)
/s/ DAVID E. WARTNER
- ------------------------------
David E. Wartner Corporate Controller
(Principal Accounting Officer)
*
- ------------------------------
David G. Offensend Director
*
- ------------------------------
Anthony P. Scotto Director
*
- ------------------------------
Glenn R. August Director
*By: /s/ G. DOUGLAS PATTERSON Attorney-In-Fact
- ------------------------------
G. Douglas Patterson
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT
No annual report or proxy material has been or will be sent to security
holders.
59
<PAGE> 62
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM 10-K
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
IVEX PACKAGING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
60
<PAGE> 63
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ------------------------------------------------------------------------------- --------
<S> <C> <C>
3.1 Certificate of Incorporation of IPC, Inc. ("IPC")
3.2 By-Laws of IPC
3.3 Form of Amended Certificate of Incorporation of IPC, dated December 8, 1992
3.4 Certificate of Amendment of the Certificate of Incorporation of IPC, dated
as of February 2, 1993
3.5 Certificate of Amendment to the Certificate of Incorporation of IPC, dated
August 2, 1995
3.6 Amended and Restated Certificate of Incorporation of Ivex Packaging Corporation
("Holdings" or "Ivex")
3.7 By-Laws of Ivex
3.8 Certificate of Amendment to Amended and Restated Certificate of
Incorporation of Ivex, dated August 2, 1995
4.1 Indenture relating to IPC's 12-1/2% Senior Subordinated Notes (including form
of 12-1/2% Senior Subordinated Notes)
4.2 Indenture relating to Ivex's 13-1/4% Senior Discount Debentures (including form
of 13-1/4% Senior Discount Debentures)
10.1 Form of Senior Management Incentive Compensation Plan for 1996 (1)
10.2 Form of Executive Deferred Compensation Plan (1)
*10.3 Form of Trust Agreement, dated October 17, 1996, between IPC, Inc.
and the trustee thereof relating to executive deferred compensation (1)
10.4 Form of IPC Stock Option and Purchase Agreement, dated as of January 1, 1993,
among IPC, Ivex, Acadia Partners, L.P. and each of certain senior managers of
IPC with the Ivex Stock Purchase and Option Agreement attached thereto (1)
10.5 Form of Amended and Restated IPC, Inc. Stock Option and Purchase Agreement
and Amended Restated Ivex Packaging Corporation Stock Option and Purchase
Agreement, each dated as of January 1, 1996 (1)
10.6 IPC Retirement Plan and Trust, as amended and Restated May 1, 1992 (1)
10.7 Form of IPC Special Incentive Agreement, dated as of January 1, 1993 (1)
</TABLE>
61
<PAGE> 64
<TABLE>
Sequentially
Exhibit Numbered
Number Description Of Document Page
- ------- ----------------------- ------------
<S> <C> <C>
10.8 Amended and Restated Employment Agreement, dated as of May 30, 1996,
between George V. Bayly and IPC (1)
10.9 Employment Agreement, dated as of December 31, 1992, between IPC and
Frank V. Tannura (1)
10.10 Amendment No. 1, dated as of September 11, 1995, to the Employment Agreement,
dated as of December 31, 1992, between IPC and Frank V. Tannura (1)
10.11 Amendment No. 2 to Employment Agreement, dated May 30, 1996, between
IPC and Frank V. Tannura (1)
10.12 Stock Option Agreement, dated as of January 22, 1991, among Ivex, Acadia
Partners, L.P. and George V. Bayly (1)
10.13 Form of Severance Agreement between the Company and certain named executive
officers (1)
10.30 Credit Agreement, dated as of December 7, 1995 (the "1995 Credit Agreement"),
among Ivex, IPC, certain of IPC's subsidiaries, the lenders listed therein, and
NationsBank, N.A., as agent
10.31 Pledge Agreement, dated as of December 7, 1995, among Ivex, IPC, IPC's
subsidiaries and NationsBank, N.A., as agent
10.32 Security Agreement, dated as of December 7, 1995, among Ivex, IPC, IPC's
subsidiaries and NationsBank, N.A., as agent
10.33 Form of Mortgage and Security Agreement in favor of NationsBank, N.A.,
as agent
*10.34 Amendment No. 1 to Credit Agreement, dated as of August 16, 1996, by and
among IPC, NationsBank, N.A., as agent, and the guarantors and lenders
identified on the signature pages thereto
*10.35 Amendment No. 2 to Credit Agreement, dated as of November 21, 1996, by and
among IPC, NationsBank, N.A., as agent, and the guarantors and lenders
identified on the signature pages thereto
*10.36 Form of Amended and Restated Credit Agreement, dated as of March, 1997
by and among IPC, NationsBank, N.A., as agent, and the guarantors and lenders
identified on the signature pages thereto
*10.37 Form of Amended and Restated Pledge Agreement among IPC, Ivex, certain of
IPC's subsidiaries and NationsBank, N.A., as agent
</TABLE>
62
<PAGE> 65
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Document Page
- ------- ----------------------- ------------
<S> <C> <C>
*10.38 Form of Amended and Restated Security Agreement among IPC, Ivex, certain of
IPC's subsidiaries and NationsBank, N.A., as agent
10.39 Loan Agreement, dated as of December 1, 1987, between the County of Kankakee,
Illinois and Ivex of Delaware, Inc. (n/k/a IPC, Inc.)
10.40 Loan Agreement, dated as of June 1, 1988, between the Development Authority
of Morgan County and Ivex of Delaware, Inc. (n/k/a IPC, Inc.)
10.41 Loan Agreement, dated as of October 1, 1987, between the County of Will,
Illinois and LPX, Inc.
10.42 Loan Agreement, dated as of April 1, 1988, between the Illinois Development
Finance Authority and Ivex of Delaware, Inc. (n/k/a IPC, Inc.)
10.43 Indenture of Trust, dated as of March 1, 1989, between Marine Midland Bank, N.A.
and Ivex of Delaware, Inc. (n/k/a IPC, Inc.)
10.44 Loan Agreement, dated November 1, 1985, between the Village of Bridgeview,
Illinois and L&CP Corporation
10.45 Loan Agreement, dated as of June 1, 1988, between
City of Troy, Ohio and L&CP Corporation (n/k/a IPC, Inc.)
*10.46 Lease Agreement, dated as of December 5, 1996, between State Street Bank and
Trust Company and IPC
10.47 Lease, dated as of October 4, 1988, between Seymour C. Graham and Kama
Corporation (n/k/a IPC, Inc.)
10.48 Amendment to Lease, dated as of December 20, 1988, between Seymour C. Graham
and Kama Corporation (n/k/a IPC, Inc.)
10.49 Lease, dated June 20, 1995, between Howard H. Gelb and Eunice Gelb and Kama
Corporation (n/k/a IPC, Inc.)
10.50 Industrial Building Lease, dated October 19, 1992, between Telegraph Road
Properties, Inc. and Packaging Products, Inc.
10.51 Industrial Building Lease, dated October 23, 1985, between IMAC Realty, Inc. and
Packaging Products, Inc.
10.52 Letter Agreement, dated March 10, 1995, between Packaging Products, Inc. and
LeWa Company
10.53 Tri-Party Agreement, dated September 11, 1995, among Packaging Products, Inc. and
Telegraph Road Properties, Inc.
</TABLE>
63
<PAGE> 66
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Document Page
- ------- --------------------------- -----------
<S> <C> <C>
*10.54 Lease, dated as of September 11, 1996, by and between Joseph P. Bennett and Trio
Products, Inc.
10.55 Installment Sales Agreement, dated as of December 12, 1990, between Grove City
Industrial Development Corporation and Ivex Converted Products Corporation
(n/k/a IPC, Inc.)
10.56 Consulting Agreement, dated as of December 17, 1992, between IPC and Penobscot-MB
Partners
10.57 Tax Sharing Agreement, dated as of December 17, 1992, between Ivex and IPC and
certain of IPC's subsidiaries
10.58 Transfer and Noncompete Agreement, dated as of October 14, 1992, between
Ivex Converted Products Corporation (n/k/a IPC, Inc.) and MaxPack S.A. de C.V.
10.59 Stockholders Agreement, dated as of October 14, 1992, by and among MaxPack S.A.
de C.V. and the stockholders thereof
10.60 Agreement and Plan of Merger, dated as of May 17, 1996 (as amended), among IPC, CFI
Industries, Inc. and Equity Partners
*21.1 Subsidiaries of Ivex
*21.2 Subsidiaries of IPC
*24.1 Powers of Attorney
27 Financial Data Schedule, which is submitted electronically to the Securities and Exchange
Commission for information only and not filed.
</TABLE>
- ----------------
* Filed herewith.
(1) Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this report.
* * * * *
64
<PAGE> 1
EXHIBIT 10.3
________________________________________________________________________________
TRUST AGREEMENT
Between
IPC, Inc.
(Formerly Named Ivex Packaging Corporation)
and
David E. Wartner
__________________
October 17, 1996
__________________
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. TRUST FUND . . . . . . . . . . . . . . . . . . . . . . 2
II. PAYMENTS TO TRUST BENEFICIARIES . . . . . . . . . . . 4
III. THE TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO
A TRUST BENEFICIARY WHEN THE COMPANY IS INSOLVENT . . 6
IV. PAYMENTS TO COMPANY . . . . . . . . . . . . . . . . . 8
V. INVESTMENT OF TRUST FUND . . . . . . . . . . . . . . . 9
VI. INCOME OF THE TRUST . . . . . . . . . . . . . . . . . 12
VII. ACCOUNTING BY TRUSTEE . . . . . . . . . . . . . . . . 13
VIII. RESPONSIBILITY AND INDEMNIFICATION OF TRUSTEE . . . . 16
IX. AMENDMENTS, ETC., TO PLANS AND EXHIBITS . . . . . . . 21
X. REPLACEMENT OF TRUSTEE . . . . . . . . . . . . . . . . 23
XI. AMENDMENT OR TERMINATION OF AGREEMENT . . . . . . . . 25
XII. SPECIAL DISTRIBUTIONS . . . . . . . . . . . . . . . . 26
XIII. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . 29
XIV. NOTICES . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
-i-
<PAGE> 3
TABLE OF DEFINITIONS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
Section
-------
<S> <C>
"Agreement" Introduction
"Board" 3.1
"CEO" 3.1
"Code" 1.6
"Company" Introduction
"ERISA" 1.6
"Executive" 7.3
"Insolvent" Recitals
"Participants" Recitals
"Plans" Recitals
"Successor" 9.1
"Supplemental Benefits" Recitals
"Trust Beneficiaries" Recitals
"Trust" Recitals
"Trustee" Introduction
</TABLE>
-ii-
<PAGE> 4
TRUST AGREEMENT
This trust agreement ("Agreement") made this 17th day of October, 1996 by
and between IPC, Inc. (formerly named Ivex Packaging Corporation), a Delaware
corporation (the "Company"), and David E. Wartner (the "Trustee").
WITNESSETH:
WHEREAS, the current employees of the Company listed on Exhibit A hereto
(the "Participants") and their beneficiaries are, or may become, entitled to
benefits under the provisions of one or more of the plans and/or individual
agreements listed on Exhibit B hereto, as the same have been or may hereafter
be amended or restated, or any successor thereto (collectively referred to
herein as the "Plans"), copies of which are appended hereto;
WHEREAS, the Plans provide for certain income deferral, retirement income
and/or other benefits, and the Company wishes specifically to assure the
payment to the Participants and their beneficiaries (the Participants and their
respective beneficiaries being collectively referred to herein as the "Trust
Beneficiaries") of amounts due thereunder (the amounts so payable being
collectively referred to herein as the "Supplemental Benefits");
WHEREAS, the Company wishes to establish a trust (the "Trust") and to
transfer to the Trust assets which shall be held therein subject to the claims
of the creditors of the Company to the extent set forth in Article III hereof
until (i) paid in full
<PAGE> 5
to all Trust Beneficiaries as Supplemental Benefits in
such manner and at such times as specified herein unless the Company is
Insolvent (as that term is defined herein) at the time that such Supplemental
Benefits become payable or (ii) otherwise disposed of pursuant to the terms of
this Agreement; and
WHEREAS, the Company shall be considered "Insolvent" for
purposes of this Agreement at such time as the Company (i) is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code, as
heretofore or hereafter amended, or (ii) is unable to pay its debts as they
become due;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
I. TRUST FUND
I.1 Subject to the claims of creditors to the extent set
forth in Article III hereof, the Company hereby deposits with the Trustee in
trust Fifty Thousand Dollars ($50,000), which shall become the principal of
this Trust, to be held, administered and disposed of by the Trustee as herein
provided.
I.2 The Trust hereby established shall be irrevocable.
I.3 The principal of the Trust and any earnings thereon shall be held in
trust separate and apart from other funds of the Company and shall be used
exclusively for the uses and purposes herein set forth. No Trust Beneficiary
shall have any preferred claim on, or any beneficial ownership interest in, any
assets of
-2-
<PAGE> 6
the Trust prior to the time that such assets are paid to a Trust
Beneficiary as Supplemental Benefits as provided herein. Any rights created
under the Plans and this Agreement shall be mere unsecured contractual rights
of Trust Beneficiaries with respect to the Company. The obligation of the
Trustee to pay Supplemental Benefits pursuant to this Agreement constitutes
merely an unfunded and unsecured promise to pay such Supplemental Benefits.
I.4 Within 10 days after the end of each calendar quarter ending after
the date of this Agreement, the Company shall make a contribution to the Trust
that is sufficient, taking into account the assets of the Trust as of the end
of such calendar quarter prior to such contribution, to provide for the payment
of all Supplemental Benefits and any other amounts that may become payable or
reimbursable pursuant to the terms of this Agreement as determined as of the
end of such calendar quarter.
I.5 Within 10 days after each of the date of this Agreement and the end
of each calendar quarter ending thereafter, the Company shall (a) specify as of
the end of such calendar quarter or the date of this Agreement, as the case may
be, the nature, amounts and timing of the Supplemental Benefits, if any,
including the vested percentage thereof under the applicable Plans as if the
Participant had then terminated employment, to which each Trust Beneficiary may
become entitled, subject to Article IX hereof, in an exhibit ("Exhibit C")
which shall become a part of this Agreement and be incorporated herein by this
reference, (b) provide any corresponding revisions to Exhibits A
-3-
<PAGE> 7
and B that may be required and (c) provide the Trustee with copies of the
Plans and any amendments thereto.
I.6 The Trust is intended to be a grantor trust within the
meaning of section 671 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any successor provision thereto, and shall be construed
accordingly. The purpose of the Trust is to assure that the Company's
obligations to the Participants pursuant to the Plans are fulfilled. The Trust
is neither intended nor designed to qualify under section 401(a) of the Code or
to be subject to the provisions of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). The Trust established under this Agreement does
not fund and is not intended to fund the Plans or any other employee benefit
plan or program of the Company. Such Trust is and is intended to be a
depository arrangement with the Trustee for the setting aside of cash and other
assets of the Company for the meeting of part or all of its future obligations
with respect to Supplemental Benefits to some or all of the Trust Beneficiaries
under the Plans.
II. PAYMENTS TO TRUST BENEFICIARIES
II.1 Provided that the Company is not Insolvent, the Trustee shall make
payments of Supplemental Benefits to each Trust Beneficiary from the assets of
the Trust in compliance and conformity with the terms of the Plans and in
accordance with Exhibit C hereto, and subject to Article IX hereof. If all or
any portion of a Participant's account balance under the Plans is
-4-
<PAGE> 8
forfeited in accordance with the terms of the Plans, the Company, subject to
Article IX thereof, shall provide notice to the Trustee of such forfeiture no
later than 10 days after the end of the calendar quarter in which such
forfeiture occurs and shall specify the portion of the Participant's account so
forfeited.
II.2 No payment from the Trust assets to a Trust Beneficiary shall
exceed the balance of the separate subaccount(s) maintained pursuant to Section
7.2 hereof with respect to the corresponding Plan and the applicable
Participant. If, after application of the preceding sentence, the balance of a
Participant's separate subaccount(s) maintained pursuant to Section 7.2 hereof
with respect to a Plan is not sufficient to provide for full payment of the
Supplemental Benefits to which such Participant's Trust Beneficiaries are
entitled as provided under the Plan, the Trustee shall so notify the Company
and the Company shall make the balance of each such payment directly to the
Trust Beneficiary as it falls due as provided in the applicable provision of
the respective Plan.
II.3 The Company may make payments of Supplemental
Benefits to each Trust Beneficiary. The Company shall notify the Trustee of
its decision to pay Supplemental Benefits directly prior to the time amounts
are due to be paid to a Trust Beneficiary.
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II.4 Nothing in this Agreement shall in any way diminish any rights of any
Trust Beneficiary to pursue such Trust Beneficiary's rights as a general
creditor of the Company with respect to Supplemental Benefits or otherwise, and
the rights of each Trust Beneficiary under the respective Plan shall in no way
be affected or diminished by any provision of this Agreement or action taken
pursuant to this Agreement, except that any payment actually received by any
Trust Beneficiary hereunder shall reduce dollar-per-dollar amounts otherwise
due to such Trust Beneficiary pursuant to such Plan.
III. THE TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO
A TRUST BENEFICIARY WHEN THE COMPANY IS INSOLVENT
III.1 At all times during the continuance of this Trust, the principal and
income of the Trust shall be subject to claims of creditors of the Company as
set forth in this Section 3.1. The Board of Directors of the Company (the
"Board") and the Chief Executive Officer of the Company (the "CEO") shall have
the duty to inform the Trustee in writing if either the Board or the CEO
believes that the Company is Insolvent. If the Trustee receives a notice in
writing from the Board or the CEO stating that the Company is Insolvent or if a
person claiming to be a creditor of
the Company with claims in excess of $5 million alleges in writing to the
Trustee that the Company has become Insolvent, the Trustee shall independently
determine within 30 days after receipt of such notice whether the Company is
Insolvent. Pending such determination, or if the Trustee has actual knowledge
or has
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determined that the Company is Insolvent, the Trustee shall discontinue
or refrain from making payments to any Trust Beneficiary and hold the Trust
assets for the benefit of the general creditors of the Company. The Trustee
shall pay any undistributed principal and income in the Trust to the extent
necessary to satisfy the claims of the creditors of the Company as a court of
competent jurisdiction may direct. Such payments of principal and income shall
be borne by the Participants in proportion to the balances on the date of such
court order of their respective subaccounts maintained pursuant to Section 7.2
hereof; provided, however, that all accounts and subaccounts shall first be
allocated and reallocated as of such date in accordance with Section 7.2
hereof. If the Trustee has discontinued or refrained from making payments to
any Trust Beneficiary pursuant to this Section 3.1, the Trustee shall pay or
resume payments to such Trust Beneficiary in accordance with this Agreement if
the Trustee has determined that the Company is
not Insolvent, or is no longer Insolvent (if the Trustee initially determined
the Company to be Insolvent), or pursuant to the order of a court of competent
jurisdiction. The Trustee shall have no duty to inquire as to whether the
Company is Insolvent and may rely on information concerning the Insolvency of
the Company that has been furnished to the Trustee by any creditor of the
Company or by any person (other than an employee or director of the Company)
acting with apparent or actual authority with respect to the Company.
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III.2. Subject to the provisions of Section 2.2 hereof, if the Trustee
is precluded from paying Supplemental Benefits from the Trust assets pursuant
to Section 3.1 hereof and such prohibition is subsequently removed, the Trustee
shall pay the aggregate amount of all Supplemental Benefits that would have
been paid to the Trust Beneficiaries in accordance with this Agreement during
the period of such prohibition, less the aggregate amount of Supplemental
Benefits paid to any Trust Beneficiary directly by the Company during any such
period, together with interest on the net amount delayed determined at a rate
equal to the rate actually earned (including, without limitation, accrued but
unpaid income, market appreciation or depreciation, both realized and
unrealized, and accrued expenses of the Trust payable from Trust assets under
the terms of the Agreement) during such period with respect to the assets of
the Trust corresponding to such net amount delayed.
IV. PAYMENTS TO COMPANY
IV.1 Except to the extent expressly contemplated by this Article IV or
Section 11.3, the Company shall have no right or power to direct the Trustee to
return any of the Trust assets to the Company before all payments of
Supplemental Benefits have been made to all Trust Beneficiaries as herein
provided.
IV.2 Not later than 90 days after the end of each calendar quarter ending
after the date of this Agreement, the Trustee shall pay to the Company the
portion of the balance of the separate subaccount(s) maintained pursuant to
Section 7.2 hereto
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on behalf of any Participant that is in excess of the Supplemental Benefits
to which the Participant's Trust Beneficiaries are entitled under the Plan,
which excess has been forfeited by the Participant under the terms of the Plan
during such calendar year, as determined by the Trustee consistent with Section
2.1 and subject to Section IX hereof.
V. INVESTMENT OF TRUST FUND
V.1 In absence of the exercise of the power of direction provided for in
Section 5.2, the Trustee is authorized and empowered in its sole discretion to
invest and reinvest the assets of Trust consistent with the provisions of this
Section 5.1 and 5.3. The investment objective of the Trustee shall be to
preserve the principal of the Trust while obtaining a reasonable total rate of
return, measurement of which shall include, without limitation, market
appreciation or depreciation plus receipt of interest and dividends. The
Trustee shall be mindful, in the course of its management of the Trust, of the
liquidity demands on the Trust.
V.2 The Company with the agreement of the Executive, as hereinafter
defined, may direct the Trustee to segregate all or a portion of the Trust
assets in a separate investment account or accounts and may appoint an
investment advisor or manager (hereinafter referred to as an "investment
manager") to direct the investment and reinvestment of such investment account
or accounts in respect of which an investment manager has been appointed,
including to have the power to manage, acquire and
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dispose of any assets of the Trust on a discretionary basis in a manner
consistent with investment objectives provided to the investment manager by the
Company and the Executive. In such event, the Company and the Executive shall
notify the Trustee in writing of the appointment of such investment manager.
The Trustee shall, without question, comply with any directions given to it by
the investment manager appointed pursuant to the preceding sentences of this
Section 5.2. Directions for the investment or reinvestment of Trust assets
from an investment manager shall, in a manner and in accordance with procedures
acceptable to or established by the Trustee or its designee, be communicated to
and implemented by, as the case be, the Trustee, the Trustee's designee or
broker/dealer designated for the purpose by the investment manager.
Communication of any such directions to such a designee or broker/dealer shall
conclusively be deemed an authorization to the designee or broker/dealer to
implement the direction even though coming from a person other than the
Trustee. The Trustee shall not be accountable for any losses sustained by
reason of any action taken or omitted pursuant to the provisions of the
preceding sentences of this Section 5.2 and no person dealing with the Trustee
need inquire whether or not these provisions have been complied with. The
Trustee shall be under no duty to question any such direction of the investment
manager, to review any securities or other property held in any investment
account or accounts in respect of which an investment manager has been
appointed or to make any recommendations to the investment manager with respect
to such
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securities or other property. The Trustee shall not be liable or responsible
for any loss resulting to the Trust by reason of any sale or investment made
pursuant to the direction of an investment manager nor by reason of the failure
to take any action with such direction in the absence of further directions of
such investment manager. Notwithstanding anything in the Agreement to the
contrary, the Trustee shall be indemnified and saved harmless by the Company
from and against any and all personal liability to which the Trustee may be
subjected by carrying out any directions of an investment manager issued
pursuant hereto or for failure to act in the absence of directions of the
investment manager including all expenses reasonably incurred in its defense in
the event the Company fails to provide such defense; provided, however, the
Trustee shall not be so indemnified if it participates knowingly in, or
knowingly undertakes to conceal, an act or omission of an investment manager,
having actual knowledge that such act or omission was a breach of fiduciary
duty; provided further, however, that the Trustee shall not be deemed to have
knowingly participated in or knowingly undertaken to conceal an act or
omission of an investment manager with knowledge that such act or omission was
a breach of fiduciary duty by merely complying with directions of an investment
manager or for failure to act in the absence of directions of an investment
manager or by reason of maintaining accounting records. The Trustee shall not
be charged with knowledge of the termination of the appointment of any
investment manager until it receives written notice thereof from the Company
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and the Executive.
V.3 The Trustee shall have the sole power to invest the assets of the Trust,
subject to and in accordance with the provisions of Section 5.1 and 5.2 hereof
(including, without limitation, in securities of the Company). The Trustee
shall not be liable for any failure to maximize income on such portion of the
Trust assets as may be from time to time invested or reinvested as set forth
above, nor for any loss of principal or income due to the liquidation of any
investment that the Trustee, in its sole discretion, believes necessary to make
payments or to reimburse expenses under the terms of this Agreement.
Notwithstanding the provisions of Section 5.1 and 5.2, the Trustee shall have
the right to invest assets of the Trust for short-term investment periods,
pending distribution or long-term investment of such assets, as the Trustee may
deem proper and suitable in non-interest bearing deposit accounts (including
any such accounts offered or maintained by the Trustee or any successor or
affiliated corporation). Nothing in this Agreement shall preclude the
commingling of Trust assets for investment.
VI. INCOME OF THE TRUST
VI.1 Except as provided in Article III hereof, during the continuance of
this Trust all net income (or loss) of the Trust shall be retained in the Trust
and allocated quarterly in accordance with Section 7.2 hereof. For this
purpose, the income (or loss) of the Trust shall be determined for a calendar
quarter by taking into account all income, gains or losses on Trust
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assets, including (a) accrued but unpaid income, (b) any increase or decrease,
both realized and unrealized, in the value of the Trust assets attributable to
market appreciation or depreciation and (c) any accrued expenses of the Trust
payable form Trust assets under the terms of the Agreement.
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VII. ACCOUNTING BY TRUSTEE
VII.1 The Trustee shall maintain or cause to be maintained such books,
records and accounts as may be necessary for the proper administration of the
Trust assets, including such specific records as shall be agreed upon in writing
by the Company and the Trustee. Within 60 days following the close of each
calendar year that includes or commences after the date of this Agreement until
the termination of this Trust or the removal or resignation of the Trustee (and
within 60 days after the date of such termination, removal or resignation), the
Trustee shall render or cause to be rendered to the Company and the Executive an
accounting with respect to the Trust assets as of the end of the then most
recent calendar year (and as of the date of such termination, removal or
resignation, as the case may be). The Trustee shall furnish or cause to be
furnished to the Company on a monthly basis (or as the Company shall direct from
time to time) and in a timely manner such information regarding the Trust as the
Company shall require for purposes of preparing its statements of financial
condition. The Trustee shall at all times maintain or cause to be maintained
separate bookkeeping subaccounts for each Participant as prescribed by Section
7.2 hereof, and shall provide or cause to be provided quarterly statements
of the subaccounts to each Participant. Upon the written request of the Company
or the Executive, the Trustee shall deliver or cause to be delivered to the
Executive or the Company, as the case may be, a written report setting forth the
amount held in the Trust, the amount credited to each subaccount
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and a record of the deposits made with respect thereto by the Company.
Absent compelling circumstances, the Trustee shall not be required to respond
to more than one such request made within any calendar quarter. Unless the
Company or the Executive shall have filed with the Trustee written exception or
objection to the statement and account furnished by the Trustee within 90 days
after receipt thereof, the Company and the Trust Beneficiaries shall be deemed
to have approved such statement and account, and in such case the Trustee shall
be forever released and discharged with respect to all matters and things
reported in such statement and account as though it had been settled by a
decree of a court of competent jurisdiction in an action or proceeding to which
the Company and the Trust Beneficiaries were parties.
VII.2 (a) Consistent with Exhibit C hereto and subject to Article IX
hereof, the Trustee shall maintain or cause to be maintained separate
subaccount(s) for each Participant as are necessary or appropriate for each
Plan. The Trustee shall credit or debit or cause to be credited a debited each
subaccount as appropriate to reflect the respective allocable portion of the
Trust assets, as such Trust assets may be adjusted from time to time pursuant to
the terms of this Agreement. All deposits of principal pursuant to Sections
1.1, 1.4 and 9.3 shall be allocated, but not reallocated, by the Company.
(b) As further described in this Section 7.2 (b), as of the last day of
each calendar quarter ending after the date of this Agreement and as of
such other date(s) provided for under this Agreement, the Trustee shall
allocate or cause to be
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allocated the net income (or loss) of the Trust for such calendar
quarter in accordance with Exhibit C hereto and subject to Article IX hereof.
The net income (or loss) of the Trust for a calendar quarter shall be allocated
to Participants' subaccounts in proportion to their subaccount balances as
determined under this Section 7.2 as of the last day of the immediately
preceding calendar quarter (or the date as of which the allocation of the
initial deposit to the Trust is made in the case of the calendar quarter
including such date) as adjusted to reflect distributions made since that date.
VII.3 For purposes of this Agreement, the term "Executive" shall refer
to the Participant listed on Exhibit A who, in the sole judgment of the
Trustee, has the greatest aggregate amount in his or her respective subaccounts
maintained under Section 7.2 hereof and who has accepted such designation in
writing; provided, however, if any Participant shall be deceased or adjudged
incompetent, such Participant's Successor (as defined in Section 9.1 hereof)
(or if no Successor, the Trust Beneficiaries of such Participant) shall
participate in such Participant's stead, and (b) no Successor or Trust
Beneficiary shall participate if all payments of Supplemental Benefits have
been made with respect to such Participant (including the Trust Beneficiaries
of such Participant). The determination of which Participant should be the
Executive shall be made within 30 days after (and as of) the first day of
January of each year; provided, however, that an acceptance is not required
from a Participant who is already serving as the Executive. The Trustee
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shall notify each Participant who, as a result of such determination, is no
longer an Executive. A Participant may resign as the Executive after
providing not less than 30 days' notice in writing to the Trustee; provided,
however, that no such resignation shall become effective until the successor
Executive has accepted such designation in writing. In the event of the
resignation, death or incapacity of the Executive, the Trustee
shall designate a successor Executive, which shall be the Participant (other
than an Executive or a Participant who has declined to accept a designation as
an Executive) who has the greatest aggregate amount in such Participant's
respective subaccounts maintained under Section 7.2 hereof and who accepts such
designation in writing. Except as otherwise expressly provided herein, the
Executive shall be considered to have "agreed" or "consented" to, or "approved"
or "requested", a proposed action or decision under the terms of this Agreement
when the Executive so indicates in writing to the Trustee.
VIII. RESPONSIBILITY AND INDEMNIFICATION OF TRUSTEE
VIII.1 The duties and responsibilities of the Trustee shall be limited to
those expressly set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Trustee.
VIII.2 In addition to and without limiting any other provision of this
Agreement, the Trustee shall, in its sole discretion, based upon the
information furnished to it by the Company and/or the Participants and any
additional information
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that it may reasonably request, (a) make all decisions
regarding whether a Trust Beneficiary is eligible for the payment of
Supplemental Benefits, the nature, amount and timing of such Benefits, and any
other decisions pertinent to the exercise of the Trustee's duties and
responsibilities under this Agreement, and (b) exercise any power or discretion
granted pursuant to the Plans to the Board, any committee of the Board, or to
any other committee, entity or person. In connection with the exercise of such
duties, responsibilities, power and discretion, the Trustee (i) shall be
entitled to rely upon any information furnished to it in accordance with the
provisions of this Agreement, (ii) shall not be required to make any
independent verification of such information, and (iii) may, in its sole
discretion, waive any requirement to furnish information to it. The Company
hereby agrees that it will not contest, dispute or otherwise challenge any
decision made by the Trustee pursuant to the terms of this Agreement.
VIII.3 If all or any part of the Trust assets are at any time attached,
garnished, or levied upon by any court order, or in case the payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or in case any order, judgment or decree
shall be made or entered by a court affecting such property or any part
thereof, then and in any of such events the Trustee shall be authorized,
in its sole discretion, to rely upon and comply with any such order, judgment
or decree, and it shall not be liable to the Company or any Trust Beneficiary
by reason of such compliance
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even though such order, judgment or decree subsequently may be reversed,
modified, annulled, set aside or vacated.
VIII.4 The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; provided, however, that the
Trustee shall incur no liability to anyone for any action taken pursuant to a
direction, request, or approval given by the Company or the Executive or Trust
Beneficiary or any investment manager contemplated by and complying with the
terms of this Agreement. The Trustee shall discharge its responsibility for the
investment, management and control of the Trust assets solely in the interest of
the Trust Beneficiaries and for the exclusive purpose of assuring that, to the
extent of available Trust assets, and in accordance with the terms of this
Agreement, all payments of Supplemental Benefits are made when due to the Trust
Beneficiaries.
VIII.5 The Trustee may consult with legal counsel (who may be counsel for
the Company) to be selected by it, and the Trustee shall not be liable for any
action taken or suffered by it in accordance with the advice of such counsel.
VIII.6 The Trustee shall be reimbursed by the Company for its reasonable
expenses incurred in connection with the performance of its duties hereunder
(including, but not limited to, the fees and expenses of counsel, accountants,
investment advisors and others incurred pursuant to Section 8.5, 8.10 or
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12.2 hereof) and shall be paid reasonable fees for the performance of such
duties in the manner provided by Section 8.7 hereof. Notwithstanding the
foregoing, brokerage commissions and other transaction fees and investment fees
attributable to commingled investments shall be paid at the direction of the
Company from Trust assets. The fees and expenses of any investment manager
appointed pursuant to Section 5.2 shall be paid by the Company.
VIII.7 The Company agrees to indemnify and hold harmless the Trustee from
and against any and all damages, losses, claims or expenses as incurred
(including expenses of investigation and fees and disbursements of counsel to
the Trustee and any taxes imposed on the Trust assets or income of the Trust)
arising out of or in connection with the performance by the Trustee of its
duties hereunder, other than such damages, losses, claims or expenses arising
out of the Trustee's gross negligence or willful misconduct. The Trustee shall
not be required to undertake or to defend any litigation arising in connection
with this Agreement unless it be first indemnified by the Company against its
prospective costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto, and the Company hereby agrees to
indemnify the Trustee and be primarily liable for such costs, expenses, and
liabilities. Any amount payable to the Trustee under Section 8.6 hereof (other
than an amount which the Company, pursuant to Section 8.6, has directed paid
from Trust assets) or this Section 8.7 shall be paid by the Company promptly
upon demand therefor by the Trustee.
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VIII.8 Subject to Section 5.2 if an investment manager has been appointed,
the Trustee may vote any stock or other securities and exercise any right
appurtenant to any stock, other securities or other property held hereunder,
either in person or by general or limited proxy, power of attorney or other
instrument.
VIII.9 The Trustee may hold securities in bearer form and may register
securities and other property held in the Trust fund in its own name or in the
name of a nominee, combine certificates representing securities with
certificates of the same issue held by the Trustee in other fiduciary
capacities, and deposit, or arrange for deposit of, property with any
depository; provided that the books and records of the Trustee shall at all
times show that all such securities are part of the assets of the Trust.
VIII.10 The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals, who may be agents,
accountants, actuaries, investment advisors, financial consultants, or otherwise
act in a professional capacity, as the case may be, for the Company or with
respect to any Plan, to assist the Trustee in performing any of its duties
hereunder.
VIII.11 The Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law unless expressly provided otherwise herein.
VIII.12 Notwithstanding any other provision of this Agreement, in the event
of the termination of the Trust, or the resignation or discharge of the Trustee,
the Trustee shall have
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the right to a settlement of its accounts in accordance with the procedures
set forth in Section 7.1 hereof, which may be made, at the option of the
Trustee, either (a) by a judicial settlement in a court of competent
jurisdiction, or (b) by agreement of settlement, release and indemnity from
the Company to the Trustee.
IX. AMENDMENTS, ETC., TO PLANS AND EXHIBITS
IX.1 Not later than 10 days after the end of each calendar quarter ending
after the date of this Agreement and at such other times as may in the judgment
of the Company be appropriate in view of a change in circumstances, the Company
and each Participant (or the personal representative of such Participant
(including the guardian, executor or administrator of such Participant)
(hereafter, the "Successor" of such Participant)) shall agree upon and furnish
any amendment to Exhibit C hereto (but only with respect to such Participant's
Supplemental Benefits) as shall be required to reflect:
(a) any required change in the amounts allocated to or vested
percentage of the Participant's accounts under the Plans as the result
of the allocation of contributions or income (or loss) (or otherwise)
during the prior calendar quarter, or
(b) any amendment, restatement or other change in or to the
Plans,
which agreements to amendments to such Exhibit C shall be furnished to the
Trustee by the Company or the Participants (or
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their Successors) and thereafter be deemed to be a part of, and to amend to
the extent thereof, this Agreement; provided, however, that in the event of the
failure of the Company and any Participant (or Successor) to reach such
agreement, the provisions of Section 9.2. hereof shall control.
IX.2 The Company shall, and any Trust Beneficiary may, promptly furnish
the Trustee true and correct copies of any amendment, restatement or successor
to any of the Plans. The Company shall, and any Trust Beneficiary may, also
furnish the Trustee, upon the Trustee's request, such evidence of the
compensation of the Participants and other information as the Trustee shall deem
necessary for its determinations under this Section 9.2. Upon written
notification to the Trustee by the Company or any Participant (or Successor) of
the failure of the Company and such Participant (or Successor) to agree as all
provided in Section 9.1, the Trustee shall, to the extent necessary in the sole
judgment of the Trustee, (a) recompute the account balances under the Plans, the
vested percentage thereof and amounts payable hereunder as set forth in Exhibit
C hereto to any Trust Beneficiary, and (b) notify the Company and the
Participant (or Successor) in writing of its computations. Thereafter, this
Agreement and all Exhibits hereto shall be amended to the extent of such Trustee
determinations without further action; provided, however, that the failure of
the Company to furnish any such amendment, restatement, successor, compensation
or other information shall in no way diminish the rights of any Trust
Beneficiary hereunder or thereunder.
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IX.3 Any amendment to Exhibit A (and any directly corresponding amendment
to Exhibit B) that modifies one or more lists of Participants must be (a) agreed
to by the Executive, and (b) in the case of an amendment that adds a new
Participant as a Trust Beneficiary, accompanied by the deposit into the Trust by
the Company, on or before the effective date on which the new Participant would
become a Trust Beneficiary, an amount sufficient to pay such new Participant's
Supplemental Benefits hereunder.
IX.4 Notwithstanding the foregoing provisions of this Article IX, any
amendment, restatement, successor or other change in a Plan or the addition of a
new Plan that would materially increase the responsibilities or liabilities of
the Trustee or materially change its duties shall also require the consent of
the Trustee, which consent shall not be unreasonably withheld.
X. REPLACEMENT OF TRUSTEE
X.1 The Trustee may resign and be discharged from its duties hereunder
after providing not less than 90 days' notice in writing to the Company and to
the Executive. The Trustee may be removed at any time upon notice in writing by
the Company with the agreement of the Executive. A replacement or successor
trustee shall be appointed by the Company with the agreement of the Executive.
No such removal or resignation shall become effective until the effectiveness of
the acceptance of the trust by a successor trustee designated in accordance with
this Article X. If the Trustee should resign, and within 45 days of the
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notice of such resignation the Company and the Executive shall not have notified
the Trustee of an agreement as to a replacement trustee, the Trustee shall
appoint a successor trustee, which shall be such bank or trust company (a) that
the Trustee in its sole discretion considers an appropriate trustee for the
Trust, having due regard for the objectives, magnitude and expected duration of
the Trust; (b) (i) whose trust assets under investment would place it among the
100 largest trust companies in the United States, or (ii) which is a national
banking association or established under the laws of one of the states of the
United States, and which has equity in excess of $100 million; and (c) that is
independent and not subject to the control of either the Company or the Trust
Beneficiaries. The preceding determinations shall be made as of the time of
appointment of the successor trustee. If after making reasonable efforts to
appoint a successor trustee as provided above, the Trustee has been unable to do
so, the Trustee shall petition a court of competent jurisdiction to appoint a
successor trustee. Upon the acceptance of the trust by a successor trustee, the
Trustee shall release all of the moneys and other property in the Trust to its
successor, who shall thereafter for all purposes of this Agreement be considered
to be the "Trustee." In the event of its removal or resignation, the Trustee
shall duly file or cause to be filed with the Company and the Executive, a
written statement or statements of accounts and proceedings as provided in
Section 7.1 hereof for the period since the last previous annual accounting of
the Trust, and if written objection to such
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account is not filed as provided in Section 7.1 hereof, the Trustee shall
to the maximum extent permitted by applicable law be forever released and
discharged from all liability and accountability with respect to the propriety
of its acts and transactions shown in such account.
XI. AMENDMENT OR TERMINATION OF AGREEMENT
XI.1 This Agreement may be amended at any time and to any extent by a
written instrument executed by the Trustee and the Company and approved by the
Executive; provided, however, that no amendment shall have the effect of (a)
making the Trust revocable or (b) altering Section 11.2 hereof. Notwithstanding
the previous sentence, (i) amendments contemplated by Article IX hereof shall be
made as therein provided, and (ii) the approval by the Executive shall not be
required for any amendment necessary in order to obtain a favorable private
letter ruling (if such ruling is sought) from the Internal Revenue Service
regarding the effect of the Trust on the taxation of the Company or the Trust
Beneficiaries.
XI.2 The Trust shall terminate upon the earliest to occur of (i) a
determination by the Trustee in its sole judgment that no Trust Beneficiary is
or will be entitled to any further payment of Supplemental Benefits; (ii) such
time as the Trust no longer contains any assets, or contains assets that, in the
sole judgment of the Trustee, are insubstantial in relation to the actual and
potential liabilities of the Trustee to pay Supplemental Benefits under the
terms of this Agreement and any
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other amounts to be paid from the assets of the Trust, including, without
limitation, the fees and expenses of the Trustee and counsel; or (iii) such
time as the Trustee shall have received consents from the Executive to the
termination of this Agreement. Notwithstanding the previous sentence (other
than clause (ii) thereof), if payments under a Plan with respect to a Trust
Beneficiary are the subject of litigation and if the balance of the respective
subaccount maintained pursuant to Section 7.2 is greater than zero, the Trust
shall not terminate and the funds held in the Trust with respect to such Trust
Beneficiary shall continue to be held by the Trustee until the final resolution
of such litigation. The Trustee may assume that no Plan is the subject of such
litigation unless the Trustee receives written notice from a Trust Beneficiary
or the Company with respect to such litigation. The Trustee may rely upon
written notice from a Trust Beneficiary as to the final resolution of such
litigation.
XI.3 Upon a termination of the Trust as provided in Section 11.2 hereof,
any assets remaining in the Trust, less all payments, expenses, taxes and other
charges under this Agreement as of such date of termination, shall be returned
to the Company.
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XII. SPECIAL DISTRIBUTIONS
XII.1 It is intended that (a) the creation of, transfer of assets to, and
irrevocability of, the Trust will not cause any of the Plans to be other than
"unfunded" for purposes of title I of ERISA; (b) transfers of assets to the
Trust will not be transfers of property for purposes of section 83 of the Code,
or any successor provision thereto, nor will such transfers cause a currently
taxable benefit to be realized by a Trust Beneficiary pursuant to the "economic
benefit" doctrine; and (c) pursuant to section 451 of the Code, or any successor
provision thereto, amounts will be includible as compensation in the gross
income of a Trust Beneficiary in the taxable year or years in which such amounts
are actually distributed or made available to such Trust Beneficiary by the
Trustee.
XII.2 Notwithstanding anything to the contrary contained in any Plan, if
the Trustee obtains an opinion of tax counsel selected by the Trustee to the
effect that based upon any of the following occurring after the date of this
Agreement:
(a) change in the federal tax or revenue laws, (b) a decision in a
controlling case, (c) a published ruling or similar announcement issued by
the Internal Revenue Service, (d) a regulation issued by the Secretary of
the Treasury, (e) a decision by a court of competent jurisdiction involving
a Trust Beneficiary, or (f) a closing agreement made under section 7121 of
the Code, or any successor provision thereto, that is approved by the
Internal Revenue Service and involves a Trust Beneficiary, it is more
likely than not that an
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<PAGE> 32
amount is includible in the gross income of a Trust Beneficiary
in a taxable year that is prior to the taxable year or years in which such
amount would, but for this Section 12.2, otherwise actually be distributed
or made available to such Trust Beneficiary by the Trustee, then promptly
after the next quarterly allocation pursuant to Section 7.2 hereof, the
Trustee shall distribute to each affected Trust Beneficiary an amount equal
to the lesser of (i) the amount determined to be includible in gross income
in such prior taxable year, or (ii) the subaccount balance(s) corresponding
to such amount. The Trustee shall seek such an opinion of tax counsel if
and only if requested to do so by the Executive.
XII.3 Notwithstanding anything to the contrary contained in any Plan, if a
Trust Beneficiary provides evidence satisfactory to the Trustee demonstrating
that, as a result of an assertion by the Internal Revenue Service, a final
nonappealable binding determination has been made with respect to a taxable year
of such Trust Beneficiary that an amount is includible in the gross income of
such Trust Beneficiary in a taxable year that is prior to the taxable year in
which such amount would, but for this Section 12.3, otherwise actually be
distributed or made available to such Trust Beneficiary by the Trustee, then
promptly after the next quarterly allocation pursuant to Section 7.2 hereof, the
Trustee shall distribute to such Trust Beneficiary an amount equal to the lesser
of (a) such amount determined by the Internal Revenue Service to be includible
in gross income in such prior
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<PAGE> 33
taxable year, or (b) the subaccount balance(s) corresponding to such
amount.
XII.4 Notwithstanding anything to the contrary contained in any Plan, if
the Trustee determines that based upon the aggregate of the subaccount balances
with respect to a Participant the maximum amount potentially or actually due to
such Participant is less than $5,000, the Trustee shall pay such aggregate
amount to the Trust Beneficiaries of such Participant in full satisfaction of
all obligations of the Trustee hereunder to the Trust Beneficiaries of such
Participant.
XIII. GENERAL PROVISIONS
XIII.1 The Company shall, at any time and from time to time, upon the
reasonable request of the Trustee, provide information, execute and deliver such
further instruments and do such further acts as may be necessary or proper to
effectuate the purposes of this Trust.
XIII.2 Each Exhibit referred to in this Agreement shall become a part
hereof and is expressly incorporated herein by reference.
XIII.3 This Agreement sets forth the entire understanding of the parties
with respect to the subject matter hereof and supersedes any and all prior
agreements, arrangements and understandings relating thereto. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and legal representatives.
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<PAGE> 34
XIII.4 This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois, other than and without reference to any
provisions of such laws regarding choice of laws or conflict of laws.
XIII.5 In the event that any provision of this Agreement or the application
thereof to any person or circumstances shall be determined by a court of
competent jurisdiction to be invalid or unenforceable to any extent, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each provision of this Agreement shall be
valid and enforced to the maximum extent permitted by law.
XIII.6 (a) The preamble to this Agreement, including the definitions
provided therein, shall be considered a part of the agreement of the parties as
if set forth in a section of this Agreement.
(b) The headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not in any way
affect the meaning or interpretation of this Agreement.
XIII.7 The right of any Trust Beneficiary to any benefit or to any payment
hereunder may not be anticipated, assigned (either at law or in equity),
alienated or subject to attachment, garnishment, levy, execution or other legal
or equitable process except as required by law. Any attempt by any Trust
Beneficiary to anticipate, alienate, assign, sell, transfer, pledge, encumber
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<PAGE> 35
or charge the same shall be void. The Trust assets shall not in any manner be
subject to the debts, contracts, liabilities, engagement or torts of any Trust
Beneficiary and payments hereunder shall not be considered an asset of the Trust
Beneficiary in the event of the insolvency or bankruptcy of such Trust
Beneficiary.
XIII.8 Each Participant (and, where applicable, each Successor) is an
intended beneficiary under this Trust, and as an intended beneficiary shall be
entitled to enforce all terms and provisions hereof with the same force and
effect as if such person had been a party hereto.
XIII.9 The Trustee shall be permitted to withhold from any payment due to a
Participant hereunder the amount required by law to be so withheld under
federal, state and local withholding requirements or otherwise, and shall pay
over to the appropriate government authority the amounts so withheld. The
Trustee may rely on reasonable instructions from the Company as to any required
withholding and shall be fully protected under Section 8.7 hereof in relying on
such instructions.
XIII.10 Notwithstanding any other provision hereof, the parties' respective
rights and obligations under Section 13.8 shall survive any termination or
expiration of this Agreement.
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<PAGE> 36
XIV. NOTICES
XIV.1 For all purposes of this Agreement, any communication,
including without limitation, any notice, consent, report, demand or waiver
required or permitted to be given hereunder shall be in writing and, unless
otherwise provided in this Agreement, shall be deemed to have been duly given
when hand delivered or dispatched by telegram or electronic facsimile transfer
(confirmed in writing by mail simultaneously dispatched), or two business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or one business day after having been
dispatched by a nationally recognized overnight courier service to the
appropriate party at the addressed specified below:
<TABLE>
<S> <C>
If to the Company, to: IPC, Inc.
- ------------------------ 100 Tri-State Drive
Suite 200
Lincolnshire, IL 60069
Attention: G. Douglas Patterson, Jr.
Telephone: (847) 945-9100
Telecopy: (847) 945-9184
If to the Trustee, to: David E. Wartner
- ------------------------ c/o Ivex Packaging Corporation
100 Tri-State Drive
Suite 200
Lincolnshire, IL 60069
Telephone: (847) 945-9100
Telecopy: (847) 945-9184
If to a Participant, to: the address of such Participant
- ------------------------ as listed next to such Participant's
name on Exhibit A hereto,
</TABLE>
provided, however, that if any party or such party's successors shall have
designated a different address by notice to the other parties, then to the last
address so designated.
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<PAGE> 37
XIV.2 The Company shall provide the Trustee with the names of the
beneficiary or beneficiaries designated by a deceased Participant under the
Plans.
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<PAGE> 38
IN WITNESS WHEREOF, the Company and the Trustee caused this Agreement to
be executed on its behalf as of the date first above written.
Attested IPC, Inc.
By: By:
--------------------------- -----------------------------
Its: Its:
---------------------- ------------------------
David E. Wartner, as Trustee
--------------------------------
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<PAGE> 39
Exhibit A
<TABLE>
<CAPTION>
Employee Address Soc. Sec. No.
--------------- --------------------- -------------
<S> <C> <C>
George V. Bayly 544 Fletcher Circle ###-##-####
Lake Forest, IL 60045
</TABLE>
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<PAGE> 40
Exhibit B
I. Amended and Restated Employment Agreement, dated as of May 30, 1996,
between IPC, Inc. and George V. Bayly
Participant: George V. Bayly
-37-
<PAGE> 41
Exhibit C
<TABLE>
<CAPTION>
Participant Vested Percentage Subaccount Balance/Date
- ------------------ ----------------- ---------------------------
<S> <C> <C>
1. George V. Bayly 100% $50,000 as of
October 17, 1996
</TABLE>
Payment shall be made in accordance with the Amended and Restated Employment
Agreement, dated as of May 30, 1996, between IPC, Inc. and George V. Bayly.
-38-
<PAGE> 1
EXHIBIT 10.34
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (this "Amendment No. 1"), dated
as of August 16, 1996, is entered into by and among IPC, INC. (the "Borrower"),
CERTAIN GUARANTORS IDENTIFIED ON THE SIGNATURES PAGES HERETO, THE LENDERS
IDENTIFIED ON THE SIGNATURE PAGES HERETO and NATIONSBANK, N.A., as Agent (the
"Agent").
RECITALS
WHEREAS, the Borrower, the Guarantors, the Lenders and the Agent entered
into that certain Credit Agreement dated as of December 7, 1995 (the "Existing
Credit Agreement");
WHEREAS, to effectuate the Merger (as defined below), the Borrower formed
a new Subsidiary, Package Acquisition, Inc., a Delaware corporation
("Acquisition") which became a Credit Party pursuant to a Joinder Agreement;
WHEREAS, pursuant to that certain Agreement and Plan of Merger (as
amended, the "Merger Agreement"), dated as of May 17, 1996, among the Borrower,
Acquisition, CFI Industries, Inc., a Delaware corporation (the "Company"), and
Equity Holdings, Acquisition will merge with and into the Company (the
"Merger"), and the Company shall be the surviving corporation;
WHEREAS, after the Merger, the Company, Plastofilm Limited, Plastofilm
Industries, Inc. and CFI Recycling, Inc. shall be Subsidiaries of the Borrower;
and
WHEREAS, in recognition of the Merger, the parties hereto have agreed to
amend the Existing Credit Agreement;
NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereby agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. Unless otherwise defined
herein or the context otherwise requires, the following terms used
in this Amendment No. 1, including its preamble and recitals, have
the following meanings:
"Amended Credit Agreement" means the Existing
Credit Agreement as amended hereby.
"Amendment No. 1 Effective Date" is defined in
Subpart 3.1.
<PAGE> 2
SUBPART 1.2. Other Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this
Amendment No. 1, including its preamble and recitals, have the
meanings provided in the Amended Credit Agreement.
PART II
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Amendment No. 1
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Part II. Except as so amended, the Existing Credit Agreement and all
other Credit Documents shall continue in full force and effect.
SUBPART 2.1. Amendments and Additions to Section 1.1.
SUBPART 2.1.1. The following definitions in Section 1.1 of the
Existing Credit Agreement are amended in their entirety to read as
follows:
"Guarantor" means Holdings, each of the Subsidiaries of the Borrower
(other than Plastofilm Ltd.) and each Additional Credit Party which has
executed a Joinder Agreement.
"Permitted Investments" means Investments which are (i) cash or Cash
Equivalents, (ii) accounts receivable created, acquired or made in the
ordinary course of business and payable or dischargeable in accordance
with customary trade terms, (iii) Investments in a Guarantor (other than
Holdings), (iv) Investments in Plastofilm Ltd. not to exceed $2,000,000,
in the aggregate, at any one time; (v) loans to directors, officers,
employees, agents, customers or suppliers in the ordinary course of
business for reasonable business expenses, (vi) loans to directors,
officers and employees to finance purchases (or tax obligations relating
to such purchases) of Holding's capital stock not to exceed $5,000,000,
in the aggregate, at any one time, (vii) Permitted Acquisitions, (viii)
Investments in foreign joint ventures not to exceed $5,000,000, in the
aggregate, at any one time, (ix) the purchase of restricted stock or
options of Holdings or the Borrower from employees who voluntarily or
involuntarily terminate their employment with the Borrower or any of its
Subsidiaries, (x) the redemption of Subordinated Debt as permitted by
this Credit Agreement, (xi) the Investments set forth on Schedule 9.6
attached hereto, and (xii) the purchase of the Newton Property.
SUBPART 2.1.2. Section 1.1 of the Existing Credit Agreement is
amended to add the following definition in its proper alphabetical
location:
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<PAGE> 3
"Plastofilm Ltd." means Plastofilm Limited, a corporation organized
and existing under the laws of Northern Ireland.
SUBPART 2.2. Amendments to Section 8.13. Section 8.13 of the
Existing Credit Agreement is amended in its entirety to read as follows:
8.13 Additional Credit Parties. At the time any Person (other than
Plastofilm Ltd.) becomes a Subsidiary of a Credit Party, the Borrower
shall so notify the Agent and promptly thereafter (but in any event
within 30 days after the date thereof) shall (a) cause such Person to
execute a Joinder Agreement in substantially the same form as Exhibit
8.13 attached hereto, (b) cause all of the capital stock of such Person
to be delivered to the Agent (together with undated stock powers signed
in blank) and pledged to the Agent pursuant to an appropriate pledge
agreement in substantially the form of the Pledge Agreements and
otherwise in a form acceptable to the Agent, (c) cause such Person to
pledge all of its assets to the Lenders pursuant to a security agreement
in substantially the form of the Security Agreements and otherwise in a
form acceptable to the Agent, and (d) if such Person has any
Subsidiaries, cause such Person to (A) deliver all of the capital stock
of such Subsidiaries (together with undated stock powers signed in blank)
to the Agent and (B) execute a pledge agreement in substantially the form
of the Pledge Agreement and otherwise in a form acceptable to the Agent,
(e) if such Person owns or leases any real property, cause such Person to
execute any and all necessary mortgages, deeds of trust, deeds to secure
debt or other appropriate real estate collateral documentation in a form
acceptable to the Agent and (f) deliver such other documentation as the
Agent may reasonably request in connection with the foregoing, including,
without limitation, appropriate UCC-1 financing statements, real estate
title insurance policies, environmental reports, landlord's waivers,
certified resolutions and other organizational and authorizing documents
of such Person and favorable opinions of counsel to such Person (which
shall cover, among other things, the legality, validity, binding effect
and enforceability of the documentation referred to above), all in form,
content and scope reasonably satisfactory to the Agent.
SUBPART 2.3. Amendments to Section 9.1. Section 9.1 of the
Existing Credit Agreement is amended by deleting the word "and" at the
end of subsection (j), replacing the period at the end of subsection (k)
with a semicolon followed by the word "and" and adding the following
subsection (l) thereafter:
9.1 Indebtedness. Neither Holdings, the Borrower nor any of their
Subsidiaries will contract, create, incur, assume or permit to exist any
Indebtedness, except:
-3-
<PAGE> 4
* * * * *
(l) Indebtedness of Plastofilm Ltd. not to exceed $4,000,000
in the aggregate at any one time;
SUBPART 2.4. Amendments to Schedules. Schedules 7.9, 7.15, 7.18,
7.19(a), 7.19(b), 7.23(a), 7.23(b) and 7.23(c) of the Existing Credit
Agreement are replaced in their entirety with Schedules 7.9, 7.15, 7.18,
7.19(a), 7.19(b), 7.23(a), 7.23(b) and 7.23(c) attached hereto.
PART III
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1. Amendment No. 1 Effective Date. This Amendment No. 1
shall be and become effective as of the date hereof (the "Amendment No. 1
Effective Date") when all of the conditions set forth in this Subpart 3.1
shall have been satisfied, and thereafter this Amendment No. 1 shall be
known, and may be referred to, as "Amendment No. 1."
SUBPART 3.1.1. Execution of Counterparts of Amendment. The Agent
shall have received executed counterparts (or other evidence of
execution, including facsimile signatures, satisfactory to the Agent) of
this Amendment No. 1, which collectively shall have been duly executed on
behalf of each of the Borrower, the Guarantors, the Required Lenders and
the Agent.
SUBPART 3.1.2. Merger. The Merger shall have been consummated,
with the Agent having received a copy, certified by an officer of the
Borrower as true and complete, of the Merger Agreement and of each other
document or instrument executed by the Borrower or any Credit Party in
connection with the Merger, in each case as originally executed and
delivered, and no amendment or modification thereof shall have been
entered into on or prior to the Amendment No. 1 Effective Date which
shall not have been approved by the Required Lenders.
SUBPART 3.1.3. Opinion. The Agent shall have received an opinion,
or opinions, satisfactory to the Agent, addressed to the Agent on behalf
of the Lenders and dated as of the date hereof, from legal counsel to the
Credit Parties, including, but not limited to, the authority of the
Credit Parties to enter into this Amendment No. 1, the enforceability of
this Amendment No. 1 and the consummation of the Merger.
SUBPART 3.1.4. Other Documents. The Agent shall have received such
other documents relating to the transactions contemplated hereby
(including, without limitation, the
-4-
<PAGE> 5
Merger) as the Agent or any Lender or counsel to the Agent may request.
PART IV
JOINDER
As soon as practicable following the date on which the Merger is
consummated (the "Merger Date"), but in no event later than thirty (30) days
after the Merger Date, the Borrower shall:
SUBPART 4.1. Documents.
SUBPART 4.1.1 Joinder Agreement. Cause a Joinder Agreement in
substantially the same form as Exhibit 8.13 to the Credit Agreement to be
delivered to the Agent by each of the Company, Plastofilm Industries,
Inc. and CFI Recycling, Inc. (collectively, the "New Guarantors").
SUBPART 4.1.2. Pledge Agreement. Cause all of the capital stock of
each New Guarantor to be delivered to the Agent (together with undated
stock powers signed in blank) and pledged to the Agent pursuant to an
appropriate pledge agreement in substantially the form of the Pledge
Agreement and otherwise in a form acceptable to the Agent.
SUBPART 4.1.3. Security Agreement. Cause each of the New
Guarantors to pledge all of its assets to the Lenders pursuant to a
security agreement in substantially the form of the Security Agreements
and otherwise in a form acceptable to the Agent.
SUBPART 4.2. Personal Property Collateral. Cause each of the New
Guarantors to deliver to the Agent, in form and substance satisfactory to
the Agent:
(i) searches of Uniform Commercial Code ("UCC") filings in
each jurisdiction of the chief executive office of each New
Guarantor and each jurisdiction where a filing would need to be
made in order to perfect the Lenders' security interest in the
assets of the New Guarantors (the "New Collateral"), copies of the
financing statements on file in such jurisdictions and evidence
that no Liens exist other than Permitted Liens;
(ii) duly executed financing statements under the UCC or
similar legislation for each appropriate jurisdiction as is
necessary, in the Agent's sole discretion, to perfect the Lenders'
security interest in the New Collateral;
(iii) searches of ownership of intellectual property in the
appropriate governmental offices and
-5-
<PAGE> 6
such patent/trademark/copyright filings as requested by the Agent
in order to perfect the Lenders' security interest in the
intellectual property assets of the New Guarantors; and
(iv) all instruments and chattel paper in the possession of a
New Guarantor together with allonges or assignments as may be
necessary or appropriate to perfect the Lenders' security interest
in the New Collateral.
SUBPART 4.3. Real Property Collateral. Cause to be delivered to
the Agent, in form and substance satisfactory to the Agent:
(i) a fully executed and notarized mortgage, deed of trust,
deed to secure debt or hypothec in registerable form (the "New Fee
Mortgage") encumbering the fee interest (whether legal, equitable
or otherwise) of Plastofilm Industries, Inc. in the fee estate (or
the equivalent form of title under applicable law) located in
Wheaton, Illinois (the "Wheaton Property"), together with such
UCC-1 financing statements (or equivalent instruments) as the Agent
shall deem appropriate with respect to the Wheaton Property;
(ii) a fully executed and notarized mortgage, deed of trust or
deed to secure debt (the "New Leasehold Mortgage;" the New
Leasehold Mortgage and the New Fee Mortgage are collectively
referred to as the "New Mortgages") encumbering the leasehold
interest of Plastofilm Industries, Inc. in the leasehold estate
located in Sparks, Nevada (the "Sparks Property;" the Sparks
Property and the Wheaton Property are collectively referred to as
the "New Real Properties"), together with such UCC-1 financing
statements (or equivalent instruments) as the Agent shall deem
appropriate with respect to the Sparks Property; provided that the
New Leasehold Mortgage and UCC-1 financing statements (or
equivalent instruments) shall not be required for the Sparks
Property if the lease prohibits the same and the landlord or any
other required party thereunder has not consented to the same after
good faith efforts to obtain the same by the Credit Parties (for
purposes of this subsection, good faith efforts shall not be deemed
to include the filing of lawsuits or the payment of any
consideration);
(iii) unless in any such case the Credit Parties are unable
after good faith efforts to obtain the same (for purposes of this
subsection, good faith efforts shall not be deemed to include the
filing of lawsuits or the payment of any consideration) (A) in the
case of
-6-
<PAGE> 7
the Sparks Property and the leasehold estate located in Batavia,
Illinois, such estoppel letters, consents and waivers from the
landlords of such real property as may be reasonably required by
the Agent, which estoppel letters shall be in form and substance
reasonably satisfactory to the Agent and (B) in the case of the
Sparks Property, evidence that the applicable lease, a memorandum
of lease with respect thereto, or other evidence of such lease in
form and substance reasonably satisfactory to the Agent, has been
recorded in all places to the extent necessary or desirable, in the
reasonable judgment of the Agent, so as to enable the New Leasehold
Mortgage to effectively create a valid and enforceable lien
(subject only to Permitted Liens) on the Sparks Property in favor
of the Agent (or such other Person as may be required or desired
under local law) for the benefit of Lenders;
(iv) an opinion of counsel (which counsel shall be
satisfactory to the Agent) in the state or province in which each
New Real Property is located with respect to the enforceability of
the form of the New Mortgage and sufficiency of the form of UCC-1
financing statements (or equivalent instruments) to be recorded or
filed in such state or province and such other matters as the Agent
may request, in form and substance satisfactory to the Agent;
(v) ALTA mortgagee title insurance policies (the "New Mortgage
Policies") issued by Chicago Title Insurance Company (the "Title
Insurance Company"), in amounts satisfactory to the Agent with
respect to all New Real Properties, assuring the Agent that each
applicable New Mortgage creates valid and enforceable mortgage
liens on the respective New Real Property, free and clear of all
defects and encumbrances except Permitted Liens, which New Mortgage
Policies shall be in form and substance satisfactory to the Agent
and containing such endorsements as shall be satisfactory to the
Agent and for any other matters that the Agent may request, and
shall provide for affirmative insurance and such reinsurance as the
Agent may request, all of the foregoing in form and substance
satisfactory to the Agent;
(vi) maps or plats of an as-built survey of the Wheaton
Property certified to the Agent and the Title Insurance Company in
a manner reasonably satisfactory to them, dated a date satisfactory
to the Agent and the Title Insurance Company by an independent
professional licensed land surveyor reasonably satisfactory to the
Agent and the Title Insurance Company, which maps or plats and the
surveys on which they are based shall be sufficient to delete any
-7-
<PAGE> 8
standard printed survey exception contained in the applicable title
policy and be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and adopted
by the American Land Title Association and the American Congress on
Surveying and Mapping in 1992, and, without limiting the generality
of the foregoing, there shall be surveyed and shown on such maps,
plats or surveys the following: (A) the locations on such sites of
all the buildings, structures and other improvements and the
established building setback lines; (B) the lines of streets
abutting the sites and width thereof; (C) all access and other
easements appurtenant to the sites necessary to use the sites; (D)
all roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting the
site, whether recorded, apparent from a physical inspection of the
sites or otherwise known to the surveyor; (E) any encroachments on
any adjoining property by the building structures and improvements
on the sites; and (F) if the site is described as being on a filed
map, a legend relating the survey to said map;
(vii) zoning letters from appropriate authorities in form and
substance acceptable to the Agent or other evidence satisfactory to
the Agent that each of the New Real Properties, and the uses of the
New Real Properties, are in compliance in all material respects
with all applicable zoning laws, including the zoning designation
made for each of the New Real Properties, the permitted uses of
each such New Real Properties under such zoning designation and
zoning requirements as to parking, lot size, ingress, egress and
building setbacks; and
(viii) certification from Bankers Hazard Determination
Services or Borrower's land surveyor in a form reasonably
satisfactory to the Agent or other evidence acceptable to the Agent
that none of the improvements on the New Real Properties are
located within any area designated by the Director of the Federal
Emergency Management Agency as a "special flood hazard" area or if
any improvements on the New Real Properties are located within a
"special flood hazard" area, evidence of a flood insurance policy
from a company and in an amount satisfactory to the Agent for the
applicable portion of the premises, naming the Agent, for the
benefit of the Lenders, as mortgagee.
SUBPART 4.4. Environmental Reports. Cause to be delivered to the
Agent, in form and substance satisfactory to the Agent, environmental
site assessment reports and related documents of a recent date with
respect to the Wheaton Property.
-8-
<PAGE> 9
SUBPART 4.5. Corporate Documents. Cause to be delivered to the
Agent each of the following:
(i) Charter Documents. Copies of the articles or certificates
of incorporation or other charter documents of each New Guarantor,
certified to be true and complete as of a recent date by the
appropriate Governmental Authority of the state or other
jurisdiction of its incorporation and certified by a secretary or
assistant secretary of such New Guarantor to be true and correct as
of the Merger Date.
(ii) Bylaws. A copy of the bylaws of each New Guarantor
certified by a secretary or assistant secretary of such New
Guarantor to be true and correct as of the Merger Date.
(iii) Resolutions. Copies of resolutions of the Board of
Directors of each New Guarantor approving and adopting each
document executed in accordance with Subpart 4.1 to which it is a
party, the transactions contemplated therein and authorizing
execution and delivery thereof, certified by a secretary or
assistant secretary of such New Guarantor to be true and correct
and in force and effect as of the Merger Date.
(iv) Good Standing. Copies of (A) certificates of good
standing, existence or its equivalent with respect to each New
Guarantor certified as of a recent date by the appropriate
Governmental Authorities of the state or other jurisdiction of
incorporation and each other jurisdiction in which the failure to
so qualify and be in good standing would have a Material Adverse
Effect and (B) to the extent available, a certificate indicating
payment of all corporate franchise taxes certified as of a recent
date by the appropriate governmental taxing authorities.
(v) Incumbency. An incumbency certificate of each New
Guarantor certified by a secretary or assistant secretary to be
true and correct as of the Merger Date.
SUBPART 4.6. Opinion of Counsel. Receipt by the Agent of an
opinion, or opinions, satisfactory to the Agent, addressed to the Agent
on behalf of the Lenders and dated as of the Merger Date, from legal
counsel to the New Guarantors, including, but not limited to, opinions
similar to those received from counsel to the Credit Parties in
connection with the initial closing of the Existing Credit Agreement.
-9-
<PAGE> 10
SUBPART 4.7. Further Assurances. Deliver or cause to be delivered
to the Agent or Lender(s), as appropriate, such other documents,
instruments, agreements or information as reasonably requested by the
Agent or any Lender, including, but not limited to, information regarding
litigation, tax, accounting, labor, insurance, pension liabilities
(actual or contingent), real estate leases, material contracts, debt
agreements, property ownership and contingent liabilities of the New
Guarantors.
PART V
MISCELLANEOUS
SUBPART 5.1. Cross-References. References in this Amendment No. 1
to any Part or Subpart are, unless otherwise specified, to such Part or
Subpart of this Amendment No. 1.
SUBPART 5.2. Instrument Pursuant to Existing Credit Agreement.
This Amendment No. 1 is a Credit Document executed pursuant to the
Existing Credit Agreement and shall (unless otherwise expressly indicated
therein) be construed, administered and applied in accordance with the
terms and provisions of the Existing Credit Agreement.
SUBPART 5.3. References in Other Credit Documents. At such time as
this Amendment No. 1 shall become effective pursuant to the terms of
Subpart 3.1, all references in the Credit Documents to the "Credit
Agreement" shall be deemed to refer to the Credit Agreement as amended by
this Amendment No. 1.
SUBPART 5.4. Representations and Warranties. Each Credit Party
hereby represents and warrants that (i) each Credit Party that is party
to the Merger Agreement and this Amendment No. 1: (a) has the requisite
corporate power and authority to execute, deliver and perform the Merger
Agreement and this Amendment No. 1, as applicable and (b) is duly
authorized to, and has been authorized by all necessary corporate action,
to execute, deliver and perform the Merger Agreement or this Amendment
No. 1, as applicable, (ii) the Merger constitutes a Permitted
Acquisition, (iii) the only Subsidiaries to be acquired by the Borrower
pursuant to the Merger are the Company, Plastofilm Ltd., Plastofilm
Industries, Inc. and CFI Recycling, Inc., (iv) the only Real Property to
be acquired pursuant to the Merger is described on the new Schedule
7.23(a) and the locations of all personal property acquired pursuant to
the Merger are described on the new Schedule 7.23(b), (v) the Borrower
has no claims, counterclaims, offsets, or defenses to the Credit
Documents and the performance of its obligations thereunder, or if the
Borrower has any such claims, counterclaims, offsets, or defenses to the
Credit Documents or any transaction related to the Credit Documents, the
same are hereby waived,
-10-
<PAGE> 11
relinquished and released in consideration of the Lenders' execution and
delivery of this Amendment No. 1, (vi) since the date of the last
financial statements of the Borrower delivered to the Lenders, no event
or condition has occurred which has had or could have a Material Adverse
Effect, (vii) the representations and warranties contained in Section 7
of the Existing Credit Agreement are correct on and as of the date hereof
as though made on and as of such date and after giving effect to the
amendments contained herein and (vii) no Default or Event of Default
exists under the Existing Credit Agreement on and as of the date hereof
or will occur as a result of the transactions contemplated hereby.
SUBPART 5.5. Liens. The Borrower and the Guarantors, as
applicable, affirm the liens and security interests created and granted
in the Credit Documents and agree that this Amendment No. 1 shall in no
manner adversely effect or impair such liens and security interest.
SUBPART 5.6. Acknowledgement of Guarantors. The Guarantors
acknowledge and consent to all of the terms and conditions of this
Amendment No. 1 and agree that this Amendment No. 1 and all documents
executed in connection herewith do not operate to reduce or discharge the
Guarantors' obligations under the Credit Agreement or the other Credit
Documents. The Guarantors further acknowledge and agree that the
Guarantors have no claims, counterclaims, offsets, or defenses to the
Credit Documents and the performance of the Guarantors' obligations
thereunder or if the Guarantors did have any such claims, counterclaims,
offsets or defenses to the Credit Documents or any transaction related to
the Credit Documents, the same are hereby waived, relinquished and
released in consideration of the Lenders' execution and delivery of this
Amendment No. 1.
SUBPART 5.7. No Other Changes. Except as expressly modified and
amended in this Amendment No. 1, all the terms, provisions and
conditions of the Credit Documents shall remain unchanged.
SUBPART 5.8. Counterparts. This Amendment No. 1 may be executed by
the parties hereto in several counterparts, each of which shall be deemed
to be an original and all of which shall constitute together but one and
the same agreement.
SUBPART 5.9. Entirety. This Amendment No. 1, the Credit Agreement
and the other Credit Documents embody the entire agreement between the
parties and supersede all prior agreements and understandings, if any,
relating to the subject matter hereof. These Credit Documents represent
the final agreement between the parties and may not be contradictive by
evidence of prior, contemporaneous or subsequent oral agreements of the
parties.
-11-
<PAGE> 12
SUBPART 5.10. Governing Law. THIS AMENDMENT NO. 1 SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
SUBPART 5.11. Successors and Assigns. This Amendment No. 1
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-12-
<PAGE> 13
This Amendment No. 1 is executed as of the day and year first written
above.
BORROWER: IPC, INC.
- --------
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
GUARANTORS: IVEX PACKAGING CORPORATION
- ----------
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
IVEX PAPER MILL CORPORATION
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
IPMC HOLDING CORPORATION
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
IPMC, INC.
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
<PAGE> 14
VALLEY EXPRESS LINES, INC.
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
KAMA OF ILLINOIS CORPORATION
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
<PAGE> 15
PACKAGING PRODUCTS, INC.
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
IVEX CORPORATION
an Ontario corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
PACKAGE ACQUISITION, INC.
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
<PAGE> 16
LENDERS: NATIONSBANK, N.A.
- ------- individually in its capacity as a
Lender and in its capacity as
Agent
By:_____________________________
Name:___________________________
Title__________________________
BANKERS TRUST COMPANY
By:_____________________________
Name:___________________________
Title__________________________
GENERAL ELECTRIC CAPITAL CORPORATION
By:_____________________________
Name:___________________________
Title__________________________
SOCIETE GENERALE, SOUTHWEST AGENCY
By:_____________________________
Name:___________________________
Title__________________________
BANQUE PARIBAS
By:_____________________________
Name:___________________________
Title__________________________
By:_____________________________
Name:___________________________
Title__________________________
ABN AMRO BANK, N.V., HOUSTON AGENCY
<PAGE> 17
BY: ABN AMRO NORTH AMERICA, INC.,
AS AGENT
By:_____________________________
Name:___________________________
Title__________________________
By:_____________________________
Name:___________________________
Title__________________________
BANK OF BOSTON (F/K/A FIRST NATIONAL BANK OF
BOSTON)
By:_____________________________
Name:___________________________
Title__________________________
FIRST BANK NATIONAL ASSOCIATION
By:_____________________________
Name:___________________________
Title__________________________
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By:_____________________________
Name:___________________________
Title__________________________
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME
TRUST
By:_____________________________
Name:___________________________
Title__________________________
<PAGE> 18
SENIOR DEBT PORTFOLIO
By:_____________________________
Name:___________________________
Title__________________________
IMPERIAL BANK
By:_____________________________
Name:___________________________
Title__________________________
<PAGE> 1
EXHIBIT 10.35
AMENDMENT NO. 2 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT (this "Amendment No. 2"), dated
as of November 21, 1996, is entered into by and among IPC, INC. (the
"Borrower"), CERTAIN GUARANTORS IDENTIFIED ON THE SIGNATURES PAGES HERETO, THE
LENDERS IDENTIFIED ON THE SIGNATURE PAGES HERETO and NATIONSBANK, N.A., as
Agent (the "Agent").
RECITALS
WHEREAS, the Borrower, the Guarantors, the Lenders and the Agent entered
into that certain Credit Agreement, dated as of December 7, 1995, as amended by
that certain Amendment No. 1 to Credit Agreement, dated as of August 16, 1996
(as amended, the "Existing Credit Agreement");
WHEREAS, to allow the financing of the Newton Property, the parties hereto
have agreed to amend the Existing Credit Agreement;
NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereby agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. Unless otherwise defined herein or the
context otherwise requires, the following terms used in this Amendment No. 2,
including its preamble and recitals, have the following meanings:
"Amended Credit Agreement" means the Existing Credit
Agreement as amended hereby.
"Amendment No. 2 Effective Date" is defined in Subpart 4.1.
SUBPART 1.2. Other Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Amendment No. 2, including its
preamble and recitals, have the meanings provided in the Amended Credit
Agreement.
PART II
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Amendment No. 2
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Part II. Except as so
<PAGE> 2
amended, the Existing Credit Agreement and all other Credit Documents shall
continue in full force and effect.
SUBPART 2.1. Amendments to Section 1.1. The following definitions in
Section 1.1 of the Existing Credit Agreement are amended in their entirety to
read as follows:
"Funded Debt" means, without duplication, the sum of (i) all
Indebtedness of the Borrower and its Subsidiaries for borrowed
money, excluding intercompany items, (ii) all purchase money
Indebtedness of the Borrower and its Subsidiaries, (iii) the
principal portion of all obligations of the Borrower and its
Subsidiaries under capitalized leases, (iv) unreimbursed portions
of letters of credit drawn for the account of the Borrower and its
Subsidiaries, (v) all Guaranty Obligations of the Borrower and its
Subsidiaries with respect to Funded Debt of another entity, (vi)
all Funded Debt of another entity secured by a Lien on any
property of the Borrower and its Subsidiaries but only to the
extent of the value of such property, whether or not such Funded
Debt has been assumed by the Borrower or any of its Subsidiaries,
(vii) all Funded Debt of any partnership or unincorporated joint
venture where the Borrower or one of its Subsidiaries is a general
partner therein but only to the extent such Person is legally
obligated or has a reasonable expectation of being liable with
respect thereto, net of any assets of such partnership or joint
venture and (viii) the principal balance outstanding under any
synthetic lease, tax retention operating lease, off-balance sheet
loan or similar off-balance sheet financing product to which the
Borrower or any of its Subsidiaries is a party, where such
transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance
with GAAP; provided that any Indebtedness incurred in connection
with the Newton Property shall be excluded from this clause
(viii).
"Indebtedness" of any Person means, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes
or similar instruments, or upon which interest payments are
customarily made, (iii) all obligations of such Person under
conditional sale or other title retention agreements relating to
property purchased by such Person to the extent of the value of
such property (other than customary reservations or retentions of
title under agreements with suppliers entered into in the ordinary
course of business), (iv) all obligations, including without
limitation intercompany items, of such Person issued or assumed as
the deferred purchase price of Property or services purchased by
such Person which would appear as liabilities on a balance sheet
of such Person, (v) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on, or payable
out of the proceeds of Property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed,
(vi) all Guaranty Obligations of such Person, (vii) the principal
portion of all obligations of such Person under capital leases,
(viii) all obligations of such Person in respect of interest rate
protection
-2-
<PAGE> 3
agreements, foreign currency exchange agreements, or other
interest or exchange rate or commodity price hedging agreements,
(ix) the maximum amount of all standby letters of credit issued or
bankers' acceptances facilities created for the account of such
Person and, without duplication, all drafts drawn thereunder (to
the extent unreimbursed), (x) all preferred stock issued by such
Person and required by the terms thereof to be redeemed, or for
which mandatory sinking fund payments are due, by a fixed date,
(xi) all other obligations which would be shown as a liability on
the balance sheet of such Person, (xii) the aggregate purchase
price paid by third parties for the purchase of the accounts
receivable of such Person subject at such time to a sale of
receivables (or similar transaction) regardless of whether such
transaction is effected without recourse to such Person or in a
manner that would not be reflected on the balance sheet of such
Person in accordance with GAAP and (xiii) the principal balance
outstanding under any synthetic lease, tax retention operating
lease, off-balance sheet loan or similar off-balance sheet
financing product to which such Person is a party, where such
transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance
with GAAP. The Indebtedness of any Person shall include the
Indebtedness of any partnership or unincorporated joint venture
but only to the extent such Person is legally obligated or has a
reasonable expectation of being liable with respect thereto.
SUBPART 2.2. Deletion of Section 8.15(h). Section 8.15(h) of the
Existing Credit Agreement is deleted in its entirety.
SUBPART 2.3. Amendments to Section 9.1(k). Section 9.1(k) of the
Existing Credit Agreement is amended in its entirety to read as follows:
9.1 Indebtedness. Neither Holdings, the Borrower nor any of
their Subsidiaries will contract, create, incur, assume or permit
to exist any Indebtedness, except:
* * * * *
(k) Indebtedness with respect to the financing of the Newton
Property by the Borrower, provided that such Indebtedness shall
not exceed $9,000,000.00.
PART III
WAIVER
SUBPART 3.1. Waiver of Section 8.9. So long as no Credit Party shall
have a fee interest in the Newton Property, the Lenders agree not to take a
Lien in the Newton Property as required pursuant to the terms of Section 8.9 of
the Existing Credit Agreement or as contemplated by the terms of Section 2 of
the Security Agreement.
-3-
<PAGE> 4
PART IV
CONDITIONS TO EFFECTIVENESS
SUBPART 4.1. Amendment No. 2 Effective Date. This Amendment No. 2 shall
be and become effective as of the date hereof (the "Amendment No. 2 Effective
Date") when all of the conditions set forth in this Subpart 4.1 shall have been
satisfied, and thereafter this Amendment No. 2 shall be known, and may be
referred to, as "Amendment No. 2."
SUBPART 4.1.1. Execution of Counterparts of Amendment. The Agent shall
have received executed counterparts (or other evidence of execution, including
facsimile signatures, satisfactory to the Agent) of this Amendment No. 2, which
collectively shall have been duly executed on behalf of each of the Borrower,
the Guarantors, the Required Lenders and the Agent.
SUBPART 4.1.2. Other Documents. The Agent shall have received such other
documents relating to the financing of the Newton Property as the Agent or any
Lender or counsel to the Agent may reasonably request.
PART V
MISCELLANEOUS
SUBPART 5.1. Cross-References. References in this Amendment No. 2 to any
Part or Subpart are, unless otherwise specified, to such Part or Subpart of
this Amendment No. 2.
SUBPART 5.2. Instrument Pursuant to Existing Credit Agreement. This
Amendment No. 2 is a Credit Document executed pursuant to the Existing Credit
Agreement and shall (unless otherwise expressly indicated therein) be
construed, administered and applied in accordance with the terms and provisions
of the Existing Credit Agreement.
SUBPART 5.3. References in Other Credit Documents. At such time as this
Amendment No. 2 shall become effective pursuant to the terms of Subpart 4.1,
all references in the Credit Documents to the "Credit Agreement" shall be
deemed to refer to the Amended Credit Agreement.
SUBPART 5.4. Representations and Warranties. Each Credit Party hereby
represents and warrants that (i) each Credit Party that is party to this
Amendment No. 2: (a) has the requisite corporate power and authority to
execute, deliver and perform this Amendment No. 2, as applicable and (b) is
duly authorized to, and has been authorized by all necessary corporate action,
to execute, deliver and perform this Amendment No. 2, (ii) the Borrower has no
claims, counterclaims, offsets, or defenses to the Credit Documents and the
performance of its obligations thereunder, or if the Borrower has any such
claims, counterclaims, offsets, or defenses to the Credit Documents or any
transaction related to the Credit Documents, the same are hereby waived,
relinquished and released in consideration of the Lenders' execution and
delivery of this Amendment No. 2, (iii) since the date of the last financial
statements of the Borrower delivered to the Lenders, no event or condition has
occurred which has had or could have a Material Adverse Effect, (iv) the
representations and warranties contained in Section 7 of the Existing Credit
Agreement are correct on and as of the date
-4-
<PAGE> 5
hereof as though made on and as of such date and after giving effect to the
amendments contained herein and (v) after giving effect to the amendments
contained herein, no Default or Event of Default exists under the Existing
Credit Agreement on and as of the date hereof or will occur as a result of the
transactions contemplated hereby.
SUBPART 5.5. Liens. The Borrower and the Guarantors, as applicable,
affirm the liens and security interests created and granted in the Credit
Documents and agree that this Amendment No. 2 shall in no manner adversely
effect or impair such liens and security interest.
SUBPART 5.6. Acknowledgement of Guarantors. The Guarantors acknowledge
and consent to all of the terms and conditions of this Amendment No. 2 and
agree that this Amendment No. 2 and all documents executed in connection
herewith do not operate to reduce or discharge the Guarantors' obligations
under the Amended Credit Agreement or the other Credit Documents. The
Guarantors further acknowledge and agree that the Guarantors have no claims,
counterclaims, offsets, or defenses to the Credit Documents and the performance
of the Guarantors' obligations thereunder or if the Guarantors did have any
such claims, counterclaims, offsets or defenses to the Credit Documents or any
transaction related to the Credit Documents, the same are hereby waived,
relinquished and released in consideration of the Lenders' execution and
delivery of this Amendment No. 2.
SUBPART 5.7. No Other Changes. Except as expressly modified and amended
in this Amendment No. 2, all the terms, provisions and conditions of the
Credit Documents shall remain unchanged.
SUBPART 5.8. Counterparts. This Amendment No. 2 may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SUBPART 5.9. Entirety. This Amendment No. 2, the Amended Credit
Agreement and the other Credit Documents embody the entire agreement between
the parties and supersede all prior agreements and understandings, if any,
relating to the subject matter hereof. These Credit Documents represent the
final agreement between the parties and may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the parties.
SUBPART 5.10. Governing Law. THIS AMENDMENT NO. 2 SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SUBPART 5.11. Successors and Assigns. This Amendment No. 2 shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-5-
<PAGE> 6
This Amendment No. 2 is executed as of the day and year first written
above.
BORROWER: IPC, INC.
- -----------
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
<PAGE> 7
GUARANTORS: IVEX PACKAGING CORPORATION
- -----------
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
IVEX PAPER MILL CORPORATION
a Delaware corporation
IPMC HOLDING CORPORATION
a Delaware corporation
IPMC, INC.
a Delaware corporation
VALLEY EXPRESS LINES, INC.
a Delaware corporation
KAMA OF ILLINOIS CORPORATION
a Delaware corporation
PACKAGING PRODUCTS, INC.
a Delaware corporation
IVEX CORPORATION
an Ontario corporation
CFI INDUSTRIES, INC.
a Delaware corporation
PLASTOFILM INDUSTRIES, INC.
a Delaware corporation
CFI RECYCLING, INC.
a Delaware corporation
TRIO PRODUCTS, INC.
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
7
<PAGE> 8
LENDERS: NATIONSBANK, N.A.
- -------
individually in its capacity as a
Lender and in its capacity as
Agent
By:_____________________________
Name:___________________________
Title___________________________
BANKERS TRUST COMPANY
By:_____________________________
Name:___________________________
Title___________________________
GENERAL ELECTRIC CAPITAL CORPORATION
By:_____________________________
Name:___________________________
Title___________________________
SOCIETE GENERALE, SOUTHWEST AGENCY
By:_____________________________
Name:___________________________
Title___________________________
BANQUE PARIBAS
By:_____________________________
Name:___________________________
Title___________________________
By:_____________________________
Name:___________________________
Title___________________________
ABN AMRO BANK, N.V., HOUSTON AGENCY
BY: ABN AMRO NORTH AMERICA, INC.,
AS AGENT
By:_____________________________
Name:___________________________
Title___________________________
By:_____________________________
Name:___________________________
8
<PAGE> 9
Title___________________________
9
<PAGE> 10
BANK OF BOSTON (F/K/A FIRST NATIONAL BANK
OF BOSTON)
By:_____________________________
Name:___________________________
Title___________________________
FIRST BANK NATIONAL ASSOCIATION
By:_____________________________
Name:___________________________
Title___________________________
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By:_____________________________
Name:___________________________
Title___________________________
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME
TRUST
By:_____________________________
Name:___________________________
Title___________________________
SENIOR DEBT PORTFOLIO
By:_____________________________
Name:___________________________
Title___________________________
IMPERIAL BANK
By:_____________________________
Name:___________________________
Title___________________________
10
<PAGE> 1
EXHIBIT 10.36
AMENDED AND RESTATED
CREDIT AGREEMENT
among
IPC, INC.,
as Borrower,
IVEX PACKAGING CORPORATION,
and the
DOMESTIC SUBSIDIARIES OF IPC, INC.,
as Guarantors,
THE LENDERS IDENTIFIED HEREIN,
AND
NATIONSBANK, N.A.
as Agent
DATED AS OF MARCH __, 1997
<PAGE> 2
TABLE OF CONTENTS
-----------------
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Computation of Time Periods . . . . . . . . . . . . . . . . . 22
1.3 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2
CREDIT FACILITIES
2.1 Revolving Loans. . . . . . . . . . . . . . . . . . . . . . . . 22
2.2 Revolving Letter of Credit Subfacility. . . . . . . . . . . . 25
2.3 Term Loans. . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.4 Stand Alone Letter of Credit Facility . . . . . . . . . . . . 29
2.5 Indemnification of Issuing Lenders . . . . . . . . . . . . . . 32
2.6 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3
PAYMENTS
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.2 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.3 Payment in full at Maturity . . . . . . . . . . . . . . . . . 35
3.4 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.5 Place and Manner of Payments . . . . . . . . . . . . . . . . . 37
3.6 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . 37
3.7 Allocation of Payments After Event of Default . . . . . . . . 38
3.8 Sharing of Payments . . . . . . . . . . . . . . . . . . . . . 39
3.9 Computations of Interest and Fees . . . . . . . . . . . . . . 40
SECTION 4
YIELD PROTECTION PROVISIONS
4.1 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . 40
4.2 Inability To Determine Interest Rate . . . . . . . . . . . . . 41
4.3 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.4 Requirements of Law . . . . . . . . . . . . . . . . . . . . . 41
4.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.6 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5
GUARANTY
5.1 Guaranty of Payment . . . . . . . . . . . . . . . . . . . . . 45
i
<PAGE> 3
5.2 Obligations Unconditional . . . . . . . . . . . . . . . . . . 45
5.3 Modifications . . . . . . . . . . . . . . . . . . . . . . . . 46
5.4 Waiver of Rights . . . . . . . . . . . . . . . . . . . . . . . 46
5.5 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . 47
5.6 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.7 Limitation of Guaranty . . . . . . . . . . . . . . . . . . . . 47
SECTION 6
CONDITIONS PRECEDENT
6.1 Closing Conditions . . . . . . . . . . . . . . . . . . . . . . 48
6.2 Conditions to All Extensions of Credit . . . . . . . . . . . . 54
SECTION 7
REPRESENTATIONS AND WARRANTIES
7.1 Organization and Good Standing . . . . . . . . . . . . . . . . 54
7.2 Due Authorization . . . . . . . . . . . . . . . . . . . . . . 55
7.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.5 Enforceable Obligations . . . . . . . . . . . . . . . . . . . 55
7.6 Financial Condition . . . . . . . . . . . . . . . . . . . . . 55
7.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.8 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.9 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.11 Material Agreements . . . . . . . . . . . . . . . . . . . . . 56
7.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.13 Compliance with Law . . . . . . . . . . . . . . . . . . . . . 56
7.14 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.16 Use of Proceeds; Margin Stock . . . . . . . . . . . . . . . . 57
7.17 Government Regulation . . . . . . . . . . . . . . . . . . . . 58
7.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . 58
7.19 Intellectual Property . . . . . . . . . . . . . . . . . . . . 59
7.20 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.21 Investments . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.22 No Financing of Corporate Takeovers . . . . . . . . . . . . . 60
7.23 Location of Collateral . . . . . . . . . . . . . . . . . . . . 60
SECTION 8
AFFIRMATIVE COVENANTS
8.1 Information Covenants. . . . . . . . . . . . . . . . . . . . . 60
8.2 Preservation of Existence and Franchises . . . . . . . . . . . 64
8.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . 64
8.4 Compliance with Law . . . . . . . . . . . . . . . . . . . . . 64
8.5 Payment of Taxes and Other Indebtedness . . . . . . . . . . . 64
8.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ii
<PAGE> 4
8.7 Maintenance of Property . . . . . . . . . . . . . . . . . . . 65
8.8 Performance of Obligations . . . . . . . . . . . . . . . . . . 65
8.9 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.10 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 65
8.11 Audits/Inspections . . . . . . . . . . . . . . . . . . . . . . 66
8.12 Financial Covenants . . . . . . . . . . . . . . . . . . . . . 66
8.13 Additional Credit Parties . . . . . . . . . . . . . . . . . . 67
8.14 Interest Rate Protection Agreements . . . . . . . . . . . . . 67
SECTION 9
NEGATIVE COVENANTS
9.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.3 Nature of Business . . . . . . . . . . . . . . . . . . . . . . 69
9.4 Consolidation and Merger . . . . . . . . . . . . . . . . . . . 69
9.5 Sale or Lease of Assets . . . . . . . . . . . . . . . . . . . 69
9.6 Advances, Investments and Loans . . . . . . . . . . . . . . . 70
9.7 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.8 Transactions with Affiliates . . . . . . . . . . . . . . . . . 70
9.9 Ownership of the Borrower . . . . . . . . . . . . . . . . . . 70
9.10 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.11 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . 70
9.12 Assets of Holdings . . . . . . . . . . . . . . . . . . . . . . 71
9.13 Sale Leasebacks . . . . . . . . . . . . . . . . . . . . . . . 71
9.14 Negative Pledges . . . . . . . . . . . . . . . . . . . . . . . 71
9.15 Limitation on Foreign Operations . . . . . . . . . . . . . . . 71
SECTION 10
EVENTS OF DEFAULT
10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . 71
10.2 Acceleration; Remedies . . . . . . . . . . . . . . . . . . . . 74
iii
<PAGE> 5
SECTION 11
AGENCY PROVISIONS
11.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . 75
11.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . 76
11.4 Reliance on Communications . . . . . . . . . . . . . . . . . . 76
11.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . 77
11.6 Non-Reliance on Agent and Other Lenders . . . . . . . . . . . 77
11.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 77
11.8 Agent in Its Individual Capacity . . . . . . . . . . . . . . . 78
11.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 12
MISCELLANEOUS
12.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
12.2 Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . 79
12.3 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . 79
12.4 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . 81
12.5 Payment of Expenses; Indemnification . . . . . . . . . . . . . 81
12.6 Amendments, Waivers and Consents . . . . . . . . . . . . . . . 82
12.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.9 Defaulting Lender . . . . . . . . . . . . . . . . . . . . . . 82
12.10 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
12.11 Governing Law; Venue . . . . . . . . . . . . . . . . . . . . . 83
12.12 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . 83
12.13 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 83
12.15 Binding Effect; Termination of Original Credit Agreement;
Release of Foreign Subsidiary Guarantors and Collateral . . . 83
12.16 Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
iv
<PAGE> 6
SCHEDULES
Schedule 1.1(a) Commitment Percentages
Schedule 2.2 Existing Revolving Letters of Credit
Schedule 2.4 Existing Stand Alone Letters of Credit
Schedule 7.9 Indebtedness
Schedule 7.10 Litigation
Schedule 7.15 Subsidiaries
Schedule 7.18 Environmental Matters
Schedule 7.19(a) Intellectual Property
Schedule 7.19(b) Intellectual Property Claims
Schedule 7.23(a) Real Property Collateral
Schedule 7.23(b) Personal Property Collateral
Schedule 7.23(c) Chief Executive Offices
Schedule 8.6 Insurance
Schedule 9.2 Liens
Schedule 9.6 Investments
Schedule 9.8 Affiliate Transactions
Schedule 12.1 Notices
EXHIBITS
Exhibit 2.1 Form of Notice of Borrowing/Continuation/Conversion
Exhibit 2.6(a) Form of Revolving Loan Note
Exhibit 2.6(b) Form of Tranche A Term Loan Note
Exhibit 8.1(d) Form of Officer's Certificate
Exhibit 8.13 Form of Joinder Agreement
Exhibit 12.3 Form of Assignment Agreement
v
<PAGE> 7
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (this "Credit Agreement"),
is entered into as of March __, 1997 among IPC, INC., a Delaware corporation
(the "Borrower"), IVEX PACKAGING CORPORATION, a Delaware corporation
("Holdings"), each of the Borrower's Domestic Subsidiaries (the Borrower's
Domestic Subsidiaries, together with Holdings, individually a "Guarantor" and
collectively the "Guarantors"), the Lenders (as defined herein) and NATIONSBANK,
N.A., as agent for the Lenders (in such capacity, the "Agent").
RECITALS
WHEREAS, the Borrower, Holdings, the Subsidiaries of the Borrower, the
Lenders party thereto and NationsBank, N.A., as Agent are currently parties to
that certain Credit Agreement, dated as of December 7, 1995 (the "Original
Credit Agreement");
WHEREAS, the Borrower and the Guarantors have requested that the
Lenders provide an amended and restated $205,000,000 credit facility to the
Borrower; and
WHEREAS, the Lenders have agreed to make the requested amended and
restated credit facility available to the Borrower on the terms and conditions
hereinafter set forth and securing such obligations as set forth herein.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION I.
DEFINITIONS AND ACCOUNTING TERMS
1.1 Definitions. As used herein, the following terms shall have
the meanings herein specified unless the context otherwise requires. Defined
terms herein shall include in the singular number the plural and in the plural
the singular.
"Acadia" means Acadia Partners, L.P., a Delaware limited
partnership.
"Additional Credit Party" means each Person that becomes a
Guarantor after the Effective Date, as provided in Section 8.13
hereof.
"Adjusted Base Rate" means the Base Rate plus the Applicable
Percentage.
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the
Applicable Percentage.
"Agent" means NationsBank, N.A. and any successors and
assigns in such
<PAGE> 8
capacity.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited
to all directors and officers of such Person), controlled by or under
direct or indirect common control with such Person. A Person shall be
deemed to control a Person if such Person possesses, directly or
indirectly, the power (i) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person or
(ii) to direct or cause direction of the management and policies of
such Person, whether through the ownership of voting securities, by
contract or otherwise.
"Applicable Percentage" means for Eurodollar Loans, Base Rate
Loans, and the Letter of Credit Fee, the appropriate applicable
percentages per annum corresponding to the Debt Coverage Ratio in
effect as of the most recent Calculation Date as shown below:
<TABLE>
<CAPTION>
Applicable Applicable
Debt Percentage For Percentage For Letter Of
Pricing Coverage Eurodollar Base Rate Credit
Level Ratio Loans Loans Fee
------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
I > = 4.75 to 1.0 2.5% 1.50% 2.375%
II < 4.75 to 1.0 but 2.25% 1.25% 2.125%
> = 4.5 to 1.0
III < 4.5 to 1.0 but 2.00% 1.00% 1.875%
> = 4.0 to 1.0
IV < 4.0 to 1.0 but 1.75% 0.75% 1.625%
> = 3.5 to 1.0
V < 3.5 to 1.0 but 1.50% 0.50% 1.375%
> = 3.0 to 1.0
VI < 3.0 to 1.0 but 1.25% 0.25% 1.125%
> = 2.5 to 1.0
VII < 2.5 to 1.0 1.00% 0.00% 0.875%
</TABLE>
The initial Applicable Percentage for Base Rate Loans,
Eurodollar Loans and the Letter of Credit Fee shall be based on
Pricing Level __ and shall remain at Pricing Level __ until the first
Calculation Date (as defined below) occurring after the Effective
Date. Thereafter, the Applicable Percentage for Revolving Loans,
Tranche A Term Loans and the Letter of Credit Fee shall, in each case,
be determined and adjusted quarterly on the date five Business Days
after the date by which the Borrower is required to provide the
officer's certificate in accordance with the provisions of Section
8.1(d) hereof (each a "Calculation Date"). Such Applicable
Percentage shall be effective from such Calculation Date until the next
such Calculation Date. Any adjustment in the Applicable Percentage
shall be applicable to all existing Loans and Letters of Credit as well
as any new Loans made or Letters of Credit issued.
"Asset Disposition" means the disposition of any or all of the
assets of the Borrower or any of its Subsidiaries whether by sale,
lease, transfer or otherwise, other than transfers of assets permitted
by Section 9.5 hereof.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of
the United States
2
<PAGE> 9
Code, as amended, modified, succeeded or replaced from time to time.
"Base Rate" means, for any day, a simple rate per annum equal
to the greater of (a) the Prime Rate for such day or (b) the sum of
1/2% plus the Federal Funds Rate for such day.
"Base Rate Loan" means a Loan which bears interest based on
the Adjusted Base Rate.
"Borrower" means IPC, Inc., a Delaware corporation.
"Business Day" means any day other than a Saturday, a Sunday,
a legal holiday or a day on which banking institutions are authorized
or required by law or other governmental action to close in Charlotte,
North Carolina or New York, New York; provided that in the case of
Eurodollar Loans, such day is also a day on which dealings between
banks are carried on in U.S. dollar deposits in the London interbank
market.
"Capital Expenditures" means all expenditures of the Borrower
and its Subsidiaries which in accordance with GAAP would be classified
as capital expenditures, including, without limitation, capitalized
leases.
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar denominated time deposits and
certificates of deposit of (i) any Lender, (ii) any domestic
commercial bank of recognized standing having capital and surplus in
excess of $500,000,000 or (iii) any bank whose short-term commercial
paper rating from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent thereof (any such bank
being an "Approved Bank"), in each case with maturities of not more
than 270 days from the date of acquisition, (c) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the
parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-1 (or the equivalent
thereof) or better by S&P or P-1 (or the equivalent thereof)
or better by Moody's and maturing within six months of the date of
acquisition, (d) repurchase agreements with a bank or trust company
(including any of the Lenders) or recognized securities dealer having
capital and surplus in excess of $500,000,000 for direct obligations
issued by or fully guaranteed by the United States of America in which
the Borrower shall have a perfected first priority security interest
(subject to no other Liens) and having, on the date of purchase
thereof, a fair market value of at least 100% of the amount of the
repurchase obligations, (e) Investments, classified in accordance with
GAAP as current assets, in money market investment programs registered
under the Investment Company Act of 1940, as amended, which are
administered by reputable financial institutions having capital of at
least $100,000,000 and the portfolios of which are limited to
Investments of the character described in the foregoing subdivisions
(a) through (d), and (f) demand deposit accounts and other deposits in
the ordinary course.
"Change of Control" means any Person, other than Acadia,
beneficially owning, directly or indirectly, stock of Holdings
controlling 20% or more of the voting power with respect to Holdings;
provided that a change of control shall not be deemed to occur upon
(a) the acquisition by the current partners of Acadia (or their
Affiliates) of shares of
3
<PAGE> 10
Holding's voting stock pursuant to a distribution made in connection
with the winding-up of Acadia or (b) the acquisition of any voting
stock of Holdings by any Person, the majority of the equity of which
is owned by Persons (or their Affiliates) that in the aggregate
currently control, or own a majority of the equity of, Acadia.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral" means all collateral referred to in and covered
by the Collateral Documents.
"Collateral Assignment of Leasehold Interests" has the meaning
set forth in Section 6.1(d).
"Collateral Documents" means the Security Agreements, the
Pledge Agreements, the Mortgage Documents and such other documents
executed and delivered in connection with the attachment and
perfection of the Lenders' security interests in the assets of the
Credit Parties, including without limitation, UCC financing
statements, other applicable security registrations and patent and
trademark filings.
"Commitments" means the Revolving Committed Amount, the
Tranche A Term Loan Committed Amount and the Stand Alone LOC Committed
Amount.
"Controlled Group" means (i) the controlled group of
corporations as defined in Section 414(b) of the Code and the
applicable regulations thereunder or (ii) the group of trades or
businesses under common control as defined in Section 414(c) of the
Code and the applicable regulations thereunder, of which the Borrower
or any of its Subsidiaries is a member.
"Credit Documents" means this Credit Agreement, the Notes, any
Joinder Agreement, the Security Agreements, the Pledge Agreements, the
Collateral Documents and all other related agreements and documents
issued or delivered hereunder or thereunder or pursuant hereto or
thereto.
"Credit Parties" means the Borrower and the Guarantors and
"Credit Party" means any one of them.
"Credit Party Obligations" means, without duplication, all of
the obligations of the Borrower and the other Credit Parties to the
Lenders and the Agent, whenever arising, under this Credit Agreement,
the Notes, the Collateral Documents or any of the other Credit
Documents to which the Borrower or any other Credit Party is a party.
"Debt Coverage Ratio" means, with respect to the Borrower and
its Subsidiaries on a consolidated basis, the ratio of (a) Funded Debt
to (b) EBITDA, as such ratio is calculated from time to time giving
effect to the Interim Adjustments.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
4
<PAGE> 11
"Defaulting Lender" means, at any time, any Lender that, at
such time (a) has failed to make a Loan or purchase a Participation
Interest required pursuant to the term of this Credit Agreement, (b)
other than as set forth in (a) above, has failed to pay to the Agent
or any Lender an amount owed by such Lender pursuant to the terms of
this Credit Agreement unless such amount is subject to a good faith
dispute or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or to a receiver, trustee or
similar official.
"Domestic Subsidiaries" means all direct and indirect
Subsidiaries of the Parent or the Borrower that are domiciled,
incorporated or organized under the laws of any state of the United
States or the District of Columbia (or has any material assets located
in the United States). As of the Closing Date, the Domestic
Subsidiaries are as set forth on Schedule 7.15.
"EBITDA" means, for any period with respect to the Borrower
and its Subsidiaries on a consolidated basis, the sum of (a) Net
Income plus (b) an amount which, in the determination of Net Income
for such period has been deducted for (i) cash Interest Expense for
such period, (ii) total Federal, state or other income taxes for such
period (iii) all depreciation, amortization and other non-cash charges
for such period, (iv) all nonrecurring items (A) with respect to
noncash charges in connection with the Borrower's option plans dated
January 1, 1993, and (B) with respect to charges in connection with
the Borrower's special incentive agreement dated January 1, 1993, (v)
the net gain or loss on the sale or disposition of any real property,
and (vi) all extraordinary gains or losses, all as determined in
accordance with GAAP.
"Effective Date" means the date that all conditions precedent
under Section 6.1 hereunder have been satisfied (or waived by the
Lenders).
"Eligible Assignee" means any Lender or Affiliate or
subsidiary of a Lender, and any other commercial bank, financial
institution or "accredited investor" (as defined in Regulation D of
the Securities and Exchange Commission) reasonably acceptable to the
Agent and the Borrower.
"Environmental Claim" means any written notice of
investigation, violation, demand, written allegation, action, suit,
injunction, judgment, order, consent decree, penalty, fine, lien,
proceeding, or written claim (whether administrative, judicial, or
private in nature) arising (a) pursuant to, or in connection with, an
actual or alleged violation of, any Environmental Law, (b) in
connection with any Hazardous Material, (c) from any assessment,
abatement, removal, remedial, corrective, or other response action in
connection with an Environmental Law or other order of a Governmental
Authority or (d) from any actual or alleged damage, injury, threat, or
harm to natural resources, or the environment or to health or safety
from the Release of any Hazardous Materials.
"Environmental Laws" means any current or future legal
requirement pertaining to (a) the protection of health, safety, and
the indoor or outdoor environment, (b) the conservation, management,
or use of natural resources and wildlife, (c) the protection or use of
surface water and groundwater, (d) the management, manufacture,
possession, presence, use, generation, transportation, treatment,
storage, disposal, release, threatened release, abatement, removal,
remediation or handling of, or exposure to, any Hazardous Material or
(e) pollution (including any release to air, land, surface water, and
groundwater), and includes, without limitation, the Comprehensive
Environmental
5
<PAGE> 12
Response, Compensation, and Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act of 1986, 42 USC 9601 et
seq., Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and Hazardous and Solid Waste
Amendment of 1984, 42 USC 6901 et seq., Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 USC 1251 et
seq., Clean Air Act of 1966, as amended, 42 USC 7401 et seq., Toxic
Substances Control Act of 1976, 15 USC 2601 et seq., Hazardous
Materials Transportation Act, 49 USC App. 1801 et seq., Occupational
Safety and Health Act of 1970, as amended, 29 USC 651 et seq., Oil
Pollution Act of 1990, 33 USC 2701 et seq., Emergency Planning and
Community Right-to-Know Act of 1986, 42 USC 11001 et seq., National
Environmental Policy Act of 1969, 42 USC 4321 et seq., Safe Drinking
Water Act of 1974, as amended, 42 USC 300(f) et seq., any analogous
federal, state, provincial or local or any similar, implementing or
successor law, and any amendment, rule, regulation, order, or
directive issued thereunder.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity, whether or not
incorporated, which is under common control with any Credit Party or
any of its Subsidiaries within the meaning of Section 4001(a)(14) of
ERISA, or is a member of a group which includes any Credit Party or
any of its Subsidiaries and which is treated as a single employer
under Sections 414(b), (c), (m), or (o) of the Code.
"Eurodollar Loan" means a Loan which bears interest based on
the Adjusted Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = Interbank Offered Rate
------------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means, for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as such regulation may be amended
from time to time or any successor regulation, as the maximum reserve
requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
Eurocurrency liabilities as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is
determined), whether or not a Lender has any Eurocurrency liabilities
subject to such reserve requirement at that time. Eurodollar Loans
shall be deemed to constitute Eurocurrency liabilities and as such
shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available
from time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
6
<PAGE> 13
"Event of Default" has the meaning specified in Section 10.1
hereof.
"Excess Cash Flow" means, with respect to the Borrower and its
Subsidiaries on a consolidated basis, an amount equal to (a) EBITDA
minus (b) Capital Expenditures and Investments minus (c) cash Interest
Expense minus (d) Federal, state and other income taxes actually paid
minus (e) Principal Amortization Payments and principal payments under
other Indebtedness minus (f) voluntary prepayments made with respect
to the Term Loans minus (g) dividends paid to Holdings to redeem
Holdings Debentures or as otherwise permitted by this Credit Agreement
in accordance with the terms of this Credit Agreement minus (h)
amounts paid to redeem Subordinated Notes in accordance with the terms
of this Credit Agreement minus (i) increases in Working Capital plus
(j) decreases in Working Capital.
"Existing Revolving Letters of Credit" means the Revolving
Letters of Credit set forth on Schedule 2.2 attached hereto.
"Existing Stand Alone Letters of Credit" means the Stand Alone
Letters of Credit set forth on Schedule 2.4 attached hereto.
"Extension of Credit" means, as to any Lender, the making of a
Loan by such Lender (or a participation therein by a Lender) or the
issuance of, or participation in, a Letter of Credit by such Lender.
"Federal Funds Rate" means for any day the rate per annum
(rounded upward to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal Reserve Bank of New
York on the New York business day next succeeding such day; provided
that (a) if such day is not a New York business day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next
preceding New York business day and (b) if no such rate is so
published on such next preceding New York business day, the Federal
Funds Rate for such day shall be the average rate quoted to the Agent
on such day on such transactions as determined by the Agent.
"Fee Letter" means that certain letter agreement, dated as of
the Closing Date, between the Agent and the Borrower, as amended,
modified, supplemented or replaced from time to time.
"Fixed Charge Coverage Ratio" means, with respect to the
Borrower and its Subsidiaries on a consolidated basis, the ratio of
(a) EBITDA minus Capital Expenditures to (b) the sum of, without
duplication, (i) cash Interest Expense plus (ii) Federal, state and
other income taxes paid in cash plus (iii) Scheduled Funded Debt
Payments plus (iv) cash interest due on Holdings Debentures plus (v)
dividends paid to Holdings (other than to redeem Holdings Debentures)
as permitted by Section 9.7 hereof, as such ratio shall be calculated
from time to time giving effect to the Interim Adjustments.
"Foreign Subsidiaries" means all Subsidiaries of the Borrower
that are not Domestic Subsidiaries.
"Funded Debt" means, without duplication, the sum of (i) all
Indebtedness of the
7
<PAGE> 14
Borrower and its Subsidiaries for borrowed money, excluding
intercompany items, (ii) all purchase money Indebtedness of the
Borrower and its Subsidiaries, (iii) the principal portion of all
obligations of the Borrower and its Subsidiaries under capitalized
leases, (iv) unreimbursed portions of letters of credit drawn for the
account of the Borrower and its Subsidiaries, (v) all Guaranty
Obligations of the Borrower and its Subsidiaries with respect to
Funded Debt of another entity, (vi) all Funded Debt of another entity
secured by a Lien on any property of the Borrower and its Subsidiaries
but only to the extent of the value of such property, whether or not
such Funded Debt has been assumed by the Borrower or any of its
Subsidiaries, and (vii) all Funded Debt of any partnership or
unincorporated joint venture where the Borrower or one of its
Subsidiaries is a general partner therein but only to the extent such
Person is legally obligated or has a reasonable expectation of being
liable with respect thereto, net of any assets of such partnership or
joint venture.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to Section 1.3
hereof.
"Governmental Authority" means any Federal, state, provincial,
local or foreign court or governmental agency, authority,
instrumentality or regulatory body.
"Guarantor" means Holdings, each of the Domestic Subsidiaries
of the Borrower and each Additional Credit Party which has executed a
Joinder Agreement.
"Guaranty Obligations" means, without duplication, any
obligations (other than endorsements in the ordinary course of
business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations of any other Person in any manner,
whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (a) to purchase any such
Indebtedness or other obligation or any property constituting security
therefor, (b) to advance or provide funds or other support for the
payment or purchase of such indebtedness or obligation or to maintain
working capital, solvency or other balance sheet condition of such
other Person (including, without limitation, maintenance agreements,
comfort letters or similar agreements or arrangements), (c) to lease
or purchase property, securities or services primarily for the purpose
of assuring the owner of such Indebtedness or obligation, or (d) to
otherwise assure or hold harmless the owner of such Indebtedness or
obligation against loss in respect thereof. The amount of any
Guaranty Obligation hereunder shall (subject to any limitations set
forth therein) be deemed to be an amount equal to the outstanding
principal amount (or maximum principal amount, if larger) of the
Indebtedness in respect of which such Guaranty Obligation is made.
"Hazardous Materials" means any substance, material or waste
defined or regulated in or under any Environmental Laws.
"Holdings" means Ivex Packaging Corporation, a Delaware
corporation.
"Holdings Debentures" means those certain 13 1/4% Senior
Discount Debentures due 2005 issued by Ivex Packaging Corporation
f/k/a Ivex Holdings Corporation as of March 8, 1993.
"Indebtedness" of any Person means, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds,
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<PAGE> 15
debentures, notes or similar instruments, or upon which interest
payments are customarily made, (iii) all obligations of such Person
under conditional sale or other title retention agreements relating to
property purchased by such Person to the extent of the value of such
property (other than customary reservations or retentions of title
under agreements with suppliers entered into in the ordinary course of
business), (iv) all obligations, including without limitation
intercompany items, of such Person issued or assumed as the deferred
purchase price of Property or services purchased by such Person which
would appear as liabilities on a balance sheet of such Person, (v) all
Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of Property
owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (vi) all Guaranty Obligations of
such Person, (vii) the principal portion of all obligations of such
Person under (A) capital leases and (B) any synthetic lease, tax
retention operating lease, off-balance sheet loan or similar
off-balance sheet financing product where such transaction is
considered borrowed money indebtedness for tax purposes but is
classified as an operating lease in accordance with GAAP, (viii) all
obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements, or other interest or
exchange rate or commodity price hedging agreements, (ix) the maximum
amount of all standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed),
(x) all preferred stock issued by such Person and required by the
terms thereof to be redeemed, or for which mandatory sinking fund
payments are due, by a fixed date and (xi) all other obligations which
would be shown as a liability on the balance sheet of such Person and
(xii) the aggregate purchase price paid by third parties for the
purchase of the accounts receivable of such Person subject at such
time to a sale of receivables (or similar transaction) regardless of
whether such transaction is effected without recourse to such Person
or in a manner that would not be reflected on the balance sheet of
such Person in accordance with GAAP. The Indebtedness of any Person
shall include the Indebtedness of any partnership or unincorporated
joint venture but only to the extent such Person is legally obligated
or has a reasonable expectation of being liable with respect thereto.
"Interbank Offered Rate" means, with respect to any Eurodollar
Loan for the Interest Period applicable thereto, the rate appearing on
Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period. If,
for any reason, such rate is not available, the term "Interbank
Offered Rate" shall mean, with respect to any Eurodollar Loan for the
Interest Period applicable thereto, the rate per annum appearing on
Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 A.M. (London time) two
Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if
more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"Interest Coverage Ratio" means, with respect to the Borrower
and its Subsidiaries on a consolidated basis, the ratio of (a) EBITDA
to (b) cash Interest Expense, as such ratio is calculated from time to
time giving effect to the Interim Adjustments.
"Interest Expense" means, with respect to the Borrower and its
Subsidiaries on a
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<PAGE> 16
consolidated basis, all interest expense, including the interest
component under capitalized leases and Receivables Transactions, as
determined in accordance with GAAP.
"Interest Payment Date" means (a) as to Base Rate Loans, the
last day of each fiscal quarter of the Borrower and the Revolving Loan
Maturity Date or the Tranche A Term Loan Maturity Date as applicable,
and (b) as to Eurodollar Loans, the last day of each applicable
Interest Period and the Revolving Loan Maturity Date or the Tranche A
Term Loan Maturity Date, as applicable, and in addition where the
applicable Interest Period for a Eurodollar Loan is greater than three
months, then also the last day of each fiscal quarter of the Borrower
during such Interest Period. If an Interest Payment Date falls on a
date which is not a Business Day, such Interest Payment Date shall be
deemed to be the next succeeding Business Day, except that in the case
of Eurodollar Loans where the next succeeding Business Day falls in
the next succeeding calendar month, then on the next preceding day.
"Interest Period" means, as to Eurodollar Loans, a period of
one, two, three or six months' duration, as the Borrower may elect,
commencing, in each case, on the date of the borrowing (including
continuations and conversions thereof); provided, however, (a) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
(except that where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day),
(b) no Interest Period shall extend beyond the Revolving Loan Maturity
Date or the Tranche A Term Loan Maturity Date, as applicable, and (c)
with regard to the Tranche A Term Loans, no Interest Period shall
extend beyond any Principal Amortization Payment Date unless the
portion of Tranche A Term Loans comprised of Base Rate Loans together
with the portion of Tranche A Term Loans comprised of Eurodollar Loans
with Interest Periods expiring prior to the date such Principal
Amortization Payment is due, is at least equal to the amount of such
Principal Amortization Payment due on such date and where an Interest
Period begins on a day for which there is no numerically corresponding
day in the calendar month in which the Interest Period is to end, such
Interest Period shall end on the last Business Day of such calendar
month.
"Intellectual Property" has the meaning set forth in Section
7.19 hereof.
"Interim Adjustments" means that, subsequent to the addition
of a New Company, the Interest Coverage Ratio, the Fixed Charge
Coverage Ratio and the Debt Coverage Ratio shall be calculated using
the adjustments and assumptions set forth below:
EBITDA, Capital Expenditures, Interest Expense and Scheduled
Funded Debt Payments for any New Company will be calculated commencing
after the acquisition of such New Company as follows:
(a) for any partial fiscal quarter that occurs
immediately subsequent to the addition of the New Company and for the
first three full fiscal quarters subsequent to the addition of the New
Company, EBITDA, Capital Expenditures Interest Expense and Scheduled
Funded Debt Payments for the New Company, for the quarter ending on
such date, shall be multiplied times a ratio equal to (i) 365 divided
by (ii) the number of days elapsed since the date of the addition of
the New Company until the last day of such quarter; and
(b) for the fourth full fiscal quarter subsequent to the
addition of the New
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<PAGE> 17
Company and each fiscal quarter end thereafter, EBITDA, Capital
Expenditures, Interest Expense and Scheduled Funded Debt Payments for
the New Company shall be the actual amounts for the four quarter
period ending on such date.
"Investment" in any Person means (a) the acquisition (whether
for cash, property, services, assumption of Indebtedness, securities
or otherwise) of assets, shares of capital stock, bonds, notes,
debentures, partnership, joint ventures or other ownership interests
or other securities of such other Person or (b) any deposit with, or
advance, loan or other extension of credit to, such Person (other than
deposits made in connection with the purchase of equipment or other
assets in the ordinary course of business) or (c) any other investment
in such Person, including, without limitation, any Guaranty Obligation
incurred for the benefit of such person.
"Issuing Lender" means (a) with respect to certain Existing
Stand Alone Letters of Credit under the Stand Alone Letter of Credit
Facility, Societe Generale, Southwest Agency and (b) with respect to
certain Existing Stand Alone Letters of Credit, any new Stand Alone
Letters of Credit, the Existing Revolving Letters of Credit, and any
new Revolving Letters of Credit, NationsBank, N.A.
"Issuing Lender Fees" has the meaning set forth in Section
3.4(b) hereof.
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Exhibit 8.13 attached hereto.
"Leasehold Properties" has the meaning set forth in Section
6.1(d) hereof.
"Lender" means any of the Persons identified as a "Lender" on
the signature pages hereto, and any Person which may become a Lender
by way of assignment in accordance with the terms hereof, together
with their successors and permitted assigns.
"Letter of Credit" means any standby or commercial letter of
credit issued by an Issuing Lender for the account of the Borrower in
accordance with the terms of Section 2.2 or 2.4 hereof and shall refer
to both Stand Alone Letters of Credit and Revolving Letters of Credit.
"Letter of Credit Fee" shall have the meaning assigned to such
term in the definition of Applicable Percentage in Section 1 hereof.
"Letter of Credit Lenders" shall have the meaning set forth in
Section 2.4 hereof.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory
or otherwise), preference, priority or charge of any kind (including
any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any financing or similar statement or
notice filed under the Uniform Commercial Code as adopted and in
effect in the relevant jurisdiction or other similar recording or
notice statute, and any lease in the nature thereof).
"Loan" or "Loans" means the Revolving Loans and/or the Tranche
A Term Loans (or a portion of any Revolving Loan or the Tranche A Term
Loans), individually or collectively, as appropriate.
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<PAGE> 18
"LOC Obligations" means Stand Alone LOC Obligations and
Revolving LOC Obligations.
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or
providing for (i) the rights and obligations of the parties concerned
or at risk or (ii) any collateral security for such obligations.
"Material Adverse Effect" means a material adverse effect,
after taking into account applicable insurance, if any, on (i) the
operations, financial condition or business of the Borrower and its
Subsidiaries taken as a whole, (ii) the ability of the Borrower or a
Guarantor to perform its respective obligations under this Credit
Agreement or any of the other Credit Documents, or (iii) the validity
or enforceability of this Credit Agreement, any of the other Credit
Documents, or the rights and remedies of the Lenders hereunder or
thereunder taken as a whole.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Mortgage Documents" means the Mortgages, the Collateral
Assignments of Leasehold Interests, the Mortgage Policies and such
other documents and agreements executed or delivered in connection
with the Real Properties.
"Mortgage Policies" has the meaning set forth in Section
6.1(d) hereof.
"Mortgages" has the meaning set forth in Section 6.1(d)
hereof.
"Mortgaged Properties" has the meaning set forth in Section
6.1(d) hereof.
"Multiemployer Plan" means a Plan covered by Title IV of ERISA
which is a multiemployer plan as defined in Sections 3(37) or
4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan covered by Title IV of
ERISA, other than a Multiemployer Plan, which any Credit Party or any
of its Subsidiaries or any ERISA Affiliate and at least one employer
other than a Credit Party or any of its Subsidiaries or any ERISA
Affiliate are contributing sponsors.
"Net Cash Proceeds" means the gross cash proceeds (including
cash actually received by way of deferred payment pursuant to a
promissory note, receivable, or otherwise) received from the sale,
lease, conveyance, disposition or other transfer of assets, net of (i)
transaction costs payable to third parties, and (ii) a good faith
estimate of the taxes payable with respect to such proceeds
(including, without duplication, withholding taxes).
"Net Income" means, for any period, the net income after taxes
for such period of the Borrower and its Subsidiaries on a consolidated
basis, as determined in accordance with GAAP.
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<PAGE> 19
"Net Worth" means, as of any date, shareholders' equity or net
worth of the Borrower and its Subsidiaries on a consolidated basis, as
determined in accordance with GAAP.
"New Company" means a Person that is acquired by, and becomes
a Subsidiary of, a Credit Party (or a Subsidiary that is established
to purchase the assets of another Person) as long as, during the first
four full fiscal quarters subsequent to the acquisition, it remains a
separate Subsidiary of a Credit Party.
"Newton Property" means the property leased by the Borrower
located in Newton, Massachusetts.
"Non-Excluded Taxes" has the meaning set forth in Section 4.5
hereof.
"Note" or "Notes" means the Revolving Loan Notes and/or the
Tranche A Term Loan Notes, individually or collectively, as
appropriate.
"Notice of Borrowing/Continuation/Conversion" means a request
by the Borrower for a Revolving Loan (or any continuation or
conversion thereof) or for all or a portion of the Term Loans to
accrue interest at the Adjusted Base Rate or the Adjusted Eurodollar
Rate, in the form of Exhibit 2.1 attached hereto.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereto.
"Participation Interest" means, the Extension of Credit by a
Lender by way of a purchase of a participation in Letters of Credit or
LOC Obligations as provided in Section 2.2 and 2.4 hereof or in any
Loans as provided in Section 3.8 hereof.
"Permitted Acquisition" means an acquisition of all or part of
the assets or stock of another Person by the Borrower; provided that
after giving effect to such acquisition (a) there is at least
$15,000,000 of availability under the Revolving Committed Amount, (b)
the ratio of (i) Senior Funded Debt to (ii) EBITDA, on a Pro Forma
Basis, is less than 3.0 to 1.0, (c) the Borrower and its Subsidiaries
are in compliance, on a Pro Forma Basis, with all of the covenants set
forth in Section 8.12 hereof and (d) no Default or Event of Default
exists and is continuing.
"Permitted Investments" means Investments which are (i) cash
or Cash Equivalents, (ii) accounts receivable created, acquired or
made in the ordinary course of business and payable or dischargeable
in accordance with customary trade terms, (iii) Investments in a
Guarantor (other than Holdings), (iv) loans to directors, officers,
employees, agents, customers or suppliers in the ordinary course of
business for reasonable business expenses, (v) loans to directors,
officers and employees to finance purchases (or tax obligations
relating to such purchases) of Holding's capital stock not to exceed
$5,000,000, in the aggregate, at any one time, (vi) Permitted
Acquisitions, (vii) Investments in foreign joint ventures not to
exceed $5,000,000, in the aggregate, at any one time, (viii) the
purchase of restricted stock or options of Holdings or the Borrower
from employees who voluntarily or involuntarily terminate their
employment with the Borrower or any of its Subsidiaries, (ix) the
redemption of Subordinated Debt as permitted by this Credit Agreement
(x) the Investments set forth on Schedule 9.6 attached hereto and (xi)
Investments in Foreign Subsidiaries, subsequent to the Closing Date,
not
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<PAGE> 20
to exceed $20,000,000 PLUS THE AMOUNT OF DIVIDENDS PAID BY
FOREIGN SUBSIDIARIES TO A CREDIT PARTY, in the aggregate.
"Permitted Liens" means (i) Liens in favor of the Agent on
behalf of the Lenders, (ii) Liens for taxes not yet due or Liens for
taxes being contested in good faith by appropriate proceedings for
which adequate reserves determined in accordance with GAAP have been
established (and as to which the property subject to any such Lien is
not yet subject to foreclosure, sale or loss on account thereof),
(iii) Liens in respect of property imposed by law arising in the
ordinary course of business such as materialmen's, mechanics',
warehousemen's carrier's, landlords' and other nonconsensual statutory
Liens and other like Liens which are not delinquent for a period of
more than sixty days or, if due and payable, are being contested in
good faith by appropriate proceedings for which adequate reserves
determined in accordance with GAAP have been established (and as to
which the Property subject to any such Lien is not yet subject to
foreclosure, sale or loss on account thereof), (iv) pledges or
deposits made to secure payment of worker's compensation insurance,
unemployment insurance, pensions or social security programs, (v)
Liens arising from good faith deposits in connection with or to secure
performance of tenders, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
incurred in the ordinary course of business (other than obligations in
respect of the payment of borrowed money), (vi) Liens arising from
good faith deposits in connection with or to secure performance of
statutory obligations and surety and appeal bonds, (vii) easements,
rights-of-way, restrictions (including zoning restrictions), minor
defects or irregularities in title and other similar charges or
encumbrances not, in any material respect, impairing the use of the
encumbered property for its intended purposes, (viii) judgment Liens
that would not constitute an Event of Default, (ix) Liens on
receivables sold pursuant to a Receivables Transaction, (x) Liens in
connection with Indebtedness allowed under Sections 9.1(g) and 9.1(l)
hereof, (xi) Liens constituting intellectual property licenses entered
into in the ordinary course of business, (xii) Liens on the property
or assets of a corporation which becomes a Subsidiary of the Borrower
or is merged with or into a Credit Party after the date hereof that
secures Indebtedness permitted by Section 9.1(j) hereof; provided,
that (A) such Liens existed at the time such corporation became a
Subsidiary of the Borrower or was merged with or into a Credit Party
and were not created in anticipation thereof, (B) such Liens do not
extend to any property other than the actual property acquired in
connection with such acquisition and (C) at such time, no Default or
Event of Default exists or shall result from such transaction ; (xiii)
Liens arising by virtue of any statutory or common law provision
relating to banker's liens, rights of setoff or similar rights as to
deposit accounts or other funds maintained with a creditor depository
institution; and (xiv) Liens existing on the date hereof and identified
on Schedule 9.2 hereto and any Liens granted in connection with any
amendment, restatement, supplement, renewal, replacement, extension or
refunding (or successive amendments, restatements, supplements,
renewals, replacements, extensions or refundings) in whole or part of
any such Liens or the Indebtedness permitted by Section 9.1(b) hereof;
provided that the principal amount of Indebtedness secured by any such
Lien does not exceed the principal amount of such Indebtedness
outstanding immediately prior to such amendment, restatement,
supplement, renewal, replacement, extension or refunding.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated), or any Governmental
Authority.
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<PAGE> 21
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which any
Credit Party or any of its Subsidiaries or any ERISA Affiliate is (or,
if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" within the meaning of Section
3(5) of ERISA.
"Pledge Agreement" means the Amended and Restated Pledge
Agreement, executed and delivered by each of the applicable Credit
Parties in favor of the Agent, for the benefit of the Lenders, to
secure their obligations under the Credit Documents, as amended,
modified, extended, renewed or replaced from time to time.
"Prime Rate" means the per annum rate of interest established
from time to time by the Agent at its principal office in Charlotte,
North Carolina as its Prime Rate. Any change in the interest rate
resulting from a change in the Prime Rate shall become effective as of
12:01 a.m. of the Business Day on which each change in the Prime Rate
is announced by the Agent. The Prime Rate is a reference rate used by
the Agent in determining interest rates on certain loans and is not
intended to be the lowest rate of interest charged on any extension of
credit to any debtor.
"Principal Amortization Payment" means a principal payment on
the Tranche A Term Loans as set forth in Section 2.3(c) hereof.
"Principal Amortization Payment Date" means the date a
Principal Amortization Payment is due.
"Pro Forma Basis" means, with respect to a Permitted
Acquisition, that such Permitted Acquisition shall be deemed to have
occurred as of the first day of the four fiscal quarter period ending
as of the last day of the most recent fiscal quarter for which the
Lenders have received the financial information required by Section
8.1(b) hereof.
"Real Properties" means the Mortgaged Properties and the
Leasehold Properties.
"Receivables Transaction" means a transaction in which a
Credit Party sells or grants a security interest in its trade
receivables, as approved by the Required Lenders in their sole
discretion.
"Redemption Conditions" means, after giving effect to the
redemption or other acquisition of any Subordinated Debt (a) such
redemption or other acquisition is otherwise permitted under this
Credit Agreement, (b) there remains at least $15,000,000 of
availability under the Revolving Committed Amount, (c) the ratio of
(i) Senior Funded Debt to (ii) EBITDA, on a pro forma basis, is less
than 3.0 to 1.0, (d) the Borrower and its Subsidiaries, on a pro forma
basis, are in compliance with all of the covenants set forth in
Section 8.12 hereof, (e) no more than $25,000,000, in the aggregate,
shall be used to redeem or acquire Holdings Debentures from the
Closing Date to the date the Credit Party Obligations are satisfied in
full, (f) no Default or Event of Default exists and is continuing and
(g) the redemption price of Holdings Debentures and Subordinated Notes
shall not exceed the percentage of accreted value or par value, as
applicable, as set forth below:
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<PAGE> 22
Maximum Percentage of
Period Accreted Value/Par Value
------ ------------------------
From the Effective Date
to December 14, 1997 112.5%
From December 15, 1997
to December 14, 1998 109.25%
From December 15, 1998
to December 14, 1999 106.125%
From December 15, 1999
and thereafter 103.00%
"Regulation D, G, U, or X" means Regulation D, G, U or X,
respectively, of the Board of Governors of the Federal Reserve System
as from time to time in effect and any successor to all or a portion
thereof.
"Reportable Event" means a "reportable event" as defined in
Section 4043 of ERISA with respect to which the notice requirements to
the PBGC have not been waived.
"Required Lenders" means Lenders whose aggregate Credit
Exposure (as hereinafter defined) constitutes at least 51% of the
Credit Exposure of all Lenders at such time; provided, however, that
if any Lender shall be a Defaulting Lender at such time then there
shall be excluded from the determination of Required Lenders the
aggregate principal amount of Credit Exposure of such Lender at such
time. For purposes of the preceding sentence, the term "Credit
Exposure" as applied to each Lender shall mean (a) at any time prior
to the termination of the Commitments, the sum of (i) the Revolving
Commitment Percentage of such Lender multiplied times the Revolving
Committed Amount plus, (ii) the Tranche A Term Loan Commitment
Percentage of such Lender multiplied times the aggregate face amount
of Tranche A Term Loans outstanding at such time, plus (iii) the Stand
Alone LOC Commitment Percentage of such Lender multiplied times the
face amount of Stand Alone LOC Committed Amount and (b) at any time
after the termination of the Commitments, the sum of (i) the principal
balance of the outstanding Loans of such Lender, plus (ii) such
Lender's interest in the face amount of the outstanding Letters of
Credit.
"Requirement of Law" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation or final, non-appealable determination of an arbitrator or
a court or other Governmental Authority, in each case applicable to or
binding upon such Person or to which any of its material property is
subject.
"Revolving Committed Amount" means ONE HUNDRED FIVE MILLION
DOLLARS ($105,000,000), as such amount may be reduced from time to
time in accordance with the terms hereof.
"Revolving Letter of Credit" means the Existing Revolving
Letters of Credit and any Letter of Credit issued for the account of a
Credit Party by an Issuing Lender
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<PAGE> 23
pursuant to Section 2.2 hereof, as such Revolving Letters of Credit
may be amended, modified, extended, renewed or replaced.
"Revolving Letter of Credit Subfacility" shall have the
meaning set forth in Section 2.2 hereof.
"Revolving Loan Commitment Percentage" means, for each Lender,
the percentage identified as its Revolving Loan Commitment Percentage
on Schedule 1.1(a) attached hereto, as such percentage may be
modified in connection with any assignment made in accordance with the
provisions of Section 12.3 hereof.
"Revolving Loan Lenders" shall have the meaning set forth in
Section 2.1 hereof.
"Revolving Loan Maturity Date" means September 30, 2001.
"Revolving Loans" means the Revolving Loans made to the
Borrower pursuant to Section 2.1 hereof.
"Revolving Loan Unused Commitment" means, for any period, the
amount by which (i) the then applicable aggregate Revolving Committed
Amount exceeds (ii) the daily average sum for such period of the
outstanding aggregate principal amount of all Revolving Loans plus the
aggregate amount of Revolving LOC Obligations outstanding.
"Revolving LOC Obligations" means, at any time, the sum of (i)
the maximum amount which is, or at any time thereafter may become,
available to be drawn under Revolving Letters of Credit then
outstanding, assuming compliance with all requirements for drawings
referred to in such Revolving Letters of Credit plus (ii) the
aggregate amount of all drawings under Revolving Letters of Credit
honored by an Issuing Lender but not theretofore reimbursed.
"Revolving Note" or "Revolving Notes" means the amended and
restated promissory notes of the Borrower in favor of each of the
Lenders evidencing the Revolving Loans provided pursuant to Section
2.1 hereof, individually or collectively, as appropriate, as such
promissory notes may be amended, modified, supplemented, extended,
renewed or replaced from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of
such division in the business of rating securities.
"Scheduled Funded Debt Payments" means, as of the date of
determination, for the Borrower and its Subsidiaries on a consolidated
basis, the sum of all scheduled payments of principal on Funded Debt
for the twelve month period ending on the date of determination
(including the principal component of payments due on leases that are
required to be capitalized in accordance with GAAP during the twelve
month period ending on the date of determination); it being understood
that Scheduled Funded Debt Payments shall not include voluntary
prepayments or the mandatory prepayments required pursuant to Section
3.2 hereof.
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"Security Agreement" means the Amended and Restated Security
Agreement executed and delivered by each of the Credit Parties in
favor of the Agent for the benefit of the Lenders to secure their
obligations under the Credit Documents, as amended, modified,
extended, renewed or replaced from time to time.
"Senior Funded Debt" means all Funded Debt of the Borrower and
its Subsidiaries other than Funded Debt specifically subordinated to
the Credit Party Obligations.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"Solvent" means, with respect to any Person as of a particular
date, that on such date (i) such Person is able to pay its debts and
other liabilities, contingent obligations and other commitments as
they mature in the normal course of business, (ii) such Person does
not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and
liabilities mature in their ordinary course, (iii) such Person is not
engaged in a business or a transaction, and is not about to engage in
a business or a transaction, for which such Person's assets would
constitute unreasonably small capital after giving due consideration
to the prevailing practice in the industry in which such Person is
engaged or is to engage, (iv) the fair value of the assets of such
Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person and (v) the
present fair saleable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured. In
computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount which,
in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an
actual or matured liability.
"Stand Alone Letters of Credit" means the Existing Stand Alone
Letters of Credit and any Letter of Credit issued for the account of a
Credit Party by an Issuing Lender pursuant to Section 2.4 hereof, as
such Stand Alone Letters of Credit may be amended, modified, extended,
renewed or replaced.
"Stand Alone Letter of Credit Facility" shall have the meaning
set forth in Section 2.4 hereof.
"Stand Alone Letter of Credit Maturity Date" means
September 30, 2001.
"Stand Alone LOC Committed Amount" means FORTY FIVE MILLION
DOLLARS ($45,000,000).
"Stand Alone LOC Commitment Percentage" means, for each
Lender, the percentage identified as its Stand Alone LOC Commitment
Percentage on Schedule 1.1(a) attached hereto, as such
percentage may be modified in connection with any assignment made in
accordance with the terms of Section 12.3 hereof.
"Stand Alone LOC Obligations" means, at any time, the sum of
(i) the maximum amount which is, or at any time thereafter may become,
available to be drawn under Stand Alone Letters of Credit then
outstanding, assuming compliance with all requirements for drawings
referred to in such Stand Alone Letters of Credit plus (ii) the
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aggregate amount of all drawings under Stand Alone Letters of Credit
honored by an Issuing Lender but not theretofore reimbursed.
"Stand Alone LOC Unused Commitment" means, for any period, the
amount by which (i) the applicable aggregate Stand Alone LOC Committed
Amount exceeds (ii) the daily average sum for such period of
outstanding Stand Alone LOC Obligations.
"Subordinated Debt" means the Holdings Debentures and the
Subordinated Notes as such may be amended, modified, restated
substituted or replaced from time to time in accordance with the terms
of this Credit Agreement.
"Subordinated Notes" means those certain 12 1/2% Senior
Subordinated Notes due 2002 issued by IPC, Inc. f/k/a Ivex Packaging
Corporation as Issuer as of December 15, 1992.
"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time, any
class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time
owned by such Person directly or indirectly through Subsidiaries, and
(b) any partnership, association, joint venture or other entity in
which such person directly or indirectly through Subsidiaries has more
than 50% equity interest at any time.
"Taxes" has the meaning set forth in Section 4.5 hereof.
"Term Loans" means the Tranche A Term Loans.
"Termination Event" means (i) with respect to any Plan,
covered by Title IV of ERISA, the occurrence of a Reportable Event or
the substantial cessation of operations (within the meaning of Section
4062(e) of ERISA); (ii) the withdrawal of any Credit Party or any of
its Subsidiaries or any ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a substantial employer (as such
term is defined in Section 4001(a)(2) of ERISA), or the termination of
a Multiple Employer Plan; (iii) the distribution of a notice of intent
to terminate or the actual termination of a Plan pursuant to Section
4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to
terminate or the actual termination of a Plan by the PBGC under
Section 4042 of ERISA; (v) any event or condition which might
reasonably constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Plan; or (vi) the complete or partial withdrawal of any Credit Party
or any of its Subsidiaries or any ERISA Affiliate from a Multiemployer
Plan.
"Total Assets" means, as of any date, all items which, in
accordance with GAAP, would be classified as assets of the Borrower
and its Subsidiaries on a consolidated basis.
"Tranche A Lenders" shall have the meaning set forth in
Section 2.3(a) hereof.
"Tranche A Term Loans" means the Term Loans made to the
Borrower pursuant to Section 2.3(a) hereof.
"Tranche A Term Loan Commitment Percentage" means, for each
Lender, the
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percentage identified as its Tranche A Term Loan Commitment
Percentage on Schedule 1.1(a) attached hereto, as such percentage may
be modified in connection with any assignment made in accordance with
the provisions of Section 12.3 hereof.
"Tranche A Term Loan Committed Amount" means FIFTY FIVE
MILLION DOLLARS ($55,000,000).
"Tranche A Term Loan Maturity Date" means September 30, 2001.
"Tranche A Term Note" or "Tranche A Term Notes" means the
amended and restated promissory notes of the Borrower in favor of each
of the Lenders evidencing the Tranche A Term Loans provided pursuant
to Section 2.3(a) hereof, individually or collectively, as
appropriate, as such promissory notes may be amended, modified,
supplemented, extended, renewed or replaced from time to time.
"Unused Fees" means the fees payable to the agent for the
benefit of the Lenders pursuant to Section 3.4(a) hereof.
"Working Capital" means the excess of current assets
(excluding Cash and Cash Equivalents) over current liabilities
(excluding the current portion of Funded Debt), as determined in
accordance with GAAP.
1.2 Computation of Time Periods. For purposes of computation of
periods of time hereunder, the word "from" means "from and including" and the
words "to" and "until" each mean "to but excluding."
1.3 Accounting Terms. Except as otherwise expressly provided
herein, all accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered to the Lenders hereunder shall be prepared, in
accordance with GAAP applied on a consistent basis. All calculations made for
the purposes of determining compliance with this Credit Agreement shall (except
as otherwise expressly provided herein) be made by application of GAAP applied
on a basis consistent with the most recent annual or quarterly financial
statements delivered pursuant to Section 8.1 hereof (or, prior to the delivery
of the first financial statements pursuant to Section 8.1 hereof, consistent
with the financial statements described in Section 6.1(f) hereof); provided,
however, if (a) the Borrower shall object to determining such compliance on
such basis at the time of delivery of such financial statements due to any
change in GAAP or the rules promulgated with respect thereto or (b) the Agent
or the Required Lenders shall so object in writing within 30 days after
delivery of such financial statements, then such calculations shall be made on
a basis consistent with GAAP as in effect as of the date of the most recent
financial statements delivered by the Borrower to the Lenders to which no such
objection shall have been made.
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SECTION 2
CREDIT FACILITIES
2.1 Revolving Loans.
(a) Revolving Loan Commitment. The Credit Parties and
the Lenders agree that, as of the Closing Date, the amount of
Revolving Loans outstanding, as provided under the Original Credit
Agreement, equals $_______________. Each of the outstanding Revolving
Loans made under the Original Credit Agreement shall be, as of the
Effective Date, a Revolving Loan under this Credit Agreement. Subject
to the terms and conditions set forth herein, each Lender who has a
Revolving Loan Commitment Percentage that is greater than zero (the
"Revolving Loan Lenders") severally agrees to make revolving loans
(each a " Revolving Loan" and collectively the "Revolving Loans") to
the Borrower, in U.S. dollars, at any time and from time to time,
during the period from and including the Effective Date to but not
including the Revolving Loan Maturity Date (or such earlier date if
the obligation to make Revolving Loans has been terminated as provided
herein); provided, however, that (i) the sum of the aggregate amount
of Revolving Loans outstanding plus the aggregate amount of Revolving
LOC Obligations outstanding shall not exceed the aggregate Revolving
Committed Amount and (ii) with respect to each individual Revolving
Loan Lender, the Revolving Loan Lender's pro rata share of outstanding
Revolving Loans plus such Revolving Loan Lender's pro rata share of
outstanding Revolving LOC Obligations shall not exceed such Revolving
Loan Lender's Revolving Loan Commitment Percentage of the Revolving
Committed Amount. Subject to the terms of this Credit Agreement, the
Borrower may borrow, repay and reborrow the amount of the Revolving
Loan Commitment.
(b) Method of Borrowing for Revolving Loans.
(i) Base Rate Loans. By no later than
11:00 a.m. on the date of the request for the borrowing (or
for the conversion of Eurodollar Loans to Base Rate Loans),
the Borrower shall submit a Notice of
Borrowing/Continuation/Conversion to the Agent, via telecopy,
with original to follow, (A) setting forth (x) the amount
requested and (y) the desire to have such Revolving Loans
accrue interest at the Adjusted Base Rate and (B) complying in
all respects with Section 6.2 hereof; provided that existing
Eurodollar Loans may be converted into Base Rate Loans at the
end of an Interest Period without complying with Section 6.2
hereof.
(ii) Eurodollar Loans. By no later than
11:00 a.m. three Business Days prior to the date of the
request for the borrowing (or for the conversion of Base Rate
Loans to Eurodollar Loans or the continuation of existing
Eurodollar Loans), the Borrower shall submit a Notice of
Borrowing/Continuation/Conversion to the Agent (A) setting
forth (x) the amount requested, (y) the desire to have such
Revolving Loans accrue interest at the Adjusted Eurodollar
Rate, and (z) the Interest Period applicable thereto, and (B)
complying in all respects with Section 6.2 hereof.
(iii) Continuation and Conversion. The
Borrower shall have the option, on any Business Day, to
continue existing Eurodollar Loans for a subsequent Interest
Period, to convert Base Rate Loans into Eurodollar Loans or
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to convert Eurodollar Loans into Base Rate Loans; provided,
however, that (A) except as provided in Section 4.3 hereof,
Eurodollar Loans may be converted to Base Rate Loans only on
the last day of an Interest Period applicable thereto; (B)
Eurodollar Loans may be continued and Base Rate Loans may be
converted to Eurodollar Loans only if no Default or Event of
Default is in existence on the date of extension or
conversion; (C) any continuation or conversion must comply
with all requirements of this Credit Agreement including
timely delivery of a properly completed Notice of
Borrowing/Continuation/Conversion; provided, however, that
existing Eurodollar Loans may be converted into Base Rate
Loans at the end of an Interest Period without complying with
Section 6.2 hereof and (D) failure by the Borrower to properly
continue Eurodollar Loans at the end of an Interest Period
shall be deemed a conversion to Base Rate Loans.
(c) Funding of Revolving Loans. Upon receipt of a Notice
of Borrowing/Continuation/Conversion, the Agent shall promptly inform
the Lenders as to the terms thereof. Each Revolving Loan Lender will
make its pro rata share of the Revolving Loans available to the Agent
by 2:00 p.m. on the date specified in the Notice of
Borrowing/Continuation/Conversion by deposit (in U.S. dollars) of
immediately available funds at the offices of the Agent at its
principal office in Charlotte, North Carolina, or at such other
address as the Agent may designate in writing. All Revolving Loans
shall be made by the Lenders pro rata on the basis of each Revolving
Loan Lender's Revolving Loan Commitment Percentage.
No Revolving Loan Lender shall be responsible for the failure
or delay by any other Revolving Loan Lender in its obligation to make
Revolving Loans hereunder; provided, however, that the failure of any
Lender to fulfill its obligations hereunder shall not relieve any
other Lender of its obligations hereunder. Unless the Agent shall
have been notified by any Revolving Loan Lender prior to the date of
any such Revolving Loan that such Revolving Loan Lender does not
intend to make available to the Agent its portion of the Revolving
Loans to be made on such date, the Agent may assume that such Lender
has made such amount available to the Agent on the date of such
Revolving Loans, and the Agent in reliance upon such assumption, may
(in its sole discretion without any obligation to do so) make
available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent, the
Agent shall be able to recover such corresponding amount from such
Revolving Loan Lender. If such Lender does not pay such corresponding
amount forthwith upon the Agent's demand therefor, the Agent will
promptly notify the Borrower and the Borrower shall immediately pay
such corresponding amount to the Agent. The Agent shall also be
entitled to recover from the Revolving Loan Lender or the Borrower, as
the case may be, interest on such corresponding amount in respect of
each day from the date such corresponding amount was made available by
the Agent to the Borrower to the date such corresponding amount is
recovered by the Agent at a per annum rate equal to (i) from the
Borrower at the applicable rate for such Revolving Loan pursuant to
the Notice of Borrowing/Continuation/Conversion and (ii) from a Lender
at the Federal Funds Rate.
(d) Minimum Amounts of Revolving Loans. Each request for
Revolving Loans shall be (a) in the case of Eurodollar Loans, in an
aggregate principal amount that is not less than $1,000,000 and (b) in
the case of Base Rate Loans, in an aggregate principal amount that is
not less than the lesser of $1,000,000 or the remaining amount
available under the Revolving Committed Amount. Any Revolving Loan
requested shall be in an integral multiple of $100,000 unless the
request is for all of the remaining amount available to be borrowed
under the Revolving Committed Amount.
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(e) Reductions of Revolving Committed Amount. Upon at
least three Business Days' notice, the Borrower shall have the right
to permanently terminate or reduce the aggregate unused amount of the
Revolving Committed Amount at any time or from time to time; provided
that (i) each partial reduction shall be in an aggregate amount at
least equal to $1,000,000 and in integral multiples of $100,000 above
such amount and (ii) no reduction shall be made which would reduce the
Revolving Committed Amount to an amount less than the aggregate amount
of outstanding Revolving Loans plus the aggregate amount of
outstanding Revolving LOC Obligations. Any reduction in (or
termination of) the Revolving Committed Amount shall be permanent and
may not be reinstated.
2.2 Revolving Letter of Credit Subfacility.
(a) Issuance. Subject to the terms and conditions hereof
and of the LOC Documents, if any, and any other terms and conditions
which the Issuing Lender may reasonably require, the Issuing Lender
shall issue (in U.S. dollars) and the Revolving Loan Lenders shall
participate in, letters of credit (the "Revolving Letters of Credit")
for the account of the Borrower for its benefit or the benefit of any
other Credit Party from time to time upon request from the Effective
Date until the Revolving Loan Maturity Date in a form reasonably
acceptable to the Issuing Lender; provided, however, that (i) the
aggregate amount of Revolving LOC Obligations shall not at any time
exceed FIVE MILLION DOLLARS ($5,000,000) and (ii) the sum of the
aggregate amount of Revolving Loans outstanding plus the aggregate
amount of Revolving LOC Obligations outstanding shall not exceed the
Revolving Committed Amount. Revolving Letters of Credit shall be
issued for any lawful purpose. Except as otherwise expressly agreed
upon by all the Revolving Loan Lenders, no Revolving Letter of Credit
shall have an original expiry date more than one year from the date of
issuance or as extended, shall have an expiry date extending beyond 30
days prior to the Revolving Loan Maturity Date. Each Revolving Letter
of Credit shall comply with the related LOC Documents. The issuance
and expiry date of each Revolving Letter of Credit shall be a Business
Day.
(b) Request and Reports. The request for the issuance of
a Revolving Letter of Credit shall be submitted to the Issuing Lender
at least three Business Days prior to the requested date of issuance.
The Issuing Lender will, at least quarterly and more frequently upon
request, provide to the Agent for dissemination to the Lenders a
detailed report specifying the Revolving Letters of Credit which are
then issued and outstanding and any activity with respect thereto
which may have occurred since the date of the prior report, and
including therein, among other things, the account party, the
beneficiary, the outstanding balance, and the expiry date as well as
any payments or expirations which may have occurred. The Issuing
Lender will further provide to the Agent, promptly upon request,
copies of the Revolving Letters of Credit.
(c) Participations.
(i) On the Effective Date, each Revolving Loan
Lender shall automatically acquire a participation in the
liability of the Issuing Lender under each Existing Revolving
Letter of Credit in an amount equal to its Revolving Loan
Commitment Percentage of such Existing Revolving Letters of
Credit. Each Existing Revolving Letter of Credit shall be
deemed for all purposes of this Credit Agreement and the other
Credit Documents to be a Revolving Letter of Credit.
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(ii) Each Revolving Loan Lender, upon issuance of
a Revolving Letter of Credit, shall be deemed to have
purchased without recourse a risk participation from the
Issuing Lender in such Revolving Letter of Credit and the
obligations arising thereunder and any collateral relating
thereto, in each case in an amount equal to its Revolving Loan
Commitment Percentage of the obligations under such Revolving
Letter of Credit and shall absolutely, unconditionally and
irrevocably assume, as primary obligor and not as surety, and
be obligated to pay to the Issuing Lender therefor and
discharge when due, its Revolving Loan Commitment Percentage
of the obligations arising under such Letter of Credit.
Without limiting the scope and nature of each Revolving Loan
Lender's participation in any Revolving Letter of Credit, to
the extent that the Issuing Lender has not been reimbursed as
required hereunder or under any such Revolving Letter of
Credit, each such Revolving Loan Lender shall pay to the
Issuing Lender its Revolving Loan Commitment Percentage of
such unreimbursed drawing in same day funds on the day of
notification by the Issuing Lender of an unreimbursed drawing
pursuant to the provisions of subsection (d) hereof. The
obligation of each Revolving Loan Lender to so reimburse the
Issuing Lender shall be absolute and unconditional and shall
not be affected by the occurrence of a Default, an Event of
Default or any other occurrence or event. Any such
reimbursement shall not relieve or otherwise impair the
obligation of the Borrower or any other Credit Party to
reimburse the Issuing Lender under any Revolving Letter of
Credit, together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Revolving Letter of Credit, the Issuing Lender will promptly notify
the Borrower. Unless the Borrower shall immediately notify the
Issuing Lender of its intent to otherwise reimburse the Issuing
Lender, the Borrower shall be deemed to have requested a Revolving
Loan at the Adjusted Base Rate in the amount of the drawing as
provided in subsection (e) hereof, the proceeds of which will be used
to satisfy the reimbursement obligations. The Borrower shall reimburse
the Issuing Lender on the day the Issuing Lender pays a drawing under
any Revolving Letter of Credit either with the proceeds of a Revolving
Loan obtained hereunder or otherwise in same day funds as provided
herein or in the LOC Documents. If the Borrower shall fail to
reimburse the Issuing Lender as provided hereinabove, the unreimbursed
amount of such drawing shall bear interest at a per annum rate equal
to the Base Rate plus three and one quarter percent (3 1/4%) and shall
constitute an Event of Default. The Borrower's reimbursement
obligations hereunder shall be absolute and unconditional under all
circumstances irrespective of any rights of set-off, counterclaim or
defense to payment the Borrower may claim or have against the Issuing
Lender, the Agent, the Lenders, the beneficiary of the Revolving
Letter of Credit drawn upon or any other Person, including without
limitation any defense based on any failure of the Borrower to receive
consideration or the legality, validity, regularity or
unenforceability of the Revolving Letter of Credit; provided, however,
that the Borrower may have a claim against the Issuing Lender, and the
Issuing Lender may be liable to the Borrower, to the extent of any
actual damages suffered by the Borrower as a result of the Issuing
Lender's gross negligence or willful misconduct in failing to pay a
drawing under a Revolving Letter of Credit presented in strict
conformity therewith. The Issuing Lender will promptly notify the
other Revolving Loan Lenders of the amount of any unreimbursed drawing
and each Revolving Loan Lender shall promptly pay to the Agent for the
account of the Issuing Lender in U.S. dollars and in immediately
available funds, the amount of such Revolving Loan Lender's Revolving
Loan Commitment Percentage of such unreimbursed drawing. Such payment
shall be made on the day such notice is
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received by such Revolving Loan Lender from the Issuing Lender if such
notice is received at or before 2:00 p.m., otherwise such payment
shall be made at or before 12:00 Noon on the Business Day next
succeeding the day such notice is received. If such Revolving Loan
Lender does not pay such amount to the Issuing Lender in full upon
such request, such Lender shall, on demand, pay to the Agent for the
account of the Issuing Lender interest on the unpaid amount during
the period from the date of payment by the Issuing Lender of such
drawing until such Revolving Loan Lender pays such amount to the
Issuing Lender in full at a rate per annum equal to, if paid within
two Business Days of the date of payment by the Issuing Lender of such
drawing, the Federal Funds Rate and thereafter at a rate equal to the
Base Rate. Each Revolving Loan Lender's obligation to make such
payment to the Issuing Lender, and the right of the Issuing Lender to
receive the same, shall be absolute and unconditional, shall not be
affected by any circumstance whatsoever and without regard to the
termination of this Credit Agreement or the Commitments hereunder, the
existence of a Default or Event of Default or the acceleration of the
obligations hereunder and shall be made without any offset, abatement,
withholding or reduction whatsoever.
(e) Repayment with Revolving Loans. On any day on which
the Borrower shall have requested, or been deemed to have requested, a
Revolving Loan borrowing to reimburse a drawing under a Revolving
Letter of Credit, the Agent shall give notice to the Lenders that
Revolving Loans have been requested or deemed requested in connection
with a drawing under a Revolving Letter of Credit, in which case a
Revolving Loan borrowing comprised solely of Base Rate Loans (each
such borrowing, a "Mandatory Borrowing") shall be immediately made
from all Revolving Loan Lenders (without giving effect to any
termination of the Commitments pursuant to Section 10.2 hereof) pro
rata based on each Lender's respective Revolving Loan Commitment
Percentage and the proceeds thereof shall be paid directly to the
Issuing Lender for application to the respective Revolving LOC
Obligations. Each such Revolving Loan Lender hereby irrevocably
agrees to make such Revolving Loans immediately upon any such request
or deemed request on account of each Mandatory Borrowing in the amount
and in the manner specified in the preceding sentence and on the same
such date notwithstanding (i) the amount of Mandatory Borrowing may
not comply with the minimum amount for borrowings of Revolving Loans
otherwise required hereunder, (ii) whether any conditions specified in
Section 6 hereof are then satisfied, (iii) whether a Default or Event
of Default then exists, (iv) failure for any such request or deemed
request for Revolving Loan to be made by the time otherwise required
in Section 2.1 hereof, (v) the date of such Mandatory Borrowing, or
(vi) any reduction in the Revolving Committed Amount after any such
Letter of Credit may have been drawn upon; provided that if a
Mandatory Borrowing occurs during or causes an Event of Default a
default rate of interest may be charged in accordance with Section
3.1(b) hereof. In the event that any Mandatory Borrowing cannot for
any reason be made on the date otherwise required above (including,
without limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code with respect to the Borrower or any other
Credit Party), then each such Revolving Loan Lender hereby agrees that
it shall forthwith fund (as of the date the Mandatory Borrowing would
otherwise have occurred, but adjusted for any payments received from
the Borrower on or after such date and prior to such purchase) its
Participation Interests in the outstanding Revolving LOC Obligations;
provided, further, that in the event any Lender shall fail to fund its
Participation Interest on the day the Mandatory Borrowing would
otherwise have occurred, then the amount of such Revolving Loan
Lender's unfunded Participation Interest therein shall bear interest
payable to the Issuing Lender upon demand, at the rate equal to, if
paid within two
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Business Days of such date, the Federal Funds Rate, and thereafter at
a rate equal to the Base Rate.
(f) Modification, Extension. The issuance of any
supplement, modification, amendment, renewal, or extensions to any
Revolving Letter of Credit shall, for purposes hereof, be treated in
all respects the same as the issuance of a new Revolving Letter of
Credit hereunder.
(g) Uniform Customs and Practices. The Issuing Lender
shall have the Revolving Letters of Credit be subject to The Uniform
Customs and Practice for Documentary Credits, as published as of the
date of issue by the International Chamber of Commerce (Publication
No. 500 or the most recent publication, the " UCP"), and the UCP shall
be incorporated therein and deemed in all respects to be a part
thereof.
2.3 Term Loans.
(a) Tranche A Term Loan. The Credit Parties acknowledge
and agree that the entire amount of the Tranche A Term Loan Commitment
(collectively, the " Tranche A Term Loans") was delivered to the
Borrower under the Original Credit Agreement on December 7, 1995.
Subject to the terms and conditions set forth herein, each Lender who
has a Tranche A Term Loan Commitment Percentage that is greater than
zero (the "Tranche A Lenders") severally agrees, on the Effective
Date, (to the extent not previously done) to make its Tranche A Term
Loan Commitment Percentage of the Tranche A Term Loan Committed Amount
available to the Agent. The outstanding Tranche A Term Loans shall be
governed by the terms of this Credit Agreement.
(b) Interest Rate Requests. The outstanding Tranche A
Term Loans made under the Original Credit Agreement shall continue to
accrue interest after the Effective Date at the rates and for the
Interest Periods provided in the Original Credit Agreement until the
end of an Interest Period or a Notice of
Borrowing/Continuation/Conversion is delivered by the Borrower. The
Borrower shall choose the interest rate to accrue on all or a portion
of the outstanding Term Loans as follows:
(i) Adjusted Base Rate. By no later
than 11:00 a.m. on the date of the request, the Borrower shall
provide to the Agent a Notice of
Borrowing/Continuation/Conversion setting forth the amount of
the Tranche A Term Loans that it wishes to have accrue
interest at the Adjusted Base Rate. From that date forward,
interest shall accrue on that portion of the Tranche A Term
Loans as set forth in the Notice of Borrowing until requested
otherwise by the Borrower.
(ii) Adjusted Eurodollar Rate. By no
later than 11:00 a.m. three Business Days prior to the date on
which the Borrower wishes to have all or a portion of the
Tranche A Term Loans accrue interest at the Adjusted
Eurodollar Rate, the Borrower shall provide to the Agent a
Notice of Borrowing/Continuation/Conversion setting forth the
amount of the Tranche A Term Loans it wishes to have accrue
interest at the Adjusted Eurodollar Rate and the Interest
Period for which such rate shall be applicable; provided,
however, that (A) the Borrower may not request all or part of
the Tranche A Term Loans to accrue interest at the Adjusted
Eurodollar Rate during the existence and continuation of a
Default or Event of Default and (B) the Borrower may only
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continue an existing Eurodollar Loan or convert an existing
Eurodollar Loan into a Base Rate Loan at the end of an
Interest Period.
(iii) Failure to Submit an Interest Rate
Request. If the Borrower fails to timely submit a Notice of
Borrowing/Continuation/Conversion at the end of any Interest
Period stating a desire to have all or a portion of the
Tranche A Term Loans accrue interest at the Adjusted
Eurodollar Rate, or if the Borrower submits an improper
Interest Rate Request, then all (or such portion) of the
Tranche A Term Loans shall accrue interest at the Adjusted
Base Rate until the Agent receives a proper request from the
Borrower.
(c) Amortization. The principal amount of the Tranche A
Term Loans shall be repaid in quarterly payments on the last day of
each fiscal quarter of the Borrower as follows:
<TABLE>
<CAPTION>
Tranche A
Principal Amortization Term Loan Principal
Payment Dates Amortization Payment
---------------------- --------------------
<S> <C>
March 31, 1997 $1,250,000
June 30, 1997 $1,250,000
September 30, 1997 $1,250,000
December 31, 1997 $1,875,000
March 31, 1998 $1,875,000
June 30, 1998 $1,875,000
September 30, 1998 $1,875,000
December 31, 1998 $3,000,000
March 31, 1999 $3,000,000
June 30, 1999 $3,000,000
September 30, 1999 $3,000,000
December 31, 1999 $3,500,000
March 31, 2000 $3,500,000
June 30, 2000 $3,500,000
September 30, 2000 $3,500,000
December 31, 2000 $4,125,000
March 31, 2001 $4,125,000
June 30, 2001 $4,125,000
September 30, 2001 $5,375,000
-----------
Total $55,000,000
</TABLE>
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<PAGE> 34
2.4 Stand Alone Letter of Credit Facility.
(a) Issuance. Subject to the terms and conditions hereof
and of the LOC Documents, if any, and any other terms and conditions
which the Issuing Lender may reasonably require (and subject to the
provisions of Section 2.4(c)(i) below), the Issuing Lender shall issue
(in U.S. dollars) and the Lenders who have a Stand Alone LOC
Commitment Percentage greater than zero (the "Letter of Credit
Lenders") shall participate in, letters of credit (the "Stand Alone
Letters of Credit") for the account of the Borrower or any other
Credit Party from time to time upon request from the Effective Date
until the Stand Alone Letter of Credit Maturity Date in a form
reasonably acceptable to the Issuing Lender; provided, however, that
the aggregate amount of Stand Alone LOC Obligations shall not at any
time exceed the "Stand Alone LOC Committed Amount". Stand Alone
Letters of Credit shall be issued for any lawful purpose. Except as
otherwise expressly agreed upon by all the Letter of Credit Lenders,
no Stand Alone Letter of Credit shall have an expiry date extending
beyond 30 days prior to the Stand Alone Letter of Credit Maturity
Date. Each Stand Alone Letter of Credit shall comply with the related
LOC Documents. The issuance and expiry date of each Stand Alone
Letter of Credit shall be a Business Day.
(b) Request and Reports. The request for the issuance of
a Stand Alone Letter of Credit shall be submitted to the Issuing
Lender at least three Business Days prior to the requested date of
issuance. The Issuing Lender will, at least quarterly and more
frequently upon request, provide to the Agent for dissemination to the
Lenders a detailed report specifying the Stand Alone Letters of Credit
which are then issued and outstanding and any activity with respect
thereto which may have occurred since the date of the prior report,
and including therein, among other things, the account party, the
beneficiary, the outstanding balance, and the expiry date as well as
any payments or expirations which may have occurred. The Issuing
Lender will further provide to the Agent, promptly upon request,
copies of the Stand Alone Letters of Credit.
(c) Participations.
(i) On the Effective Date, each Letter
of Credit Lender shall automatically acquire a participation
in the liability of the Issuing Lender under each Existing
Stand Alone Letter of Credit in an amount equal to such
Lender's Stand Alone LOC Commitment Percentage of the Stand
Alone Committed Amount. Each Existing Stand Alone Letter of
Credit shall be deemed for all purposes of this Credit
Agreement and the other Credit Documents to be a Stand Alone
Letter of Credit.
(ii) Each Letter of Credit Lender, upon
issuance of a Stand Alone Letter of Credit, shall be deemed to
have purchased without recourse a risk participation from the
Issuing Lender in such Stand Alone Letter of Credit and the
obligations arising thereunder and any collateral relating
thereto, in each case in an amount equal to its Stand Alone
LOC Commitment Percentage of the obligations under such Stand
Alone Letter of Credit and shall absolutely, unconditionally
and irrevocably assume, as primary obligor and not as surety,
and be obligated to pay to the Issuing Lender therefor and
discharge when due, its Stand Alone LOC Commitment Percentage
of the obligations arising under such Stand Alone Letter of
Credit. Without limiting the scope and nature of each Letter
of Credit Lender's participation in any Stand Alone Letter of
Credit, to the
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<PAGE> 35
extent that the Issuing Lender has not been reimbursed as
required hereunder, each such Letter of Credit Lender shall
pay to the Issuing Lender its Stand Alone LOC Commitment
Percentage of such unreimbursed drawing in same day funds on
the day of notification by the Issuing Lender of an
unreimbursed drawing pursuant to the provisions of subsection
(d) hereof. The obligation of each Letter of Credit Lender to
so reimburse the Issuing Lender shall be absolute and
unconditional and shall not be affected by the occurrence of a
Default, an Event of Default or any other occurrence or event.
Any such reimbursement shall not relieve or otherwise impair
the obligation of the Borrower or any other Credit Party to
reimburse the Issuing Lender under any Stand Alone Letter of
Credit, together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Stand Alone Letter of Credit, the Issuing Lender will promptly notify
the Borrower. The Borrower shall reimburse the Issuing Lender on the
day the Issuing Lender pays a drawing under any Stand Alone Letter of
Credit in same day funds as provided herein or in the LOC Documents;
provided, however, if, pursuant to the terms of the corresponding LOC
Documents, any reimbursement obligation with respect to a draw under
such Stand Alone Letter of Credit is not required to be immediately
paid, such reimbursement obligation will be payable in accordance with
the related LOC Documents and will accrue interest, fees, and other
charges as if such reimbursement obligation constituted a Base Rate
Loan in accordance with the terms of this Agreement; and provided
further that, notwithstanding anything to the contrary in such LOC
Documents, if any such reimbursement obligation is not immediately due
and payable, the same shall nonetheless be paid in full on or before
the Stand Alone Letter of Credit Maturity Date. If the Borrower shall
fail to reimburse the Issuing Lender as provided hereinabove, the
unreimbursed amount of such drawing shall bear interest at a per annum
rate equal to the Base Rate plus three and one quarter percent (3
1/4%) and shall constitute an Event of Default. The Borrower's
reimbursement obligations hereunder shall be absolute and
unconditional under all circumstances irrespective of any rights of
set-off, counterclaim or defense to payment the Borrower may claim or
have against the Issuing Lender, the Agent, the Lenders, the
beneficiary of the Stand Alone Letter of Credit drawn upon or any
other Person, including without limitation any defense based on any
failure of the Borrower to receive consideration or the legality,
validity, regularity or unenforceability of the Stand Alone Letter of
Credit; provided, however, that the Borrower may have a claim against
the Issuing Lender, and the Issuing Lender may be liable to the
Borrower, to the extent of any actual damages suffered by the Borrower
as a result of the Issuing Lender's gross negligence or willful
misconduct in failing to pay a drawing under a Stand Alone Letter of
Credit presented in strict conformity therewith. The Issuing Lender
will promptly notify the other Letter of Credit Lenders of the amount
of any unreimbursed drawing and each Letter of Credit Lender shall
promptly pay to the Agent for the account of the Issuing Lender in
U.S. dollars and in immediately available funds, the amount of such
Letter of Credit Lender's Stand Alone LOC Commitment Percentage of
suchunreimbursed drawing. Such payment shall be made on the day such
notice is received by such Letter of Credit Lender from the Issuing
Lender if such notice is received at or before 2:00 p.m., otherwise
such payment shall be made at or before 12:00 Noon on the Business Day
next succeeding the day such notice is received. If such Letter of
Credit Lender does not pay such amount to the Issuing Lender in full
upon such request, such Letter of Credit Lender shall, on demand, pay
to the Agent for the account of the Issuing Lender interest on the
unpaid amount during the period from the date of payment by the
Issuing Lender of such drawing until such Lender pays such amount to
the Issuing Lender in full at a rate per annum equal to, if paid
within two Business Days of the date of
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<PAGE> 36
payment of such drawing, the Federal Funds Rate and thereafter at a
rate equal to the Base Rate. Each Letter of Credit Lender's
obligation to make such payment to the Issuing Lender, and the right
of the Issuing Lender to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever
and without regard to the termination of this Credit Agreement or the
Commitments hereunder, the existence of a Default or Event of Default
or the acceleration of the obligations hereunder and shall be made
without any offset, abatement, withholding or reduction whatsoever.
(e) Modification, Extension. The issuance of any
supplement, modification, amendment, renewal, or extensions to any
Stand Alone Letter of Credit shall, for purposes hereof, be treated in
all respects the same as the issuance of a new Stand Alone Letter of
Credit hereunder.
(f) Uniform Customs and Practices. The Issuing Lender
shall have the Stand Alone Letters of Credit be subject to The Uniform
Customs and Practice for Documentary Credits, as published as of the
date of issue by the International Chamber of Commerce (Publication
No. 500 or the most recent publication, the " UCP"), and the UCP shall
be incorporated therein and deemed in all respects to be a part
thereof.
2.5 Indemnification of Issuing Lenders.
(a) In addition to its other obligations under this
Credit Agreement, the Borrower hereby agrees to protect, indemnify,
pay and save the Issuing Lender harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) that the Issuing
Lender may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any Letter of Credit or (B) the
failure of the Issuing Lender to honor a drawing under a Letter of
Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions, herein called "
Government Acts").
(b) As between the Borrower and the Issuing Lender, the
Borrower shall assume all risks of the acts, omissions or misuse of
any Letter of Credit by the beneficiary thereof. The Issuing Lender
shall not be responsible: (i) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any
party in connection with the application for and issuance of any
Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii)
for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit or
the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason;
(iii) for failure of the beneficiary of a Letter of Credit to comply
fully with conditions required in order to draw upon a Letter of
Credit; (iv) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) for errors
in interpretation of technical terms; (vi) for any loss or delay in
the transmission or otherwise of any document required in order to
make a drawing under a Letter of Credit or of the proceeds thereof;
and (vii) for any consequences arising from causes beyond the control
of the Issuing Lender, including, without limitation, any Government
Acts. None of the above shall affect, impair, or prevent the vesting
of the Issuing Lender's rights or powers hereunder.
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<PAGE> 37
(c) In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or
omitted by the Issuing Lender, under or in connection with any Letter
of Credit or the related certificates, if taken or omitted in good
faith, shall not put such Issuing Lender under any resulting liability
to the Borrower. It is the intention of the parties that this Credit
Agreement shall be construed and applied to protect and indemnify the
Issuing Lender against any and all risks involved in the issuance of
the Letters of Credit, all of which risks are hereby assumed by the
Borrower, including, without limitation, any and all risks of the acts
or omissions, whether rightful or wrongful, of any present or future
Government Acts. The Issuing Lender shall not, in any way, be liable
for any failure by the Issuing Lender or anyone else to pay any
drawing under any Letter of Credit as a result of any Government Acts
or any other cause beyond the control of the Issuing Lender.
(d) Nothing in this Section 2.5 is intended to limit the
reimbursement obligation of the Borrower contained in Sections 2.2 or
2.4 hereof. The obligations of the Borrower under this Section 2.5
shall survive the termination of this Credit Agreement. No act or
omissions of any current or prior beneficiary of a Letter of Credit
shall in any way affect or impair the rights of the Issuing Lender to
enforce any right, power or benefit under this Credit Agreement.
(e) Notwithstanding anything to the contrary contained in
this Section 2.5, the Borrower shall have no obligation to indemnify
any Issuing Lender in respect of any liability incurred by such
Issuing Lender arising solely out of the gross negligence or willful
misconduct of the Issuing Lender, as determined by a court of
competent jurisdiction.
(f) To the extent the Borrower does not fulfill any or
all its obligations under this Section 2.5, each Letter of Credit
Lender agrees to reimburse the Issuing Lender for any losses incurred
thereby ratably in accordance with each such Letter of Credit Lender's
Stand Alone LOC Commitment Percentage.
2.6 Notes.
(a) Revolving Loan Notes. The Revolving Loans made by
each Lender shall be evidenced by a duly executed amended and restated
promissory note of the Borrower to each Lender in the face amount of
its Revolving Loan Commitment Percentage of the Revolving Committed
Amount and substantially in the form of Exhibit 2.6(a) attached
hereto.
(b) Tranche A Term Loan Notes. The Tranche A Term Loan
made by each Lender shall be evidenced by a duly executed amended and
restated promissory note of the Borrower to each Lender in the face
amount of its Tranche A Term Loan Commitment Percentage of the Tranche
A Term Loan Committed Amount and in substantially in the form of
Exhibit 2.6(b) attached hereto.
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<PAGE> 38
SECTION 3
PAYMENTS
3.1 Interest.
(a) Interest Rate.
(i) All Base Rate Loans shall accrue
interest at the Adjusted Base Rate.
(ii) All Eurodollar Loans shall accrue
interest at the Adjusted Eurodollar Rate.
(b) Default Rate of Interest. Upon the occurrence, and
during the continuance, of an Event of Default, the principal of and,
to the extent permitted by law, interest on the Loans and any other
amounts owing hereunder or under the other Loan Documents shall, after
written notice of same to the Borrower, bear interest, payable on
demand, at a per annum rate equal to 2% plus the rate which would
otherwise be applicable.
(c) Interest Payments. Interest on Loans shall be due
and payable in arrears on each Interest Payment Date.
3.2 Prepayments
(a) Voluntary Prepayments. The Borrower shall have the
right to prepay Loans in whole or in part from time to time without
premium or penalty; provided, however, that (i) Eurodollar Loans may
only be prepaid on three Business Days' prior written notice to the
Agent and any prepayment of Eurodollar Loans will be subject to
Section 4.6 hereof; (ii) each such partial prepayment of Loans shall
be in the minimum principal amount of $100,000 and (iii) voluntary
prepayments with respect to the Tranche A Term Loans shall be applied
pro rata among the remaining Principal Amortization Payments.
(b) Mandatory Prepayments.
(i) Revolving Committed Amount. If at
any time (A) the aggregate amount of Revolving Loans
outstanding plus Revolving LOC Obligations outstanding exceeds
the Revolving Committed Amount, the Borrower shall immediately
make a principal payment to the Agent in the manner and in an
amount necessary to be in compliance with Section 2.1 hereof.
Any payments made under this Section 3.2(b)(i) shall be
subject to Section 4.6 hereof and shall be applied first to
Revolving Loans (first to Base Rate Loans and then to
Eurodollar Loans in direct order of Interest Period
maturities) and then to a cash collateral account in respect
of Revolving LOC Obligations.
(ii) Excess Cash Flow. Within 10 days
after the date the audited financial statements are required
to be delivered pursuant to Section 8.1(a) hereof (commencing
with the fiscal year ending December 31, 1996), the Borrower
shall make a prepayment of the Loans in an amount equal to 50%
of the
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<PAGE> 39
Excess Cash Flow earned during such prior fiscal year (to be
applied as set forth in Section 3.2(c) below).
(iii) Asset Sales. Immediately upon
receipt by the Borrower or any of its Subsidiaries of proceeds
from any Asset Disposition, the Borrower shall forward the Net
Cash Proceeds of such Asset Disposition to the Lenders as a
prepayment of the Loans (to be applied as set forth in Section
3.2(c) below).
(iv) Receivables Transaction.
Immediately upon the receipt by Holdings, the Borrower or any
of their Subsidiaries of proceeds from a Receivables
Transaction, the Borrower shall forward the Net Cash Proceeds
of such Receivables Transaction to the Lenders as a prepayment
of the Loans (to be applied as set forth in Section 3.2(c)
below).
(c) Application of Certain Prepayments. All amounts
required to be paid pursuant to Section 3.2(b)(ii) and (iii) above
shall be applied first to the outstanding Tranche A Term Loans (pro
rata among the remaining Principal Amortization Payments), second, if
the Tranche A Term Loans have been paid in full, to the Revolving
Loans with a corresponding reduction in the Revolving Committed Amount
and third if the Tranche A Term Loan and Revolving Loans have been
paid in full then to the payment or cash collaterization of Revolving
LOC Obligations and Stand Alone LOC Obligations. All amounts required
to be prepaid pursuant to Section 3.2(b)(iv) above shall be applied
first pro rata among the Tranche A Term Loans and the Revolving Loans
(pro rata among the remaining Principal Amortization Payments with
respect to the Tranche A Term Loans and with a corresponding reduction
in the Revolving Committed Amount with respect to the Revolving Loans)
and second if the Tranche A Term Loan and Revolving Loans have been
paid in full then to the payment or cash collaterization of Revolving
LOC Obligations and Stand Alone LOC Obligations. Within the
parameters of the applications set forth above, prepayments shall be
applied first to Base Rate Loans and then to Eurodollar Loans in
direct order of Interest Period maturities.
3.3 Payment in full at Maturity.
(a) On the Revolving Loan Maturity Date, (i) the entire
outstanding principal balance of all Revolving Loans, together with
accrued but unpaid interest and all other sums owing with respect
thereto, shall be due and payable in full, unless accelerated sooner
pursuant to Section 10 hereof and (ii) all Revolving Letters of
Credit, if any, shall be terminated or sufficient cash collateral
shall be provided for the total amount of any outstanding Revolving
Letters of Credit.
(b) On the Tranche A Term Loan Maturity Date, the entire
outstanding principal balance of all Tranche A Term Loans, together
with accrued but unpaid interest and all other sums owing with respect
thereto, shall be due and payable in full, unless accelerated sooner
pursuant to Section 10 hereof.
(c) On the Stand Alone Letter of Credit Maturity Date,
all Stand Alone Letters of Credit, if any, shall be terminated or
sufficient cash collateral shall be provided for the total amount of
any outstanding Stand Alone Letters of Credit.
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<PAGE> 40
3.4 Fees.
(a) Unused Fees. In consideration of the Revolving
Committed Amount and the Stand Alone LOC Committed Amount being made
available by the Revolving Loan Lenders and the Letter of Credit
Lenders hereunder, the Borrower agrees to pay to the Agent, for the
pro rata benefit of each Revolving Loan Lender and Letter of Credit
Lender, as applicable, a fee equal to .5% per annum on the Revolving
Loan Unused Commitment and .5% per annum on the Stand Alone LOC Unused
Commitment (the " Unused Fees"), such Unused Fees beginning to accrue
as of the Effective Date. The accrued Unused Fees shall be due and
payable in arrears on the last Business Day of each fiscal quarter of
the Borrower (as well as on the Revolving Loan Maturity Date and the
Stand Alone Letter of Credit Maturity Date and on any date that the
Revolving Committed Amount or the Stand Alone LOC Committed Amount is
reduced) for the immediately preceding fiscal quarter (or portion
thereof), beginning with the first of such dates to occur after the
Effective Date.
(b) Letter of Credit Fees.
(i) Letter of Credit Fee. In
consideration of the issuance of Letters of Credit hereunder,
the Borrower agrees to pay to the Issuing Lender for the pro
rata benefit of the Letter of Credit Lenders, a fee (the
"Letter of Credit Fee") equal to the applicable Letter of
Credit Fee on the average daily maximum amount available to be
drawn under each such Letter of Credit from the date of
issuance to the date of expiration. The Letter of Credit Fee
will be payable quarterly in arrears 15 days after the end of
each fiscal quarter of Borrower and on the Revolving Loan
Maturity Date and the Stand Alone Letter of Credit Maturity
Date.
(ii) Issuing Lender Fees. In addition to
the Letter of Credit Fees payable pursuant to subsection (i)
above, the Borrower shall pay to the Issuing Lender for its
own account without sharing by the other Lenders a fee equal
to one-fourth of one percent (1/4%) on the total sum of all
Letters of Credit issued by such Issuing Lender, such fee to
be paid quarterly in arrears 15 days after the end of each
fiscal quarter of the Borrower (as well as on the Revolving
Loan Maturity Date and the Stand Alone Letter of Credit
Maturity Date, as applicable) (the "Issuing Lender Fees").
(c) Administrative Fees. The Borrower agrees to pay to
the Agent, for its own account, an annual fee as agreed to between the
Borrower and the Agent in the Fee Letter.
3.5 Place and Manner of Payments. All payments of principal,
interest, fees, expenses and other amounts to be made by a Credit Party under
this Agreement shall be received not later than 2:00 p.m. on the date when due
in U.S. dollars and in immediately available funds by the Agent at its offices
at NationsBank Corporate Center, Charlotte, North Carolina. The Borrower
shall, at the time it makes any payment under this Agreement, specify to the
Agent, the Loans, Letters of Credit, fees or other amounts payable by the
Borrower hereunder to which such payment is to be applied (and in the event
that it fails to specify, or if such application would be inconsistent with the
terms hereof, the Agent shall distribute such payment to the Lenders in such
manner as the Agent may deem appropriate subject to Section 3.6 hereof).
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<PAGE> 41
In any proceeding in which the amount of any obligation which is payable
hereunder in United States currency must be converted to the currency of
another jurisdiction (the "Other Currency"), the amount of such obligation
shall be converted into an amount in the Other Currency sufficient to purchase
the amount of the obligation in United States currency at a commercial bank in
such jurisdiction at the close of business on the first day on which such bank
quotes a rate in the Other Currency for purchase of such amount of United
States currency before the day payment of the obligation is received by the
Agent, but the Lenders shall have a separate cause of action against the Credit
Parties for the amount, if any, by which the amount paid to the Agent in
respect of the obligation in the Other Currency, when promptly converted to
United States currency under normal banking procedures and in an appropriate
market of the Agent's choice, fails to yield (net after any costs of
conversion) the full amount of the obligation in United States currency, and
the Credit Parties shall receive the benefit, if after conversion from the
Other Currency the Agent has received an amount in United States currency in
excess of such obligation owed by the Credit Parties.
3.6 Pro Rata Treatment. Except to the extent otherwise provided
herein:
(a) Loans. Each Revolving Loan borrowing (including
without limitation each Mandatory Borrowing), each payment or
prepayment of principal of any Loan, each payment of fees (other than
the Issuing Lender Fees retained by the Issuing Lender for its own
account and the Administrative Fees retained by the Agent for its own
account), each reduction of the Revolving Committed Amount, and each
conversion or continuation of any Loan, shall be allocated pro rata
among the relevant Lenders in accordance with the respective Revolving
Loan Commitment Percentages and Tranche A Term Loan Commitment
Percentages, as applicable, of such Lenders (or, if the Commitments of
such Lenders have expired or been terminated, in accordance with the
respective principal amounts of their outstanding Loans and
Participation Interests of such Lenders).
(b) Letters of Credit. Each payment of unreimbursed
drawings in respect of Revolving LOC Obligations and Stand Alone LOC
Obligations shall be allocated to each Lender entitled thereto pro
rata in accordance with its Revolving LOC Commitment Percentage or
Stand Alone LOC Commitment Percentage, as applicable; provided that,
if any Lender shall have failed to pay its applicable pro rata share
of any drawing under any Letter of Credit, then any amount to which
such Lender would otherwise be entitled pursuant to this subsection
(b) shall instead be payable to the Issuing Lender; provided further,
that in the event any amount paid to any Lender pursuant to this
subsection (b) is rescinded or must otherwise be returned by the
Issuing Lender, each Lender shall, upon the request of the Issuing
Lender, repay to the Agent for the account of the Issuing Lender the
amount so paid to such Lender, with interest for the period commencing
on the date such payment is returned by the Issuing Lender until the
date the Issuing Lender receives such repayment at a rate per annum
equal to, during the period to but excluding the date two Business
Days after such request, the Federal Funds Rate, and thereafter, the
Base Rate.
3.7 Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Credit Agreement, after the
occurrence and during the continuance of an Event of Default, all amounts
collected or received by the Agent or any Lender on account of amounts
outstanding under any of the Credit Documents or in respect of the Collateral
shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses
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<PAGE> 42
(including without limitation reasonable attorneys' fees) of the Agent
in connection with enforcing the rights of the Lenders under the
Credit Documents and any protective advances made by the Agent with
respect to the Collateral under or pursuant to the terms of the
Collateral Documents;
SECOND, to payment of any fees owed to the Agent or a Issuing
Lender;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses, (including without limitation, reasonable attorneys'
fees) of each of the Lenders in connection with enforcing its rights
under the Credit Documents;
FOURTH, to the payment of all accrued fees and interest
payable to the Lenders hereunder;
FIFTH, to the payment of the outstanding principal amount of
the Loans and to the payment or cash collateralization of the
outstanding Revolving LOC Obligations and Stand Alone LOC Obligations;
SIXTH, to all other obligations which shall have become due
and payable under the Credit Documents and not repaid pursuant to
clauses "FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive an amount equal to
its pro rata share (based on the proportion that the then outstanding Loans,
Revolving LOC Obligations and Stand Alone LOC Obligations held by such Lender
bears to the aggregate then outstanding Loans, Revolving LOC Obligations and
Stand Alone LOC Obligations) of amounts available to be applied pursuant to
clauses "THIRD", "FOURTH," "FIFTH," and "SIXTH" above; and (iii) to the extent
that any amounts available for distribution pursuant to clause "FIFTH" above
are attributable to the issued but undrawn amount of outstanding Letters of
Credit, such amounts shall be held by the Agent in a cash collateral account
and applied (A) first, to reimburse the Issuing Lender from time to time for
any drawings under such Letters of Credit and (B) then, following the
expiration of all Letters of Credit, to all other obligations of the types
described in clauses "FIFTH" and "SIXTH" above in the manner provided in this
Section 3.7.
3.8 Sharing of Payments. The Lenders agree among themselves that,
except to the extent otherwise provided herein, in the event that any Lender
shall obtain payment in respect of any Loan, unreimbursed drawing with respect
to any LOC Obligations or any other obligation owing to such Lender under this
Credit Agreement through the exercise of a right of setoff, banker's lien or
counterclaim, or pursuant to a secured claim under Section 506 of the
Bankruptcy Code or other security or interest arising from, or in lieu of, such
secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any other means, in excess
of its pro rata share of such payment as provided for in this Credit Agreement,
such Lender shall promptly purchase from the other Lenders a participation in
such Loans, LOC Obligations, and other obligations in such amounts, and make
such other adjustments from time to time, as shall be equitable to the end that
all Lenders share such payment in accordance with their respective ratable
shares as provided for in this Credit Agreement. The Lenders further agree
among themselves that if payment to a Lender obtained
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by such Lender through the exercise of a right of setoff, banker's lien,
counterclaim or other event as aforesaid shall be rescinded or must otherwise
be restored, each Lender which shall have shared the benefit of such payment
shall, by repurchase of a participation theretofore sold, return its share of
that benefit (together with its share of any accrued interest payable with
respect thereto) to each Lender whose payment shall have been rescinded or
otherwise restored. The Borrower agrees that any Lender so purchasing such a
participation may, to the fullest extent permitted by law, exercise all rights
of payment, including setoff, banker's lien or counterclaim, with respect to
such participation as fully as if such Lender were a holder of such Loan, LOC
Obligation or other obligation in the amount of such participation. Except as
otherwise expressly provided in this Credit Agreement, if any Lender or the
Agent shall fail to remit to the Agent or any other Lender an amount payable by
such Lender or the Agent to the Agent or such other Lender pursuant to this
Credit Agreement on the date when such amount is due, such payments shall be
made together with interest thereon for each date from the date such amount is
due until the date such amount is paid to the Agent or such other Lender at a
rate per annum equal to the Federal Funds Rate. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a setoff to which this Section 3.8 applies, such Lender shall,
to the extent practicable, exercise its rights in respect of such secured claim
in a manner consistent with the rights of the Lenders under this Section 3.8 to
share in the benefits of any recovery on such secured claim.
3.9 Computations of Interest and Fees.
(a) Except for Base Rate Loans, in which interest shall
be computed on the basis of a 365 or 366 day year as the case may be,
all computations of interest and fees hereunder shall be made on the
basis of the actual number of days elapsed over a year of 360 days.
(b) It is the intent of the Lenders and the Credit
Parties to conform to and contract in strict compliance with
applicable usury law from time to time in effect. All agreements
between the Lenders and the Borrower are hereby limited by the
provisions of this paragraph which shall override and control all such
agreements, whether now existing or hereafter arising and whether
written or oral. In no way, nor in any event or contingency
(including but not limited to prepayment or acceleration of the
maturity of any obligation), shall the interest taken, reserved,
contracted for, charged, or received under this Credit Agreement,
under the Notes or otherwise, exceed the maximum nonusurious amount
permissible under applicable law. If, from any possible construction
of any of the Credit Documents or any other document, interest would
otherwise be payable in excess of the maximum nonusurious amount, any
such construction shall be subject to the provisions of this paragraph
and such documents shall be automatically reduced to the maximum
nonusurious amount permitted under applicable law, without the
necessity of execution of any amendment or new document. If any
Lender shall ever receive anything of value which is characterized as
interest on the Loans under applicable law and which would, apart from
this provision, be in excess of the maximum lawful amount, an amount
equal to the amount which would have been excessive interest shall,
without penalty, be applied to the reduction of the principal amount
owing on the Loans and not to the payment of interest, or refunded to
the Borrower or the other payor thereof if and to the extent such
amount which would have been excessive exceeds such unpaid principal
amount of the Loans. The right to demand payment of the Loans or any
other indebtedness evidenced by any of the Credit Documents does not
include the right to receive any interest which has not otherwise
accrued on the date of such demand, and the Lenders do not intend to
charge or receive any unearned interest in the event of such demand.
All interest paid or agreed to be paid to the Lenders with respect to
the Loans
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shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full stated term
(including any renewal or extension) of the Loans so that the amount
of interest on account of such indebtedness does not exceed the
maximum nonusurious amount permitted by applicable law.
SECTION 4
YIELD PROTECTION PROVISIONS
4.1 Capital Adequacy. If, after the date hereof, any Lender has
determined that the adoption or the becoming effective of, or any change in, or
any change by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof in the interpretation
or administration of, any applicable law, rule or regulation regarding capital
adequacy, or compliance by such Lender or its parent with any request or
directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender's or its parent's capital
or assets as a consequence of such Lender's commitments or obligations
hereunder to a level below that which such Lender or its parent could have
achieved but for such adoption, effectiveness, change or compliance (taking
into consideration such Lender's or its parent's policies with respect to
capital adequacy), then, upon notice from such Lender to the Borrower, the
Borrower shall be obligated to pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction. Each determination
by any such Lender of amounts owing under this Section shall, absent manifest
error, be conclusive and binding on the parties hereto. This covenant shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
4.2 Inability To Determine Interest Rate. If prior to the first
day of any Interest Period, the Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such Interest
Period, the Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If such notice is
given (a) any Eurodollar Loans requested to be made on the first day of such
Interest Period shall be made as Base Rate Loans, (b) any Loans that were to
have been converted on the first day of such Interest Period to or continued as
Eurodollar Loans shall be converted to or continued as Base Rate Loans and (c)
any outstanding Eurodollar Loans shall be converted, on the first day of such
Interest Period, to Base Rate Loans. Until such notice has been withdrawn by
the Agent, no further Eurodollar Loans shall be made or continued as such, nor
shall the Borrower have the right to convert Base Rate Loans to Eurodollar
Loans.
4.3 Illegality. Notwithstanding any other provision herein, if
the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof occurring after the Effective Date shall
make it unlawful for any Lender to make or maintain Eurodollar Loans as
contemplated by this Credit Agreement, (a) such Lender shall promptly give
written notice of such circumstances to the Borrower and the Agent (which
notice shall be withdrawn whenever such circumstances no longer exist), (b) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert a Base Rate Loan to Eurodollar Loans shall
forthwith be canceled and, until such time as it shall no longer be unlawful
for such Lender to make or maintain Eurodollar Loans, such Lender shall then
have a commitment only to make a Base Rate Loan when a Eurodollar Loan is
requested and (c) such Lender's Loans then outstanding as Eurodollar Loans, if
any, shall be converted automatically to Base Rate Loans on the respective last
days or the then current Interest Periods with respect to
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such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of
the then current Interest Period with respect thereto, the Borrower shall pay
to such Lender such amounts, if any, as may be required pursuant to Section 4.6
hereof.
4.4 Requirements of Law. If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof applicable
to any Lender, or compliance by any Lender with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority, in each case made subsequent to the Effective Date (or,
if later, the date on which such Lender becomes a Lender):
(a) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit, any Eurodollar Loans
made by it or its obligation to make Eurodollar Loans, or change the
basis of taxation of payments to such Lender in respect thereof
(except for Non-Excluded Taxes covered by Section 4.5 hereof
(including Non-Excluded Taxes imposed solely by reason of any failure
of such Lender to comply with its obligations under Section 4.5(b)
hereof) and changes in taxes measured by or imposed upon the overall
net income, or franchise tax (imposed in lieu of such net income tax),
of such Lender or its applicable lending office, branch, or any
affiliate thereof);
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(c) shall impose on such Lender any other condition
(excluding any tax of any kind whatsoever);
and the result of any of the foregoing in (a), (b) or (c) above is to increase
the cost to such Lender, by an amount which such Lender deems to be material,
of making, converting into, continuing or maintaining Eurodollar Loans or
issuing or participating in Letters of Credit or to reduce any amount
receivable hereunder in respect thereof, then, in any such case, upon notice to
the Borrower from such Lender, through the Agent, in accordance herewith, the
Borrower shall be obligated to promptly pay such Lender, upon its demand, any
additional amounts necessary to compensate such Lender for such increased cost
or reduced amount receivable, provided that, in any such case, the Borrower may
elect to convert the Eurodollar Loans made by such Lender hereunder to Base
Rate Loans by giving the Agent at least one Business Day's notice of such
election, in which case the Borrower shall promptly pay to such Lender, upon
demand, without duplication, such amounts, if any, as may be required pursuant
to Section 4.6. If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall provide prompt notice thereof to the
Borrower, through the Agent, certifying (x) that one of the events described in
this Section 4.4 has occurred and describing in reasonable detail the nature of
such event, (y) as to the increased cost or reduced amount resulting from such
event and (z) as to the additional amount demanded by such Lender and a
reasonably detailed explanation of the calculation thereof. Such a certificate
as to any additional amounts payable pursuant to this subsection submitted by
such Lender, through the Agent, to the Borrower shall be conclusive and binding
on the parties hereto in the absence of manifest error. This covenant shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
4.5 Taxes.
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(a) Except as provided below in this subsection, all
payments made by a Credit Party under this Credit Agreement and any
Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp
or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings (including, but not limited to, any withholding tax as a
result of Ivex Corporation being an Ontario corporation and being
located in Canada), now or hereafter imposed, levied, collected,
withheld or assessed by any court, or governmental body, agency or
other official, excluding taxes measured by or imposed upon the
overall net income of any Lender or its applicable lending office, or
any branch or affiliate thereof, and all franchise taxes, branch
taxes, taxes on doing business or taxes on the overall capital or net
worth of any Lender or its applicable lending office, or any branch or
affiliate thereof, in each case imposed in lieu of net income taxes,
imposed: (i) by the jurisdiction under the laws of which such Lender,
applicable lending office, branch or affiliate is organized or is
located, or in which its principal executive office is located, or any
nation within which such jurisdiction is located or any political
subdivision thereof; or (ii) by reason of any connection between the
jurisdiction imposing such tax and such Lender, applicable lending
office, branch or affiliate other than a connection arising solely
from such Lender having executed, delivered or performed its
obligations, or received payment under or enforced, this Credit
Agreement or any Notes. If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Agent or any Lender hereunder or under any Notes, (A)
the amounts so payable to the Agent or such Lender shall be increased
to the extent necessary to yield to the Agent or such Lender (after
payment of all Non-Excluded Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this
Credit Agreement and any Notes, provided, however, that the Borrower
shall be entitled to deduct and withhold any Non-Excluded Taxes and
shall not be required to increase any such amounts payable to any
Lender that is not organized under the laws of the United States of
America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this subsection whenever any
Non-Excluded Taxes are payable by the Borrower, and (B) as promptly as
possible thereafter the Borrower shall send to the Agent for its own
account or for the account of such Lender, as the case may be, a
certified copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority or
fails to remit to the Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Agent and the
Lenders for any incremental taxes, interest or penalties that may
become payable by the Agent or any Lender as a result of any such
failure. The agreements in this subsection shall survive the
termination of this Credit Agreement and the payment of the Loans and
all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws
of the United States of America or a state thereof shall:
(i)(A) on or before the date of any payment
by the Borrower under this Credit Agreement or Notes to such
Lender, deliver to the Borrower and the Agent (1) two (2) duly
completed copies of United States Internal Revenue Service
Form 1001 or 4224, or successor applicable form, as the case
may be, certifying that it is entitled to receive payments
under this Credit Agreement and any Notes without deduction or
withholding of any United States federal income taxes and (2)
an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be, certifying that it is
entitled to an exemption
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from United States backup withholding tax;
(B) deliver to the Borrower and the
Agent two (2) further copies of any such form or certification
on or before the date that any such form or certification
expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recent form previously
delivered by it to the Borrower; and
(C) obtain such extensions of time for
filing and complete such forms or certifications as may
reasonably be requested by the Borrower or the Agent; or
(ii) in the case of any such Lender that
is not a "bank" within the meaning of Section 881(c)(3)(A) of
the Internal Revenue Code, (A) represent to the Borrower (for
the benefit of the Borrower and the Agent) that it is not a
bank within the meaning of Section 881(c)(3)(A) of the
Internal Revenue Code, (B) agree to furnish to the Borrower on
or before the date of any payment by the Borrower, with a copy
to the Agent two accurate and complete original signed copies
of Internal Revenue Service Form W-8, or successor applicable
form certifying to such Lender's legal entitlement at the date
of such certificate to an exemption from U.S. withholding tax
under the provisions of Section 881(c) of the Internal Revenue
Code with respect to payments to be made under this Credit
Agreement and any Notes (and to deliver to the Borrower and
the Agent two further copies of such form on or before the
date it expires or becomes obsolete and after the occurrence
of any event requiring a change in the most recently provided
form and, if necessary, obtain any extensions of time
reasonably requested by the Borrower or the Agent for filing
and completing such forms), and (C) agree, to the extent
legally entitled to do so, upon reasonable request by the
Borrower, to provide to the Borrower (for the benefit of the
Borrower and the Agent) such other forms as may be reasonably
required in order to establish the legal entitlement of such
Lender to an exemption from withholding with respect to
payments under this Credit Agreement and any Notes.
Notwithstanding the above, if any change in treaty, law or regulation
has occurred after the date such Person becomes a Lender hereunder
which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect
to it and such Lender so advises the Borrower and the Agent then such
Lender shall be exempt from such requirements. Each Person that shall
become a Lender or a participant of a Lender pursuant to Section 12.3
hereof shall, upon the effectiveness of the related transfer, be
required to provide all of the forms, certifications and statements
required pursuant to this subsection (b); provided that in the case of
a participant of a Lender the obligations of such participant of a
Lender pursuant to this subsection (b) shall be determined as if the
participant of a Lender were a Lender except that such participant of
a Lender shall furnish all such required forms, certifications and
statements to the Lender from which the related participation shall
have been purchased.
4.6 Compensation. The Borrower promises to indemnify each Lender
and to hold each Lender harmless from any loss or expense which such Lender may
sustain or incur as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Credit Agreement, (b) default by the Borrower in making
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any prepayment of a Eurodollar Loan after the Borrower has given a notice
thereof in accordance with the provisions of this Credit Agreement, (c) the
making of a prepayment of Eurodollar Loans on a day which is not the last day
of an Interest Period with respect thereto or (d) the assignment of such
Lender's rights, interests and obligations under the Credit Documents in
accordance with Section 12.3 hereof during the first 180 days following the
Effective Date; provided that losses under subsection (d) shall be limited to
costs incurred as a result of a Eurodollar Loan being prepaid on a date other
than the last day of any Interest Period as a result of such assignment. With
respect to Eurodollar Loans, such indemnification shall be an amount equal to
(i) the amount of interest which would have accrued on the amount so prepaid,
or not so borrowed, converted or continued, for the period from the date of
such prepayment or of such failure to borrow, convert or continue to the last
day of the applicable Interest Period (or, in the case of a failure to borrow,
convert or continue, the Interest Period that would have commenced on the date
of such failure) in each case at the applicable rate of interest for such
Eurodollar Loans provided for herein (excluding, however, the Applicable
Percentage included therein, if any) minus (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Lender
on such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank Eurodollar market. The agreements in this
Section shall survive the termination of this Credit Agreement and the payment
of the Loans and all other amounts payable hereunder.
SECTION 5
GUARANTY
5.1 Guaranty of Payment. Subject to Section 5.7 below, (a) each
of the Guarantors hereby, jointly and severally, unconditionally guarantees to
each Lender and the Agent the prompt payment of the Credit Party Obligations in
full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise), (b) the Guarantors additionally, jointly and
severally, unconditionally guarantee to each Lender the timely performance of
all other obligations under the Credit Documents and (c) this Guaranty is a
guaranty of payment not of collection and is a continuing guaranty and shall
apply to all Credit Party Obligations whenever arising.
5.2 Obligations Unconditional. The obligations of the Guarantors
hereunder are absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of any of the Credit
Documents, or any other agreement or instrument referred to therein, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor. Each Guarantor agrees that this
Guaranty may be enforced by the Lenders without the necessity at any time of
resorting to or exhausting any other security or collateral and without the
necessity at any time of having recourse to the Notes or any other of the
Credit Documents or any collateral, if any, hereafter securing the Credit Party
Obligations or otherwise and each Guarantor hereby waives the right to require
the Lenders to proceed against the Borrower or any other Person (including a
co-guarantor) or to require the Lenders to pursue any other remedy or enforce
any other right. Each Guarantor further agrees that such Guarantor shall have
no right of subrogation, indemnity, reimbursement or contribution against the
Borrower or any other Guarantor of the Credit Party Obligations for amounts
paid under this Guaranty until such time as the Lenders have been paid in full,
all Commitments under the Credit Agreement have been terminated and no Person
or Governmental Authority shall have any right to request any return or
reimbursement of funds from the Lenders in connection with monies received
under the Credit Documents. Each Guarantor further agrees that nothing
contained herein shall prevent the
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Lenders from suing on the Notes or any of the other Credit Documents or
foreclosing its security interest in or Lien on any collateral, if any,
securing the Credit Party Obligations or from exercising any other rights
available to it under this Credit Agreement, the Notes, any other of the Credit
Documents, or any other instrument of security, if any, and the exercise of any
of the aforesaid rights and the completion of any foreclosure proceedings shall
not constitute a discharge of any of such Guarantor's obligations hereunder; it
being the purpose and intent of each Guarantor that such Guarantor's
obligations hereunder shall be absolute, independent and unconditional under
any and all circumstances. Neither any Guarantor's obligations under this
Guaranty nor any remedy for the enforcement thereof shall be impaired,
modified, changed or released in any manner whatsoever by an impairment,
modification, change, release or limitation of the liability of the Borrower or
by reason of the bankruptcy or insolvency of the Borrower.
5.3 Modifications. Each Guarantor agrees that (a) all or any part
of the security now or hereafter held for the Credit Party Obligations, if any,
may be exchanged, compromised or surrendered from time to time; (b) the Lenders
shall not have any obligation to protect, perfect, secure or insure any such
security interests, liens or encumbrances now or hereafter held, if any, for
the Credit Party Obligations or the properties subject thereto; (c) the time or
place of payment of the Credit Party Obligations may be changed or extended, in
whole or in part, to a time certain or otherwise, and may be renewed or
accelerated, in whole or in part; (d) the Borrower and any other party liable
for payment under the Credit Documents may be granted indulgences generally;
(e) any of the provisions of the Notes or any of the other Credit Documents may
be modified, amended or waived; (f) any party (including any co-guarantor)
liable for the payment thereof may be granted indulgences or be released; and
(g) any deposit balance for the credit of the Borrower or any other party
liable for the payment of the Credit Party Obligations or liable upon any
security therefor may be released, in whole or in part, at, before or after the
stated, extended or accelerated maturity of the Credit Party Obligations, all
without notice to or further assent by the Guarantor, which shall remain bound
thereon, notwithstanding any such exchange, compromise, surrender, extension,
renewal, acceleration, modification, indulgence or release.
5.4 Waiver of Rights. Each Guarantor expressly waives: (a)
notice of acceptance of this Guaranty by the Lenders and of all extensions of
credit to the Borrower by the Lenders; (b) presentment and demand for payment
or performance of any of the Credit Party Obligations; (c) protest and notice
of dishonor or of default (except as specifically required in the Credit
Agreement) with respect to the obligations or with respect to any security
therefor; (d) notice of the Lenders obtaining, amending, substituting for,
releasing, waiving or modifying any security interest, lien or encumbrance, if
any, hereafter securing the Credit Party Obligations, or the Lender's
subordinating, compromising, discharging or releasing such security interests,
liens or encumbrances, if any; (e) all other notices to which the Guarantor
might otherwise be entitled; and (f) demand for payment under this Guaranty.
5.5 Reinstatement. The obligations of the Guarantors under this
Section 5 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of any Person in respect of the Credit Party
Obligations is rescinded or must be otherwise restored by any holder of any of
the Credit Party Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and each Guarantor agrees that it
will indemnify the Agent and each Lender on demand for all reasonable costs and
expenses (including, without limitation, reasonable fees of counsel) incurred
by the Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
5.6 Remedies. The Guarantors agree that, as between the
Guarantors, on the one
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hand, and the Agent and the Lenders, on the other hand, the Credit Party
Obligations may be declared to be forthwith due and payable as provided in
Section 10 hereof (and shall be deemed to have become automatically due and
payable in the circumstances provided in Section 10 hereof) notwithstanding any
stay, injunction or other prohibition preventing such declaration (or
preventing such Credit Party Obligations from becoming automatically due and
payable) as against any other Person and that, in the event of such declaration
(or such Credit Party Obligations being deemed to have become automatically due
and payable), such Credit Party Obligations (whether or not due and payable by
any other Person) shall forthwith become due and payable by the Guarantors.
The Guarantors acknowledge and agree that their obligations hereunder are
secured in accordance with the terms of the Security Agreements and the other
Collateral Documents and that the Lenders may exercise their remedies
thereunder in accordance with their terms.
5.7 Limitation of Guaranty. Notwithstanding any provision to the
contrary contained herein or in any other of the Credit Documents, (a) to the
extent the obligations of a Guarantor shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or
transfers) then the obligations of each Guarantor hereunder shall be limited to
the maximum amount that is permissible under applicable law (whether federal or
state and including, without limitation, the Bankruptcy Code) and (b) the
obligations of Holdings hereunder and under the Credit Documents, in the
aggregate, shall be limited to an amount equal to $153,000,000.
5.8 Rights of Contribution. The Guarantors hereby agree, as among
themselves, that if any Guarantor shall become an Excess Funding Guarantor (as
defined below), each other Guarantor shall, on demand of such Excess Funding
Guarantor (but subject to the next sentence hereof and to subsection (b)
below), pay to such Excess Funding Guarantor an amount equal to such
Guarantor's Pro Rata Share (as defined below and determined, for this purpose,
without reference to the properties, assets, liabilities and debts of such
Excess Funding Guarantor) of such Excess Payment (as defined below). The
payment obligation of any Guarantor to any Excess Funding Guarantor under this
Section 5.8 shall be subordinate and subject in right of payment to the prior
payment in full of the obligations of such Guarantor under the other provisions
of this Section 5, and such Excess Funding Guarantor shall not exercise any
right or remedy with respect to such excess until payment and satisfaction in
full of all of such obligations. For purposes hereof, (i) "Excess Funding
Guarantor" shall mean, in respect of any obligations arising under the other
provisions of this Section 5 (hereafter, the "Guaranteed Obligations"), a
Guarantor that has paid an amount in excess of its Pro Rata Share of the
Guaranteed Obligations; (ii) "Excess Payment" shall mean, in respect of any
Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in
excess of its Pro Rata Share of such Guaranteed Obligations; and (iii) "Pro
Rata Share", for the purposes of this Section 5.8, shall mean, for any
Guarantor, the ratio (expressed as a percentage) of (a) the amount by which the
aggregate present fair saleable value of all of its assets and properties
exceeds the amount of all debts and liabilities of such Guarantor (including
contingent, subordinated, unmatured, and unliquidated liabilities, but
excluding the obligations of such Guarantor hereunder) to (b) the amount by
which the aggregate present fair saleable value of all assets and other
properties of the Borrower and all of the Guarantors exceeds the amount of all
of the debts and liabilities (including contingent, subordinated, unmatured,
and unliquidated liabilities, but excluding the obligations of the Borrower and
the Guarantors hereunder) of the Borrower and all of the Guarantors, all as of
the Closing Date (if any Guarantor becomes a party hereto subsequent to the
Closing Date, then for the purposes of this Section 5.8 such subsequent
Guarantor shall be deemed to have been a Guarantor as of the Closing Date and
the information pertaining to, and only pertaining to, such Guarantor as of the
date such Guarantor became a Guarantor shall be
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deemed true as of the Closing Date).
SECTION 6
CONDITIONS PRECEDENT
6.1 Closing Conditions. The obligation of the Lenders to enter
into this Credit Agreement is subject to satisfaction of the following
conditions (in form and substance acceptable to the Lenders in their sole
discretion):
(a) Executed Credit Documents. Receipt by the Agent of
duly executed copies of: (i) this Credit Agreement; (ii) the Notes;
(iii) the Collateral Documents and (iv) all other Credit Documents.
(b) Corporate Documents. Receipt by the Agent of the
following:
(i) Charter Documents. Copies of the
articles or certificates of incorporation or other charter
documents of each Credit Party certified to be true and
complete as of a recent date by the appropriate Governmental
Authority of the state or other jurisdiction of its
incorporation and certified by a secretary or assistant
secretary of such Credit Party to be true and correct as of
the Effective Date.
(ii) Bylaws. A copy of the bylaws of
each Credit Party certified by a secretary or assistant
secretary of such Credit Party to be true and correct as of
the Effective Date.
(iii) Resolutions. Copies of resolutions
of the Board of Directors of each Credit Party approving and
adopting the Credit Documents to which it is a party, the
transactions contemplated therein and authorizing execution
and delivery thereof, certified by a secretary or assistant
secretary of such Credit Party to be true and correct and in
force and effect as of the Effective Date.
(iv) Good Standing. Copies of (A)
certificates of good standing, existence or its equivalent
with respect to each Credit Party certified as of a recent
date by the appropriate Governmental Authorities of the state
or other jurisdiction of incorporation and each other
jurisdiction in which the failure to so qualify and be in good
standing would have a Material Adverse Effect and (B) to the
extent available, a certificate indicating payment of all
corporate franchise taxes certified as of a recent date by the
appropriate governmental taxing authorities.
(v) Incumbency. An incumbency
certificate of each Credit Party certified by a secretary or
assistant secretary to be true and correct as of the Effective
Date.
(c) Personal Property Collateral. The Agent shall have
received, in form and substance satisfactory to the Agent:
(i) searches of Uniform Commercial Code
("UCC") filings in
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the jurisdiction of the chief executive office of each Credit
Party and each jurisdiction where any Collateral is located or
where a filing would need to be made in order to perfect the
Lenders' security interest in the Collateral, copies of the
financing statements on file in such jurisdictions and
evidence that no Liens exist other than Permitted Liens;
(ii) to the extent not previously
received by the Agent, duly executed financing statements
under the UCC for each appropriate jurisdiction as is
necessary, in the Agent's sole discretion, to perfect the
Lenders' security interest in the Collateral;
(iii) to the extent not previously
received by the Agent, searches of ownership of intellectual
property in the appropriate governmental offices and such
patent/trademark/copyright filings as requested by the Agent
in order to perfect the Agent's security interest in the
Collateral;
(iv) to the extent not previously
received by the Agent, all stock certificates evidencing the
stock pledged to the Agent pursuant to the Pledge Agreements,
together with duly executed in blank undated stock powers
attached thereto; and
(v) to the extent not previously
received by the Agent, all instruments and chattel paper in
the possession of a Credit Party together with allonges or
assignments as may be necessary or appropriate to perfect the
Lenders' security interest in the Collateral.
(d) Real Property Collateral. The Agent shall have
received, in form and substance satisfactory to the Agent:
(i) to the extent not previously
received by the Agent, fully executed and notarized mortgages,
deeds of trust or deeds to secure debt in registerable form
(each a "Mortgage" and collectively the "Mortgages"), or
modifications of such Mortgages delivered in connection with
the Original Credit Agreement, in each case encumbering the
fee interest (whether legal, equitable or otherwise) of the
Credit Parties in each real property asset owned in fee simple
(or the equivalent form of title under applicable law) by a
Credit Party (each a "Mortgaged Property" and collectively the
"Mortgaged Properties"), together with such UCC-1 or UCC-3
financing statements (or equivalent instruments) as the Agent
shall deem appropriate with respect to each such Mortgaged
Property;
(ii) to the extent not previously
received by the Agent, a fully executed collateral assignment
of leasehold interest (the "Collateral Assignment of Leasehold
Interest"), or modifications of such Collateral Assignments of
Leasehold Interests delivered in connection with the Original
Credit Agreement, assigning to the Agent and granting the
Agent a security interest in the leasehold interest of the
Credit Parties in each real property asset leased by a Credit
Party (each a "Leasehold Property" and collectively the
"Leasehold Properties"), except to the extent the applicable
lease prohibits such assignment and security interest and the
landlord thereunder has not waived or consented to the same;
(iii) an opinion of counsel (which counsel
shall be satisfactory to
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the Agent) in the state in which each Real Property is located
with respect to the enforceability of the form of Mortgage or
the Collateral Assignment of Leasehold Interests (or the
modification thereto, as applicable), as applicable, and
sufficiency of the form of UCC-1 and/or UCC-3 financing
statements (or equivalent instruments) to be recorded or filed
in such state and such other matters as the Agent may request,
in form and substance satisfactory to the Agent;
(iv) ALTA mortgagee title insurance
policies (the "Mortgage Policies") issued by Chicago Title
Insurance Company (the "Title Insurance Company") or
sufficient endorsements to existing title insurance policies
issued by the Title Insurance Company, in amounts satisfactory
to the Agent with respect to all Mortgaged Properties,
assuring the Agent that the applicable Mortgages create valid
and enforceable mortgage liens on the respective Mortgaged
Properties, free and clear of all defects and encumbrances
except Permitted Liens, which Mortgage Policies and
endorsements to existing title insurance policies shall be in
form and substance satisfactory to the Agent and containing
such endorsements as shall be satisfactory to the Agent and
for any other matters that the Agent may request, and shall
provide for affirmative insurance and such reinsurance as the
Agent may request, all of the foregoing in form and substance
satisfactory to the Agent; and
(v) to the extent not previously
delivered to the Agent, maps or plats of an as-built survey of
the Real Properties certified to the Agent and the Title
Insurance Company in a manner reasonably satisfactory to them,
dated a date satisfactory to the Agent and the Title Insurance
Company by an independent professional licensed land surveyor
reasonably satisfactory to the Agent and the Title Insurance
Company, which maps or plats and the surveys on which they are
based shall be sufficient to delete any standard printed
survey exception contained in the applicable title policy and
be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and
adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1992, and,
without limiting the generality of the foregoing, there shall
be surveyed and shown on such maps, plats or surveys the
following: (A) the locations on such sites of all the
buildings, structures and other improvements and the
established building setback lines; (B) the lines of streets
abutting the sites and width thereof; (C) all access and other
easements appurtenant to the sites necessary to use the sites;
(D) all roadways, paths, driveways, easements, encroachments
and overhanging projections and similar encumbrances affecting
the site, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor;
(E) any encroachments on any adjoining property by the
building structures and improvements on the sites; and (F) if
the site is described as being on a filed map, a legend
relating the survey to said map;
(vi) to the extent not previously
delivered to the Agent, zoning letters from appropriate
authorities in form and substance acceptable to the Agent or
other evidence satisfactory to the Agent that each of the Real
Properties, and the uses of the Real Properties, are in
compliance in all material respects with all applicable zoning
laws, including the zoning designation made for each of the
Real Properties, the permitted uses of each such Real
Properties under such zoning designation and zoning
requirements as to parking, lot size, ingress, egress and
building setbacks;
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(vii) to the extent not previously
delivered to the Agent, certification from Bankers Hazard
Determination Services or Borrower's land surveyor in a form
reasonably satisfactory to the Agent or other evidence
acceptable to the Agent that none of the improvements on the
Real Properties located within the United States are located
within any area designated by the Director of the Federal
Emergency Management Agency as a "special flood hazard" area
or if any improvements on the Real Properties are located
within a "special flood hazard" area, evidence of a flood
insurance policy from a company and in an amount satisfactory
to the Agent for the applicable portion of the premises,
naming the Agent, for the benefit of the Lenders, as
mortgagee;
(viii) to the extent not previously
delivered to the Agent, with respect to the Mortgaged
Properties located in Bridgeview, Illinois and Troy, Ohio, a
fully executed and notarized modification of the existing
mortgage or deed of trust in favor of the issuer of the
applicable letter of credit securing the bond financing on
such property, in form and substance acceptable to the Agent,
which amends and modifies such mortgage or deed of trust to
secure, among other things, the obligations of the Credit
Parties under this Agreement; and
(ix) to the extent not previously
delivered to the Agent, with respect to the Mortgaged Property
located in Grove City, Pennsylvania, (A) such estoppel
letters, consents and waivers from the owner of such Mortgaged
Property and the holder of any existing mortgage or deed of
trust on such Mortgaged Property, as may be reasonably
required by the Agent, which estoppel letters shall be in form
and substance reasonably satisfactory to the Agent and (B)
evidence that the installment sale contract pursuant to which
IPC, Inc.'s interest in such Mortgaged Property is derived or
a memorandum of such contract with respect thereto, or other
evidence of such contract in form and substance reasonably
satisfactory to the Agent, has been recorded in all places to
the extent necessary or desirable, in the reasonable judgment
of the Agent, so as to enable the Mortgage encumbering such
Mortgaged Property to effectively create a valid and
enforceable lien (subject only to Permitted Liens) on IPC,
Inc.'s rights and interests in such Mortgaged Property in
favor of the Agent (or such other Person as may be required or
desired under local law) for the benefit of Lenders.
(e) Environmental Reports. To the extent not previously
delivered to the Agent, the Agent shall have received, in form and
substance satisfactory to the Agent, environmental site assessment
reports and related documents of a recent date with respect to all
Real Properties.
(f) Financial Statements. Receipt and approval by the
Agent and the Lenders of any and all financial information deemed
reasonably necessary for review in connection herewith.
(g) Opinion of Counsel. Receipt by the Agent of an
opinion, or opinions, satisfactory to the Agent, addressed to the
Agent on behalf of the Lenders and dated as of the Effective Date,
from legal counsel to the Credit Parties.
(h) Availability. After giving effect to the Loans
outstanding and Letters of Credit issued (to the extent undrawn) as of
the Effective Date (including any Loans made or Letters of Credit
issued (to the extent undrawn) on the Effective Date), there shall be
at
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least $50,000,000 of availability existing under the Revolving
Committed Amount.
(i) Evidence of Insurance. To the extent not previously
received by the Agent, copies of insurance policies or certificates of
insurance of the Credit Parties evidencing liability and casualty
insurance meeting the requirements set forth in the Credit Documents
and establishing the Agent, for the benefit of the Lenders, as loss
payee.
(j) Material Adverse Effect. No event shall have occurred
since December 31, 1995 that has had or would be reasonably expected
to have a Material Adverse Effect.
(k) Officer's Certificates.
(i) The Agent shall have received a
certificate or certificates executed by the chief financial
officer or treasurer of the Borrower as of the Effective Date
stating that (A) the Borrower and each of the Borrower's
Subsidiaries are in compliance with all existing financial
obligations, (B) all governmental, shareholder and third party
consents and approvals, if any, with respect to the Credit
Documents and the transactions contemplated thereby have been
obtained, (C) no event or condition has occurred since
December 31, 1995 which has had or might be reasonably
expected to have a Material Adverse Effect and (D) immediately
after giving effect to this Credit Agreement, the other Credit
Documents and all the transactions contemplated therein to
occur on such date, (1) the Borrower and each of the
Borrower's Subsidiaries is Solvent, (2) no Default or Event of
Default exists, (3) all representations and warranties
contained herein and in the other Credit Documents are true
and correct in all material respects, and (4) the Credit
Parties are in compliance with each of the financial covenants
set forth in Section 8.12.
(ii) The Agent shall have received a
certificate or certificates executed by the chief financial
officer or treasurer of Holdings as of the Effective Date
stating that (A) Holdings is in compliance with all existing
financial obligations and (B) immediately after giving effect
to this Credit Agreement, the other Credit Documents and all
the transactions contemplated therein, Holdings is Solvent.
(l) Subordinated Debt. To the extent not previously
received by the Agent, copies of all documentation evidencing the
Subordinated Debt certified by an officer of the Borrower and
Holdings, as applicable, to be true and correct, and the Agent shall
be satisfied that the execution and delivery of the Credit Documents
does not conflict with the terms of the Holdings Debentures or the
Subordinated Notes.
(m) Fees and Expenses. Payment by the Borrower to the
Lenders of an upfront fee equal to .05% of the total Commitment of
each Lender and payment by the Credit Parties of all fees and expenses
owed by them to the Lenders and the Agent, including, without
limitation, payment to the Agent of the fees set forth in the Fee
Letter.
(n) Other. Receipt by the Lenders of such other
documents, instruments, agreements or information as reasonably
requested by any Lender, including, but not limited to, information
regarding litigation, tax, accounting, labor, insurance, pension
liabilities (actual or contingent), real estate leases, material
contracts, debt agreements, property ownership and contingent
liabilities of Holdings, the Borrower and their
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respective Subsidiaries.
6.2 Conditions to All Extensions of Credit. In addition to the
conditions precedent stated elsewhere herein, the Lenders shall not be
obligated to make, continue or convert Revolving Loans (provided that
Eurodollar Loans may be converted into Base Rate Loans at the end of an
interest period without complying with the conditions of this Section 6.2) nor
shall an Issuing Lender be required to issue or extend a Letter of Credit
unless:
(a) Notice of Borrowing/Continuation/Conversion. The
Borrower shall have delivered (i) in the case of any Revolving Loan, a
Notice of Borrowing/Continuation/Conversion, duly executed and
completed, by the time specified in Section 2.1 hereof and (ii) in the
case of any Letter of Credit, an Issuing Lender shall have received an
appropriate request for issuance in accordance with the provisions of
Section 2.2 or 2.4 hereof;
(b) Representations and Warranties. The representations
and warranties made by the Credit Parties in any Credit Document are
true and correct in all material respects at and as if made as of such
date;
(c) No Default. No Default or Event of Default shall
exist or be continuing either prior to or after giving effect thereto;
(d) No Material Adverse Effect. There shall not have
occurred any Material Adverse Effect since the audited financial
statements dated December 31, 1995; and
(e) Availability. Immediately after giving effect to the
making of a Revolving Loan (and the application of the proceeds
thereof) or to the issuance of a Letter of Credit, as the case may be,
(A) the sum of the Revolving Loans outstanding plus Revolving LOC
Obligations outstanding shall not exceed the Revolving Commitment
Amount, and (B) the Stand Alone LOC Obligations shall not exceed the
Stand Alone LOC Committed Amount.
SECTION 7
REPRESENTATIONS AND WARRANTIES
Each Credit Party hereby represents and warrants to each Lender that:
7.1 Organization and Good Standing. Holdings, the Borrower and
each of their Subsidiaries (a) is a corporation duly incorporated, validly
existing and in good standing (or its equivalent) under the laws of the State
(or other jurisdiction) of its incorporation, (b) is duly qualified and in good
standing as a foreign corporation authorized to do business in every
jurisdiction where the failure to so qualify would have a Material Adverse
Effect and (c) has the requisite corporate power and authority to own its
properties and to carry on its business as now conducted and as proposed to be
conducted.
7.2 Due Authorization. Each Credit Party (a) has the requisite
corporate power and authority to execute, deliver and perform this Credit
Agreement and the other Credit Documents to which it is a party and to incur
the obligations herein and therein provided for and (b) is duly authorized to,
and has been authorized by all necessary corporate action, to execute, deliver
and
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perform this Credit Agreement and the other Credit Documents to which it is a
party.
7.3 No Conflicts. Neither the execution and delivery of the
Credit Documents, nor the consummation of the transactions contemplated
therein, nor performance of and compliance with the terms and provisions
thereof by such Credit Party will (a) violate or conflict with any provision of
its articles of incorporation or bylaws, (b) violate, contravene or materially
conflict with any law, regulation (including, without limitation, Regulation U
or Regulation X), order, writ, judgment, injunction, decree or permit
applicable to it, (c) violate, contravene or materially conflict with
contractual provisions of, or cause an event of default under, any indenture,
loan agreement, mortgage, deed of trust, contract or other agreement or
instrument to which it is a party or by which it may be bound, the violation of
which could have or might be reasonably expected to have a Material Adverse
Effect, or (d) result in or require the creation of any Lien (other than those
contemplated in or created in connection with the Credit Documents) upon or
with respect to its properties.
7.4 Consents. No consent, approval, authorization or order of, or
filing, registration or qualification with, any court or Governmental Authority
or third party in respect of such Credit Party is required in connection with
the execution, delivery or performance of this Credit Agreement or any of the
other Credit Documents by a Credit Party, or if required, such consent,
approval and authorization has been obtained.
7.5 Enforceable Obligations. This Credit Agreement and the other
Credit Documents have been duly executed and delivered and constitute legal,
valid and binding obligations of such Credit Party enforceable against such
Credit Party in accordance with their respective terms, except as may be
limited by bankruptcy or insolvency laws or similar laws affecting creditors'
rights generally or by general equitable principles.
7.6 Financial Condition. The financial statements and financial
information provided to the Lenders as described in Section 8.1 hereof fairly
present the financial condition and operations of Holdings, the Borrower and
their Subsidiaries as of the date of each such statement. In addition, such
financial statements were prepared in accordance with GAAP and, since the
audited financial statements dated December 31, 1995, there have occurred no
changes or circumstances which have had or are likely to have a Material
Adverse Effect.
7.7 No Default. No Default or Event of Default exists and is
continuing.
7.8 Ownership. Other than Permitted Liens, each Credit Party is
the owner of (free and clear of all Liens) and has good and marketable title to
(a) all of its Mortgaged Properties (except as indicated on the Mortgage
Policies accepted by the Agent) and (b) all of its other assets.
7.9 Indebtedness. Each of the Credit Parties and their
Subsidiaries have no Indebtedness except (a) as disclosed in the financial
statements referenced in Section 7.6 hereof, (b) as set forth on Schedule 7.9
attached hereto and (c) as otherwise permitted by this Credit Agreement.
7.10 Litigation. Except as disclosed in Schedule 7.10 attached
hereto, there are no actions, suits or legal, equitable, arbitration or
administrative proceedings, pending or, to the knowledge of any Credit Party,
threatened against Holdings, the Borrower or any of their Subsidiaries which,
if adversely determined, would have or would be reasonably expected to have a
Material Adverse Effect.
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7.11 Material Agreements. Neither Holdings, the Borrower nor any
of their Subsidiaries is in default in any respect under any contract, lease,
loan agreement, indenture, mortgage, security agreement or other agreement or
obligation to which it is a party or by which any of its properties is bound
which default would have or would be reasonable expected to have a Material
Adverse Effect.
7.12 Taxes. Each of Holdings, the Borrower and their Subsidiaries
has filed, or caused to be filed, all tax returns (federal, state, local and
foreign) required to be filed and paid all amounts of taxes shown thereon to be
due (including interest and penalties) and has paid all other taxes, fees,
assessments and other governmental charges (including mortgage recording taxes,
documentary stamp taxes and intangibles taxes) owing by it, except for such
taxes (a) which are not yet delinquent or (b) that are being contested in good
faith and by proper proceedings, and against which adequate reserves are being
maintained in accordance with GAAP. No Credit Party is aware of any proposed
tax assessments against it, any of its Subsidiaries or any other Credit Party.
7.13 Compliance with Law. Each of Holdings, the Borrower and their
Subsidiaries is in compliance with all laws, rules, regulations, orders and
decrees (including without limitation Environmental Laws) applicable to it, or
to its properties, unless such failure to comply would not have or be
reasonably expected to have a Material Adverse Effect.
7.14 ERISA. Except as would not result in a Material Adverse
Effect:
(a) During the five-year period prior to the date on
which this representation is made or deemed made: (i) no Termination
Event has occurred, and, to the best knowledge of the Credit Parties,
no event or condition has occurred or exists as a result of which any
Termination Event could reasonably be expected to occur, with respect
to any Plan; (ii) no "accumulated funding deficiency," as such term is
defined in Section 302 of ERISA and Section 412 of the Code, whether
or not waived, has occurred with respect to any Plan; (iii) each Plan
has been maintained, operated, and funded in compliance with its own
terms and in material compliance with the provisions of ERISA, the
Code, and any other applicable federal or state laws; and (iv) no lien
in favor or the PBGC or a Plan has arisen on account of any Plan.
(b) Neither a Credit Party, nor any of its Subsidiaries
nor any ERISA Affiliate has incurred any withdrawal liability under
ERISA to any Multiemployer Plan or Multiple Employer Plan and, to the
best knowledge of the Credit Parties, no event or condition has
occurred or exists as a result of which such withdrawal liability
could reasonably be expected to be incurred. Neither the Borrower,
any of its Subsidiaries nor any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization (within
the meaning of Section 4241 of ERISA), is insolvent (within the
meaning of Section 4245 of ERISA), or has been terminated (within the
meaning of Title IV of ERISA).
(c) No prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) or breach of
fiduciary responsibility has occurred with respect to a Plan which has
subjected a Credit Party or any of its Subsidiaries to any liability
under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of
the Code, or under any agreement or other instrument pursuant to which
the Borrower or any of its Subsidiaries has agreed or is required to
indemnify any person against any such liability.
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(d) The present value (determined using actuarial and
other assumptions which are reasonable with respect to the benefits
provided and the employees participating) of the liability of the
Credit Parties and their Subsidiaries for post-retirement welfare
benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of
ERISA), net of all assets under all such Plans allocable to such
benefits, are reflected on the Financial Statements in accordance with
FAS 106.
(e) The actuarial present value of all "benefit
liabilities" under each Single Employer Plan (determined in accordance
with Statement of Financial Accounting Standards No. 35 utilizing the
actuarial assumptions used to fund such Plans), whether or not vested,
did not, as of the last annual valuation date prior to the date on
which this representation is made or deemed made for which a valuation
is available (but in no event more than one year prior to the date on
which this representation is made or deemed made), exceed the current
fair market value of the assets of such Plan allocable to such accrued
liabilities by an amount in excess of $2,500,000.
7.15 Subsidiaries. Set forth on Schedule 7.15 attached hereto is a
complete and accurate list of all Subsidiaries of each Credit Party.
Information on the attached Schedule includes jurisdiction of incorporation;
the number of shares of each class of capital stock or other equity interests
outstanding; the number and percentage of outstanding shares of each class
owned (directly or indirectly) by such Credit Party; and the number and effect,
if exercised, of all outstanding options, warrants, rights of conversion or
purchase and all other similar rights. The outstanding capital stock and other
equity interests of all such Subsidiaries is validly issued, fully paid and
non-assessable and is owned by each such Credit Party, directly or indirectly,
free and clear of all Liens (other than those arising under or contemplated in
connection with the Credit Documents).
7.16 Use of Proceeds; Margin Stock. The proceeds of the Loans
hereunder will be used solely for the purposes specified in Section 8.10
hereof. None of such proceeds will be used for the purpose of purchasing or
carrying any "margin stock" as defined in Regulation U, Regulation X or
Regulation G, or for the purpose of reducing or retiring any Indebtedness which
was originally incurred to purchase or carry "margin stock" or for any other
purpose which might constitute this transaction a "purpose credit" within the
meaning of Regulation U, Regulation X or Regulation G. None of the Credit
Parties owns any "margin stock".
7.17 Government Regulation. No Credit Party is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940 or the Interstate Commerce Act,
each as amended. In addition, no Credit Party is (a) an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, or controlled by such a company, or (b) a "holding company,"
or a "Subsidiary company" of a "holding company," or an "affiliate" of a
"holding company" or of a "Subsidiary" or a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
7.18 Environmental Matters. (a) Except to the extent it would not
cause or be reasonably expected to cause a Material Adverse Effect:
(i) each of the Real Properties and all
other real property owned by a Credit Party or one of their
Subsidiaries (collectively, the "Properties") and all
operations at the Properties are in compliance with all
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applicable Environmental Laws, and there is no violation of
any Environmental Law with respect to the Properties or the
businesses operated by a Credit Party or any of their
Subsidiaries (the "Businesses"), and there are no conditions
relating to the Businesses or Properties that could give rise
to liability under any applicable Environmental Laws.
(ii) None of the Properties contains, or
has previously contained, any Hazardous Materials at, on or
under the Properties in amounts or concentrations that, if
release, constitute or constituted a violation of, or could
give rise to liability under, Environmental Laws.
(iii) No Credit Party has received any
written or verbal notice of, or inquiry from any Governmental
Authority, any violation, alleged violation, non-compliance,
liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to
any of the Properties or the Businesses, nor does any Credit
Party have knowledge or reason to believe that any such notice
is being threatened.
(iv) Hazardous Materials have not been
transported or disposed of from the Properties, or generated,
treated, stored or disposed of at, on or under any of the
Properties or any other location, in each case by or on behalf
of any Credit Party or any of their Subsidiaries.
(v) No judicial proceeding or
governmental or administrative action is pending or, to the
knowledge of a Credit Party, threatened, under any
Environmental Law to which a Credit Party or any of their
Subsidiaries is or will be named as a party, nor are there any
consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental
Law with respect to a Credit Party or any of their
Subsidiaries, the Properties or the Businesses.
(vi) There has been no release or threat
of release of Hazardous Materials at or from the Properties,
or arising from or related to the operations (including,
without limitation, disposal) of a Credit Party or any of
their Subsidiaries in connection with the Properties or
otherwise in connection with the Businesses.
(vii) Neither a Credit Party nor any of
their Subsidiaries has assumed any liability of any Person
(other than another Credit Party) under any Environmental Law.
(b) The Borrower has adopted procedures that are designed
to (i) ensure that each Credit Party and their Subsidiaries, any of
their operations and each of the properties owned or leased by each
Credit Party and their Subsidiaries remains in compliance with
applicable Environmental Laws and (ii) minimize any liabilities or
potential liabilities that each Credit Party and their Subsidiaries,
any of their operations and each of the properties owned or leased by
each Credit Party and their Subsidiaries may have under applicable
Environmental Laws.
(c) As of the Closing Date, no Credit Party is aware of
any material environmental issues other than as set forth on Schedule
7.18 attached hereto, none of which has caused or could be reasonably
expected to cause a Material Adverse Effect.
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7.19 Intellectual Property. Each Credit Party and each of their
Subsidiaries owns, or has the legal right to use, all trademarks, tradenames,
copyrights, technology, know-how and processes (the "Intellectual Property")
necessary for each of them to conduct its business as currently conducted
except for those the failure to own or have such legal right to use would not
have or be reasonably expected to have a Material Adverse Effect. Set forth on
Schedule 7.19(a) attached hereto is a list of all material Intellectual
Property owned by each Credit Party or that a Credit Party has the right to
use. Except as provided on Schedule 7.19(b) attached hereto, no claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does any Credit Party know of any such claim, and to
the Credit Parties' knowledge the use of such Intellectual Property by a Credit
Party or any of their Subsidiaries does not infringe on the rights of any
Person, except for such claims and infringements that in the aggregate, would
not have or be reasonably expected to have a Material Adverse Effect.
7.20 Solvency. Each Credit Party is and, after consummation of the
transactions contemplated by this Credit Agreement, will be Solvent.
7.21 Investments. All Investments of each Credit Party and each of
their Subsidiaries are either Permitted Investments or otherwise permitted by
the terms of this Credit Agreement.
7.22 No Financing of Corporate Takeovers. No proceeds of the Loans
hereunder have been or will be used to acquire, directly or indirectly, any
security in any transaction which is subject to Sections 13 or 14 of the
Securities Exchange Act of 1934, as amended, (including, without limitation,
Sections 13(d) and 14(d) thereof) or to refinance any Indebtedness used to
acquire any such securities.
7.23 Location of Collateral. Set forth on Schedule 7.23(a)
attached hereto is a list of all Real Properties with street address, county or
district and state or province where located (and legal descriptions with
respect thereto). Set forth on Schedule 7.23(b) attached hereto is a list of
all locations where any personal property of a Credit Party is located,
including county or district and state or province where located. Set forth on
Schedule 7.23(c) attached hereto is the chief executive office and principal
place of business of each Credit Party.
SECTION 8
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans and LOC Obligations, together
with interest, fees and other obligations hereunder, have been paid in full and
the Commitments hereunder shall have terminated:
8.1 Information Covenants. The Borrower will furnish, or cause to
be furnished, to the Agent:
(a) Annual Financial Statements. As soon as available,
and in any event within 90 days after the close of each fiscal year of
the Borrower, a consolidated balance sheet and income statement of
Holdings and its Subsidiaries, and the Borrower and its Subsidiaries,
as of the end of such fiscal year, together with related consolidated
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statements of operations and retained earnings and of cash flows for
such fiscal year, setting forth in comparative form consolidated
figures for the preceding fiscal year, all such financial information
described above to be in reasonable form and detail and audited by
independent certified public accountants of recognized national
standing reasonably acceptable to the Agent and whose opinion shall be
to the effect that such financial statements have been prepared in
accordance with GAAP (except for changes with which such accountants
concur) and shall not be limited as to the scope of the audit or
qualified in any manner.
(b) Quarterly Financial Statements. As soon as
available, and in any event within 45 days after the close of each
fiscal quarter of the Borrower (other than the fourth fiscal quarter,
in which case 90 days after the end thereof) a consolidated balance
sheet and income statement of Holdings and its Subsidiaries, and the
Borrower and its Subsidiaries, as of the end of such fiscal quarter,
together with related consolidated statements of operations and
retained earnings and of cash flows for such fiscal quarter in each
case setting forth in comparative form consolidated figures for the
corresponding period of the preceding fiscal year, all such financial
information described above to be in reasonable form and detail and
reasonably acceptable to the Agent, and accompanied by a management
discussion as to such financial information and a certificate of the
chief financial officer or treasurer of the Borrower to the effect
that such quarterly financial statements fairly present in all
material respects the financial condition and results of operations of
Holdings, the Borrower and their Subsidiaries and have been prepared
in accordance with GAAP, subject to changes resulting from audit and
normal year-end audit adjustments.
(c) Monthly Financial Statements. As soon as available
and in any event within 35 days after the end of each month of the
Borrower (other than the last month of the first three fiscal quarters
in which case 45 days after the end thereof), a consolidated balance
sheet and income statement of Holdings and its Subsidiaries, and the
Borrower and its Subsidiaries as at the end of such month together
with related consolidated statements of operations and retained
earnings and of cash flows for such month in each case setting forth
in comparative form consolidated figures for the corresponding period
of the preceding fiscal year (and such other financial information as
reasonably requested by the Agent or the Required Lenders, including
financial information regarding the divisions of the Borrower), all
such financial information described above to be in reasonable form
and detail and reasonably acceptable to the Agent, and accompanied by
a management discussion as to such financial information and a
certificate of the chief financial officer or treasurer of the
Borrower to the effect that such monthly financial statements fairly
present in all material respects the financial condition and results
of operations of Holdings, the Borrower and their Subsidiaries and
have been prepared in accordance with GAAP, subject to changes
resulting from audit and normal year-end audit adjustments.
(d) Officer's Certificate. At the time of delivery of
the financial statements provided for in Sections 8.1(a) and 8.1(b)
above, a certificate of the chief financial officer or treasurer of
the Borrower substantially in the form of Exhibit 8.1(d) attached
hereto, (i) demonstrating compliance with the financial covenants
contained in Section 8.12 by calculation thereof as of the end of each
such fiscal period and (ii) stating that no Default or Event of
Default exists, or if any Default or Event of Default does exist,
specifying the nature and extent thereof and what action the Borrower
proposes to take with respect thereto.
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(e) Annual Business Plan and Budgets. At least 30 days
after the end of each fiscal year of the Borrower, beginning with the
fiscal year ending December 31, 1995, an annual business plan and
budget of Holdings, the Borrower and each of its operating groups
containing, among other things, pro forma financial statements for the
next fiscal year.
(f) Compliance With Certain Provisions of the Credit
Agreement. Within 90 days after the end of each fiscal year of the
Borrower, the Borrower shall deliver a certificate, containing
information regarding (i) the calculation of Excess Cash Flow, and
(ii) the amount of Asset Dispositions and Receivables Transactions
that were made during the prior fiscal year.
(g) Accountant's Certificate. Within the period for
delivery of the annual financial statements provided in Section
8.1(a), a certificate of the accountants conducting the annual audit
stating that they have reviewed this Credit Agreement and stating
further whether, in the course of their audit, they have become aware
of any Default or Event of Default and, if any such Default or Event
of Default exists, specifying the nature and extent thereof.
(h) Auditor's Reports. Promptly upon receipt thereof, a
copy of any "management letter" submitted by independent accountants
to Holdings, the Borrower or any of its Subsidiaries in connection
with any annual, interim or special audit of the books of Holdings,
the Borrower or any of its Subsidiaries.
(i) Reports. Promptly upon transmission or receipt
thereof, (a) copies of any filings and registrations with, and reports
to or from, the Securities and Exchange Commission, or any successor
agency, and copies of all financial statements, proxy statements,
notices and reports as Holdings, the Borrower or any of their
Subsidiaries shall send to its shareholders generally or to a holder
of any Indebtedness owed by Holdings, the Borrower or any of their
Subsidiaries in its capacity as such a holder and (b) upon the written
request of the Agent, all reports and written information to and from
the United States Environmental Protection Agency, or any state or
local agency responsible for environmental matters, the United States
Occupational Health and Safety Administration, or any state or local
agency responsible for health and safety matters, or any successor
agencies or authorities concerning environmental, health or safety
matters.
(j) Notices. Upon a Credit Party obtaining knowledge
thereof, such Credit Party will give written notice to the Agent
immediately of (a) the occurrence of an event or condition consisting
of a Default or Event of Default, specifying the nature and existence
thereof and what action the Borrower proposes to take with respect
thereto, and (b) the occurrence of any of the following with respect
to Holdings, the Borrower or any of their Subsidiaries (i) the
pendency or commencement of any litigation, arbitral or governmental
proceeding against Holdings, the Borrower or any of their Subsidiaries
which if adversely determined would have or would be reasonably
expected to have a Material Adverse Effect, or (ii) the institution of
any proceedings against Holdings, the Borrower or any of their
Subsidiaries with respect to, or the receipt of written notice by such
Person of potential liability or responsibility for violation, or
alleged violation of any federal, state or local law, rule or
regulation, including but not limited to, Environmental Laws, the
violation of which would have or would be reasonably expected to have
a Material Adverse Effect.
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(k) ERISA. Upon any of the Credit Parties or any ERISA
Affiliate obtaining knowledge thereof, Borrower will give written
notice to the Agent promptly (and in any event within five Business
Days) of any of the following which would have or would be reasonably
expected to have a Material Adverse effect: (i) of any event or
condition, including, but not limited to, any Reportable Event, that
constitutes a Termination Event; (ii) with respect to any
Multiemployer Plan, the receipt of notice as prescribed in ERISA or
otherwise of any withdrawal liability assessed against the Borrowers
or any of their ERISA Affiliates, or of a determination that any
Multiemployer Plan is in reorganization or insolvent (both within the
meaning of Title IV of ERISA); (iii) the failure to make full payment
on or before the due date (including extensions) thereof of all
amounts which the Borrower or any of its Subsidiaries or ERISA
Affiliate is required to contribute to each Plan pursuant to its terms
and as required to meet the minimum funding standard set forth in
ERISA and the Code with respect thereto; or (iv) any change in the
funding status of any Plan that has a Material Adverse Effect;
together, with a description of any such event or condition or a copy
of any such notice and a statement by the principal financial officer
of the Borrower briefly setting forth the details regarding such
event, condition, or notice, and the action, if any, which has been or
is being taken or is proposed to be taken by the Credit Parties with
respect thereto. Promptly upon request, the Borrower shall furnish
the Agent with such additional information concerning any Plan as may
be reasonably requested (and which in the case of a Multiemployer Plan
is reasonably available to Credit Parties or their Subsidiaries),
including, but not limited to, copies of each annual report/return
(Form 5500 series), as well as all schedules and attachments thereto
required to filed with the Department of Labor and/or the Internal
Revenue Service pursuant to ERISA and the Code, respectively, for each
"plan year" (within the meaning of Section 3(39) of ERISA).
(l) Environmental.
(i) Upon the reasonable written request
of the Agent, Borrower will furnish or cause to be furnished
to the Agent at Borrower's expense a report of an
environmental assessment of reasonable scope, form and depth,
(including, where appropriate, invasive soil or groundwater
sampling) by a consultant reasonably acceptable to Agent as to
the nature and extent of the presence of any Hazardous
Materials on any Real Property owned, leased or operated by
any Credit Party and as to the compliance by such Credit Party
with Environmental Laws. If Borrower fails to deliver such an
environmental report within seventy-five (75) days after
receipt of Agent's written request then Agent may arrange for
same, and Borrower hereby grants to the Agent and its
representatives access to the Real Properties and a license to
undertake such an assessment (including, where appropriate,
invasive soil or groundwater sampling). The reasonable cost
of any assessment arranged for by the Agent pursuant to this
provision will be payable by Borrower on demand and added to
the obligations secured by the Collateral Documents.
(ii) Each Credit Party will conduct and
complete all investigations, studies, sampling, and testing
and all remedial, removal, and other actions necessary to
address all Hazardous Materials on, from, or affecting the
Real Properties or to otherwise comply with Environmental Laws
to the extent required by any applicable federal, state, or
local laws, regulations, rules, and policies and with their
orders and directives of all policies and with the orders and
directives of all federal, state and local governmental
authorities exercising jurisdiction over such Real Properties
if any failure to do so would cause or be
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reasonably expected to cause a Material Adverse Effect.
(m) Other Information. With reasonable promptness upon
any such request, such other information regarding the business,
properties or financial condition of the Credit Parties and their
Subsidiaries as the Agent or the Required Lenders may reasonably
request.
8.2 Preservation of Existence and Franchises. Each of the Credit
Parties will, and will cause its Subsidiaries to, do all things necessary to
preserve and keep in full force and effect its existence, rights, franchises
and authority unless any such Credit Party determines that any such rights,
franchises or authority is no longer necessary to the conduct of its business.
8.3 Books and Records. Each of the Credit Parties will, and will
cause its Subsidiaries to keep complete and accurate books and records of its
transactions in accordance with good accounting practices on the basis of GAAP
(including the establishment and maintenance of appropriate reserves).
8.4 Compliance with Law. Each of the Credit Parties will, and
will cause its Subsidiaries to, comply with all laws, rules, regulations and
orders, and all applicable restrictions imposed by all Governmental
Authorities, applicable to it and its property (including, without limitation,
Environmental Laws) if noncompliance with any such law, rule, regulation, order
or restriction would have or reasonably be expected to have a Material Adverse
Effect.
8.5 Payment of Taxes and Other Indebtedness. Each of the Credit
Parties will and will cause its Subsidiaries to, pay and discharge (a) all
taxes, assessments and governmental charges or levies imposed upon it, or upon
its income or profits, or upon any of its properties, before they shall become
delinquent, (b) all lawful claims (including claims for labor, materials and
supplies) which, if unpaid, might give rise to a Lien upon any of its
properties, and (c) except as prohibited hereunder, all of its other
Indebtedness as it shall become due; provided, however, that a Credit Party or
its Subsidiary shall not be required to pay (i) any such tax, assessment,
charge, levy, claim or Indebtedness which is being contested in good faith by
appropriate proceedings and as to which adequate reserves therefor have been
established in accordance with GAAP or (ii), any such payment in (a), (b) or
(c) above if the failure to make such payment does not give rise to an
immediate right to foreclose on a Lien securing such amounts or (ii) would have
or be reasonably expected to cause a Material Adverse Effect.
8.6 Insurance. Each of the Credit Parties will at all times
maintain in full force and effect insurance (including worker's compensation
insurance, liability insurance, casualty insurance and business interruption
insurance) in such amounts, covering such risks and liabilities and with such
deductibles or self-insurance retentions as are in accordance with normal
industry practice and naming the Agent, for the benefit of the Lenders, as loss
payee.
In case of any material loss, damage to or destruction of the Collateral of any
Credit Party or any part thereof, such Credit Party shall promptly give written
notice thereof to the Agent generally describing the nature and extent of such
damage or destruction. In case of any loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, such Credit Party, whether
or not the insurance proceeds, if any, received on account of such damage or
destruction shall be sufficient for that purpose, at such Credit Party's cost
and expense, will promptly repair or replace the Collateral of such Credit
Party so lost, damaged or destroyed; provided, however, that such Credit Party
need not repair or replace the Collateral of such Credit Party so lost, damaged
or destroyed to the extent the failure to make such repair or replacement (a)
is desirable
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to the proper conduct of the business of such Credit Party in the ordinary
course and otherwise in the best interest of such Credit Party; and (b) would
not materially impair the rights and benefits of the Agent or the Lenders under
this Credit Agreement or any other Credit Document. In the event a Credit
Party shall receive any proceeds of such insurance in a net amount in excess of
$5,000,000, such Credit Party will immediately pay over such proceeds to the
Agent, for payment on the Credit Party Obligations; provided, however, that the
Agent agrees to release such insurance proceeds to such Credit Party for
replacement or restoration of the portion of the Collateral of such Credit
Party lost, damaged or destroyed if, but only if, (A) no Default or Event of
Default shall have occurred and be continuing at the time of release, (B)
written application for such release is received by the Agent from such Credit
Party within 30 days after written notice of receipt of such proceeds and (C)
the Agent has received evidence reasonably satisfactory to it that the
Collateral lost, damaged or destroyed has been or will be replaced or restored
to its condition immediately prior to the loss, destruction or other event
giving rise to the payment of such insurance proceeds or such proceeds are used
in a manner reasonably acceptable to the Agent. All insurance proceeds shall
be subject to the security interest of the Lenders under the Security
Agreements.
The present coverage of Holdings, the Borrower and their Subsidiaries is
outlined as to carrier, policy number, expiration date, type and amount on
Schedule 8.6 attached hereto, as Schedule 8.6 may be amended from time to time
by written notice to the Agent.
8.7 Maintenance of Property. Each of the Credit Parties will, and
will cause its Subsidiaries to, maintain and preserve its properties and
equipment material to the conduct of its business in good repair, working order
and condition, normal wear and tear excepted, and will make, or cause to be
made, in such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as
may be needed or proper, to the extent and in the manner customary for
companies in similar businesses unless any such Credit Party determines any
such properties or equipment are no longer necessary to the conduct of its
business.
8.8 Performance of Obligations. Each of the Credit Parties will,
and will cause its Subsidiaries to, perform in all material respects all of its
obligations under the terms of all material agreements, indentures, mortgages,
security agreements or other debt instruments to which it is a party or by
which it is bound.
8.9 Collateral. If a Credit Party shall acquire any real
property, intellectual property or any securities subsequent to the Effective
Date, the Borrower shall immediately notify the Agent of same. Each Credit
Party shall adhere to the covenants regarding the location of personal property
as set forth in the Security Agreements. Each Credit Party shall take such
action, as requested by the Agent, to ensure that the Lenders have a first
priority perfected Lien in all real and personal property of the Credit Parties
(whether now owned or hereafter acquired), subject only to Permitted Liens.
8.10 Use of Proceeds. The Credit Parties will use proceeds of the
Loans solely (a) to replace the existing Loans and Letters of Credit
outstanding under the Original Credit Agreement (b) to redeem certain
Subordinated Debt as permitted hereunder, (c) to provide working capital, (d)
for general corporate purposes and (e) as otherwise permitted under this Credit
Agreement.
8.11 Audits/Inspections. Upon reasonable notice and during normal
business hours, each Credit Party will permit, and will cause their
Subsidiaries to permit, representatives appointed by the Agent, including,
without limitation, independent accountants, agents,
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attorneys, and appraisers to visit and inspect the Credit Parties' property,
including their books and records, their accounts receivable and inventory,
Credit Parties' facilities and their other business assets, and to make
photocopies or photographs thereof and to write down and record any information
such representative obtains and shall permit the Agent or its representatives
to investigate and verify the accuracy of information provided to the Lenders
and to discuss all such matters with the officers, employees and
representatives of the Credit Parties. The Credit Parties agree that the
Agent, and its representatives, may conduct an annual audit of the Collateral,
at the expense of the Borrower.
8.12 Financial Covenants.
(a) Interest Coverage Ratio. The Interest Coverage
Ratio, as of the end of each fiscal quarter, for the twelve month
period ending on such date, shall be greater than or equal to:
As of December 31, 1996, 1.90 to 1.0;
From the Effective Date to December 31, 1997, 2.05 to 1.0;
From January 1, 1998 to December 31, 1998, 2.20 to 1.0;
From January 1, 1999 to December 31, 1999, 2.40 to 1.0;
From January 1, 2000 to December 31, 2000, 2.65 to 1.0; and
From January 1, 2001 and thereafter, 3.0 to 1.0.
(b) Fixed Charge Coverage. The Fixed Charge Coverage
Ratio, as of the end of each fiscal quarter, for the twelve month
period ending on such date, shall be greater than or equal to 1.0 to
1.0.
(c) Debt Coverage Ratio. The Debt Coverage Ratio, as of
the end of each fiscal quarter, for the twelve month period ending on
such date, shall be less than or equal to:
As of December 31, 1996, 4.65 to 1.0;
From the Effective Date to December 31, 1997, 4.25 to 1.0;
From January 1, 1998 to December 31, 1998, 3.90 to 1.0;
From January 1, 1999 to December 31, 1999, 3.50 to 1.0;
From January 1, 2000 to December 31, 2000, 3.05 to 1.0; and
From January 1, 2001 and thereafter, 2.65 to 1.0.
(d) Net Worth. At all times Net Worth shall be greater
than or equal to (i) a negative Fifty Million (- $50,000,000) plus
(ii) 75% of Net Income on a cumulative basis (without deduction for
any losses) minus (iii) dividends paid to Holdings as permitted under
this Credit Agreement.
8.13 Additional Credit Parties. At the time any Person becomes a
Subsidiary of a Credit Party, the Borrower shall so notify the Agent and
promptly thereafter (but in any event within 30 days after the date thereof)
shall cause such Person to (a) if it is a Domestic Subsidiary, execute a
Joinder Agreement in substantially the same form as Exhibit 8.13 attached
hereto, (b) cause all of the capital stock of such Person (if it is a Domestic
Subsidiary) or 65% of the capital stock of such Person (if it is a direct
Foreign Subsidiary) to be delivered to the Agent (together with undated stock
powers signed in blank) and pledged to the Agent pursuant to an appropriate
pledge agreement in substantially the form of the Pledge Agreement and
otherwise in a form acceptable to the Agent, (c) if such Person is a Domestic
Subsidiary, pledge all of its assets to the Lenders pursuant to a security
agreement in substantially the form of the Security Agreement and
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otherwise in a form acceptable to the Agent, and (d) if such Person is a
Domestic Subsidiary and has any Subsidiaries, (A) deliver all of the capital
stock of such Domestic Subsidiaries and 65% of the stock of the direct Foreign
Subsidiaries (together with undated stock powers signed in blank) to the Agent
and (B) execute a pledge agreement in substantially the form of the Pledge
Agreement and otherwise in a form acceptable to the Agent, (e) if such Person
is a Domestic Subsidiary and owns or leases any real property, execute any and
all necessary mortgages, deeds of trust, deeds to secure debt or other
appropriate real estate collateral documentation in a form acceptable to the
Agent and (f) deliver such other documentation as the Agent may reasonably
request in connection with the foregoing, including, without limitation,
appropriate UCC-1 financing statements, real estate title insurance policies,
environmental reports, landlord's waivers, certified resolutions and other
organizational and authorizing documents of such Person and favorable opinions
of counsel to such Person (which shall cover, among other things, the legality,
validity, binding effect and enforceability of the documentation referred to
above), all in form, content and scope reasonably satisfactory to the Agent.
8.14 Interest Rate Protection Agreements. The Borrower shall,
maintain interest rate protection agreements protecting against fluctuations in
interest rates as to which the material terms are reasonably satisfactory to
the Agent and in a notional amount of at least 65% of the principal amount of
the Tranche A Term Loans.
SECTION 9
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans and LOC Obligations, together
with interest, fees and other obligations hereunder, have been paid in full and
the Commitments hereunder shall have terminated:
9.1 Indebtedness. Neither Holdings, the Borrower nor any of their
Subsidiaries will contract, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and
the other Credit Documents;
(b) Indebtedness existing as of the Effective Date as
referenced in Section 7.9 (and renewals, refinancings or extensions
thereof on terms and conditions no more favorable (subject to market
rates of interest), in the aggregate, to such Person than such
existing Indebtedness and in a principal amount not in excess of that
outstanding as of the date of such renewal, refinancing or extension);
(c) Indebtedness in respect of current accounts payable
and accrued expenses incurred in the ordinary course of business
including, to the extent not current, accounts payable and accrued
expenses that are subject to bona fide dispute;
(d) Indebtedness owing by (i) one Credit Party to another
Credit Party or (ii) by a Foreign Subsidiary to another Foreign
Subsidiary;
(e) Indebtedness issued by the Borrower (on a basis fully
subordinate to the Credit Party Obligations) to replace the
Subordinated Notes (on terms no more onerous (including maturity and
subordination provisions and subject to market rates of interest) than
the existing Subordinated Notes as determined by the Required
Lenders);
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(f) Indebtedness in an amount up to $60,000,000, in the
aggregate, if such Indebtedness (i) is used (A) to redeem or otherwise
acquire Holdings Debentures (provided that in no event shall more than
$25,000,000, in the aggregate, be used to redeem or acquire Holdings
Debentures from the Closing Date until all of the Credit Party
Obligations are satisfied in full), (B) to redeem or otherwise acquire
Subordinated Notes, or (C) to make Permitted Acquisitions, (ii) is
documented under this Credit Agreement and becomes a part of this
Credit Agreement for all purposes, including, but not limited to, such
Indebtedness being secured by the Collateral and the lenders of such
Indebtedness become Lenders hereunder, (iii) is approved by the
Required Lenders, (iv) matures no earlier than March 31, 2002 and (v)
does not require amortization in excess of 1% of the outstanding
principal amount per annum;
(g) Indebtedness with respect to capital leases, purchase
money Indebtedness or other unsecured Indebtedness (in addition to
Indebtedness otherwise permitted under this Section 9.1) which does
not exceed $7,500,000, in the aggregate, at any one time;
(h) Indebtedness in connection with a Receivables
Transaction;
(i) Indebtedness evidenced by the interest rate
protection agreements referred to in Section 8.14;
(j) Indebtedness existing with respect to real property
of a corporation which becomes a Subsidiary of the Borrower or is
merged with or into a Credit Party after the date hereof; provided
that (A) such Indebtedness existed at the time such corporation became
a Subsidiary of the Borrower or was merged with or into a Credit
Party, (B) such Indebtedness was not incurred in anticipation thereof,
(C) at such time no Default or Event of Default exists or shall result
from such transaction and (D) such Indebtedness is of a tax advantage
nature and is more favorable than available under this Credit
Agreement;
(k) Indebtedness with respect to the Newton Property not
to exceed $9,000,000; and
(l) Indebtedness incurred by Foreign Subsidiaries not to
exceed $5,000,000, in the aggregate, at any one time.
9.2 Liens. Neither Holdings, the Borrower nor any of their
Subsidiaries will contract, create, incur, assume or permit to exist any Lien
with respect to any of its property or assets of any kind (whether real or
personal, tangible or intangible), whether now owned or after acquired, except
for Permitted Liens.
9.3 Nature of Business. Neither Holdings, the Borrower nor any of
their Subsidiaries will alter the character of its business from that conducted
as of the Effective Date or engage in any business other than the business
conducted as of the Effective Date and activities which are substantially
similar or related thereto.
9.4 Consolidation and Merger. Neither Holdings, the Borrower nor
any of their Subsidiaries will enter into any transaction of merger or
consolidation or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution); provided that notwithstanding the foregoing
provisions of this Section 9.4, the following actions may be taken if after
giving effect thereto no Default or Event of Default exists:
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(a) any Credit Party other than Holdings may be merged or
consolidated with or into the Borrower or any other Credit Party;
provided that if such transaction shall be between the Borrower and
another Credit Party, the Borrower shall be the continuing or
surviving corporation;
(b) any Credit Party other than Holdings may merge or
consolidate with any other Person (other than another Credit Party) if
such Credit Party shall be the continuing or surviving corporation;
and
(c) any Foreign Subsidiary may merge or consolidate with
any other Foreign Subsidiary.
9.5 Sale or Lease of Assets. Unless the Net Cash Proceeds are
forwarded to the Agent as set forth in Section 3.2(b)(iii), neither Holdings,
the Borrower nor any of their Subsidiaries will convey, sell, lease, transfer
or otherwise dispose of, in one transaction or a series of transactions, all or
any part of its business or assets whether now owned or hereafter acquired,
including, without limitation, inventory, receivables, leasehold interests, and
securities but excluding (i) any inventory or other assets sold, leased or
disposed of (or simultaneously replaced with like goods) in the ordinary course
of business, (ii) obsolete, idle or worn-out assets no longer used or useful in
its business, (iii) subject to Section 9.4 hereof, the sale, lease or transfer
or other disposal by the Borrower or another Credit Party of any or all of its
assets or the capital stock of any other Credit Party to the Borrower or
another Credit Party, (iv) Receivables Transactions, if consideration paid by
third parties does not exceed, in the aggregate, $50,000,000, and all proceeds
from same are paid to the Lenders as set forth in Section 3.2(b)(iv) hereof,
(v) license agreements entered, as licensor, in the ordinary course of business
for use of intellectual property or other intangible assets of any Credit
Party, (vi) transfers constituting Permitted Investments, or (vii) other sales
of assets not to exceed $1,000,000 during any fiscal year of the Borrower.
[IVEX HAS ASKED FOR UNLIMITED SALES OF ASSETS FOR FOREIGN SUBSIDIARIES]
9.6 Advances, Investments and Loans. Neither Holdings, the
Borrower nor any of their Subsidiaries will make any investments except for
Permitted Investments.
9.7 Dividends. Neither Holdings, the Borrower nor any of their
Subsidiaries will, directly or indirectly, (a) declare or pay any dividends
(whether cash or otherwise) or make any other distribution upon any shares of
its capital stock of any class or (b) purchase, redeem or otherwise acquire or
retire or make any provisions for redemption, acquisition or retirement of any
shares of its capital stock of any class or any warrants or options to purchase
any such shares other than a Permitted Investment; provided that (x) if no
Default or Event of Default exists and is continuing, the Borrower may pay
dividends to Holdings, (i) for administration expenses up to $250,000 per year,
(ii) to allow for the repurchase of stock or options of Holdings or the
Borrower from employees as permitted under this Credit Agreement, (iii) to
allow for the payment of taxes in accordance with that certain Tax Allocation
Agreement dated as of December 17, 1992 among Ivex Packaging Corporation f/k/a
Ivex Holdings Corporation and its Subsidiaries, (iv) subsequent to September
14, 2000, to pay interest on the Holdings Debentures, and (v) if the Redemption
Conditions are satisfied, to redeem Holdings Debentures, (y) Subsidiaries of
the Borrower may pay dividends to the Borrower or to another Credit Party that
is a Subsidiary of the Borrower and (z) Holdings may redeem Holdings Debentures
in accordance with the terms of this Credit Agreement.
9.8 Transactions with Affiliates. Except as set forth on Schedule
9.8 attached hereto,
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neither Holdings, the Borrower nor any of their Subsidiaries will enter into
any transaction or series of transactions, whether or not in the ordinary
course of business, with any officer, director, shareholder, Subsidiary or
Affiliate other than on terms and conditions substantially as favorable than
would be obtainable in a comparable arm's-length transaction with a Person
other than an officer, director, shareholder, Subsidiary or Affiliate.
9.9 Ownership of the Borrower. Holdings will not sell, transfer
or otherwise dispose of any shares of capital stock of the Borrower.
9.10 Fiscal Year. Neither Holdings, the Borrower or any of their
Subsidiaries will change its fiscal year without the prior written consent of
the Required Lenders.
9.11 Subordinated Debt. Other than (i) the replacement of
Subordinated Notes in accordance with the terms of Section 9.1(e) hereof or
(ii) the redemption of Subordinated Debt from the net proceeds of an equity
offering by Holdings, neither Holdings, the Borrower nor any of their
Subsidiaries may, unless the Redemption Conditions are satisfied, (a) make or
offer to make any principal payments with respect to the Subordinated Debt, (b)
redeem or offer to redeem any of the Subordinated Debt, (c) deposit any funds
intended to discharge or defease any or all of the Subordinated Debt, or (d)
make or offer to make any voluntary principal prepayments on Funded Debt other
than the Loans. Furthermore, neither Holdings nor the Borrower will amend,
modify or waive any of the terms and conditions of the Holdings Debentures or
the Subordinated Notes, as applicable, in a manner that would adversely affect
the Lenders, or their rights under the Credit Documents, without the prior
written consent of the Required Lenders; provided that any amendment to the
terms and conditions of the Subordinated Debt solely to allow for the
redemption or other acquisition of Holdings Debentures in accordance with the
terms hereof shall not be deemed to adversely affect the Lenders.
9.12 Assets of Holdings. Holdings may not hold any assets other
than (a) the stock of the Borrower, (b) such amounts allowed to be transferred
to Holdings pursuant to Section 9.7 hereof and (c) net proceeds from an equity
offering by Holdings for a period not to exceed 90 days. Holdings may not have
any liabilities other than the liabilities under the Credit Documents, the
Holdings Debentures and tax liabilities and other liabilities in the ordinary
course of business.
9.13 Sale Leasebacks. Except with the consent of the Required
Lenders, none of the Credit Parties will, nor will it permit any of its
Subsidiaries to, directly or indirectly become or remain liable as lessee or as
guarantor or other surety with respect to any lease, whether an operating lease
or a capital lease, of any property (whether real or personal or mixed),
whether now owned or hereafter acquired, (a) which such Credit Party or
Subsidiary has sold or transferred or is to sell or transfer to any other
Person other than a Credit Party or (b) which such Credit Party or Subsidiary
intends to use for substantially the same purpose as any other property which
has been sold or is to be sold or transferred by such Credit Party or
Subsidiary to any Person in connection with such lease.
9.14 Negative Pledges. Except as set forth in the Credit Documents
and on Schedule 9.2 attached hereto, a Credit Party will not, nor will it
permit any of its Domestic Subsidiaries to, enter into, assume or become
subject to any agreement prohibiting or otherwise restricting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired, or requiring the grant of any security for such obligation
if security is given for some other obligation.
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9.15 Limitation on Foreign Operations. The Credit Parties will
not, nor will it permit any of its Subsidiaries to, allow the Foreign
Subsidiaries to have assets which in the aggregate constitute more than 15% of
Total Assets at any time.
SECTION 10
EVENTS OF DEFAULT
10.1 Events of Default. An Event of Default shall exist upon the
occurrence of any of the following specified events (each an "Event of
Default"):
(a) Payment. Any Credit Party shall:
(i) default in the payment when due of
any principal of any of the Loans or of any reimbursement
obligation arising from drawings under Letters of Credit; or
(ii) default, and such default shall
continue for three or more days, in the payment when due of
any interest on the Loans, or of any fees or other amounts
owing hereunder, under any of the other Credit Documents or in
connection herewith.
(b) Representations. Any representation, warranty or
statement made or deemed to be made by any Credit Party herein, in any
of the other Credit Documents, or in any statement or certificate
delivered or required to be delivered pursuant hereto or thereto shall
prove untrue in any material respect on the date as of which it was
deemed to have been made.
(c) Covenants. Any Credit Party shall:
(i) default in the due performance or
observance of any term, covenant or agreement contained in
Sections 8.2, 8.4, 8.10, 8.12 or 9.1 through 9.15, inclusive;
or
(ii) default in the due performance or
observance by it of any term, covenant or agreement contained
in Section 8.1 and such default shall continue unremedied for
a period of five Business Days after the earlier of an officer
of a Credit Party becoming aware of such default or notice
thereof given by the Agent; or
(iii) default in the due performance or
observance by it of any term, covenant or agreement (other
than those referred to in subsections (a), (b) or (c)(i) or
(ii) of this Section 10.1) contained in this Credit Agreement
and such default shall continue unremedied for a period of at
least 30 days after the earlier of an officer of a Credit
Party becoming aware of such default or notice thereof given
by the Agent.
(d) Other Credit Documents. (i) Any Credit Party shall
default in the due performance or observance of any term, covenant or
agreement in any of the other Credit Documents and such default shall
continue unremedied for a period of at least 30 days
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after the earlier of an officer of a Credit Party becoming
aware of such default or notice thereof given by the Agent, or (ii)
any Credit Document shall fail to be in full force and effect or to
give the Agent and/or the Lenders the security interests, liens,
rights, powers and privileges purported to be created thereby or any
Credit Party or any Person acting by or on behalf of any Credit Party
shall deny or disaffirm the its obligations under the Credit
Documents.
(e) Guaranties. The guaranty given by the Credit Parties
hereunder or by any Additional Credit Party hereafter or any provision
thereof shall cease to be in full force and effect, or any guarantor
thereunder or any Person acting by or on behalf of such guarantor
shall deny or disaffirm such Guarantor's obligations under such
guaranty.
(f) Bankruptcy, etc. The occurrence of any of the
following with respect to Holdings, the Borrower or any of their
Subsidiaries: (i) a court or governmental agency having jurisdiction
in the premises shall enter a decree or order for relief in respect of
Holdings, Borrower or any of their Subsidiaries in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or appoint a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of any of
Holdings, the Borrower or any of their Subsidiaries or for any
substantial part of its property or ordering the winding up or
liquidation of its affairs; or (ii) an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect is commenced against Holdings, the Borrower or any
of their Subsidiaries and such petition remains unstayed and in effect
for a period of 60 consecutive days; or (iii) Holdings, the Borrower
or any of their Subsidiaries shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of such Person or any
substantial part of its property or make any general assignment for
the benefit of creditors; or (iv) Holdings, the Borrower or any of
their Subsidiaries shall admit in writing its inability to pay its
debts generally as they become due or is not generally paying its
debts as they become due; or (v) Holdings, the Borrower or any of
their Subsidiaries shall take any action in furtherance of any of the
aforesaid purposes.
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this Credit
Agreement) of Holdings, the Borrower or any of their Subsidiaries in a
principal amount in excess of $1,000,000, including, without
limitation, the Subordinated Debt (i) a Credit Party or any of its
Subsidiaries shall (A) default in any payment (beyond the applicable
grace period with respect thereto, if any) with respect to any such
Indebtedness, or (B) default (after giving effect to any applicable
grace period) in the observance or performance relating to such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event or condition shall
occur or condition exist, the effect of which default or other event
or condition is to cause, or permit, the holder or holders of such
Indebtedness (or trustee or agent on behalf of such holders) to cause
(determined without regard to whether any notice or lapse of time is
required) any such Indebtedness to become due prior to its stated
maturity; or (ii) any such Indebtedness shall be declared due and
payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof.
(h) Judgments. One or more judgments, orders, or decrees
shall be entered against any one or more of Holdings, the Borrower or
any of their Subsidiaries involving
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a liability of $1,000,000 or more, in the aggregate, (to the extent
not paid or covered by insurance provided by a carrier who has
acknowledged coverage) and such judgments, orders or decrees shall
continue unsatisfied, undischarged and unstayed for a period ending on
the first to occur of (i) the last day on which such judgment, order
or decree becomes final and unappealable or (ii) 60 days.
(i) ERISA. Any of the following events or conditions
which is the aggregate would have a Material Adverse Effect: (1) any
"accumulated funding deficiency," as such term is defined in Section
302 of ERISA and Section 412 of the Code, whether or not waived, shall
exist with respect to any Plan, or any lien shall arise on the assets
of a Credit Party or any of its Subsidiaries or any ERISA Affiliate in
favor of the PBGC or a Plan; (2) a Termination Event shall occur with
respect to a Single Employer Plan, which is the termination of such
Plan for purposes of Title IV of ERISA; (3) a Termination Event shall
occur with respect to a Multiemployer Plan or Multiple Employer Plan,
which is (i) the termination of such Plan for purposes of Title IV of
ERISA, or (ii) a Credit Party or any of its Subsidiaries or any ERISA
Affiliate incurring liability in connection with a withdrawal from,
reorganization of (within the meaning of Section 4241 of ERISA), or
insolvency of (within the meaning of Section 4245 of ERISA) such Plan;
or (4) any prohibited transaction (within the meaning of Section 406
of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility shall occur which subjects Borrower or any of its
Subsidiaries to any liability under Sections 406, 409, 502(i), or
502(l) of ERISA or Section 4975 of the Code, or under any agreement or
other instrument pursuant to which a Credit Party or any of its
Subsidiaries has agreed or is required to indemnify any person against
any such liability; or
(j) Ownership. There shall occur a Change of Control; or
(k) Subordinated Debt. The holders of the Subordinated
Notes or the holders of the Holdings Debentures assert in a legal
proceeding (or any Governmental Authority with applicable jurisdiction
determines) that the Lenders are not either (i) holders of Senior
Indebtedness (as defined in the Subordinated Notes) or (ii) holders of
Senior Obligations (as defined in the Holdings Debentures), as
applicable.
10.2 Acceleration; Remedies. Upon the occurrence of an Event of
Default, and at any time thereafter unless and until such Event of Default has
been waived by the Required Lenders or cured to the satisfaction of the
Required Lenders, the Agent shall, upon the request and direction of the
Required Lenders, by written notice to the Borrower take any of the following
actions without prejudice to the rights of the Agent or any Lender to enforce
its claims against the Credit Parties, except as otherwise specifically
provided for herein:
(i) Termination of Commitments. Declare
the Commitments terminated whereupon the Commitments shall be
immediately terminated.
(ii) Acceleration of Loans. Declare the
unpaid principal of and any accrued interest in respect of
all Loans and any and all other indebtedness or obligations of
any and every kind owing by the Borrower to any of the Lenders
hereunder to be due whereupon the same shall be immediately
due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the
Borrower.
(iii) Cash Collateral. Direct the
Borrower to pay (and the
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Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default under Section 10.1(f), it
will immediately pay) to the Agent additional cash, to be held
by the Agent, for the benefit of the applicable Lenders, in a
cash collateral account as additional security for the LOC
Obligations in respect of subsequent drawings under all then
outstanding Letters of Credit in an amount equal to the
maximum aggregate amount which may be drawn under all Letters
of Credits then outstanding.
(iv) Enforcement of Rights. Enforce any
and all rights and interests created and existing under the
Credit Documents, including, without limitation, all rights
and remedies existing under the Collateral Documents, all
rights and remedies against a Guarantor and all rights of
set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
10.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations under Letters of Credit, all accrued
interest in respect thereof, all accrued and unpaid fees and other indebtedness
or obligations owing to the Lenders hereunder shall immediately become due and
payable without the giving of any notice or other action by the Agent or the
Lenders.
SECTION 11
AGENCY PROVISIONS
11.1 Appointment. Each Lender hereby designates and appoints
NationsBank, N.A. as agent of such Lender to act as specified herein and the
other Credit Documents, and each such Lender hereby authorizes the Agent, as
the agent for such Lender, to take such action on its behalf under the
provisions of this Credit Agreement and the other Credit Documents and to
exercise such powers and perform such duties as are expressly delegated by the
terms hereof and of the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere herein and in the other Credit Documents, the Agent shall
not have any duties or responsibilities, except those expressly set forth
herein and therein, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Credit Agreement or any of the other
Credit Documents, or shall otherwise exist against the Agent. The provisions
of this Section are solely for the benefit of the Agent and the Lenders and
none of the Credit Parties shall have any rights as a third party beneficiary
of the provisions hereof. In performing its functions and duties under this
Credit Agreement and the other Credit Documents, the Agent shall act solely as
agent of the Lenders and does not assume and shall not be deemed to have
assumed any obligation or relationship of agency or trust with or for the
Borrower or any other Credit Party.
11.2 Delegation of Duties. The Agent may execute any of its duties
hereunder or under the other Credit Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
11.3 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall
be (a) liable for any action lawfully taken or omitted to be taken by it or
such Person under or in connection herewith or in connection with
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any of the other Credit Documents (except for its or such Person's own gross
negligence or willful misconduct), or (b) responsible in any manner to any of
the Lenders for any recitals, statements, representations or warranties made by
any of the Credit Parties contained herein or in any of the other Credit
Documents or in any certificate, report, statement or other document referred
to or provided for in, or received by the Agent under or in connection herewith
or in connection with the other Credit Documents, or enforceability or
sufficiency therefor of any of the other Credit Documents, or for any failure
of the Borrower to perform its obligations hereunder or thereunder. The Agent
shall not be responsible to any Lender for the effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Credit
Agreement, or any of the other Credit Documents or for any representations,
warranties, recitals or statements made herein or therein or made by the
Borrower or any Credit Party in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made by the Agent to
the Lenders or by or on behalf of the Credit Parties to the Agent or any
Lender or be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained herein or therein or as to the use of the proceeds of the Loans or of
the existence or possible existence of any Default or Event of Default or to
inspect the properties, books or records of the Credit Parties. The Agent is
not a trustee for the Lenders and owes no fiduciary duty to the Lenders.
11.4 Reliance on Communications. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower or any of the other Credit Parties, independent accountants and other
experts selected by the Agent with reasonable care). The Agent may deem and
treat the Lenders as the owner of its interests hereunder for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Agent in accordance with Section 12.3(b) hereof. The
Agent shall be fully justified in failing or refusing to take any action under
this Credit Agreement or under any of the other Credit Documents unless it
shall first receive such advice or concurrence of the Required Lenders as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
or under any of the other Credit Documents in accordance with a request of the
Required Lenders (or to the extent specifically provided in Section 12.6, all
the Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders (including their successors and
assigns).
11.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or a Credit Party
referring to the Credit Document, describing such Default or Event of Default
and stating that such notice is a "notice of default." In the event that the
Agent receives such a notice, the Agent shall give prompt notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders.
Subsequent to an Event of Default, the Agent shall, if requested by a Lender,
conduct a phase I environmental audit, and, where necessary, a phase II
environmental audit on any parcel of real estate owned by a Credit Party prior
to proceeding with foreclosing on any real property of a Credit Party or
exercising voting rights or other remedies with respect to any Pledged Shares.
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11.6 Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent or any
affiliate thereof hereinafter taken, including any review of the affairs of the
Borrower, shall be deemed to constitute any representation or warranty by the
Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, assets, operations,
property, financial and other conditions, prospects and creditworthiness of the
Borrower and made its own decision to make its Loans hereunder and enter into
this Credit Agreement. Each Lender also represents that it will, independently
and without reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Credit Agreement, and to make such investigation as it deems
necessary to inform itself as to the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Borrower.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial or
other conditions, prospects or creditworthiness of the Borrower which may come
into the possession of nor the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
11.7 Indemnification. The Lenders agree to indemnify the Agent in
its capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to its
Commitments, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following the payment of the Credit Party Obligations) be imposed on,
incurred by or asserted against the Agent in its capacity as such in any way
relating to or arising out of this Credit Agreement or the other Credit
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided that
no Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent. If any indemnity furnished to the Agent for any
purpose shall, in the opinion of the Agent, be insufficient or become
impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished. The agreements in this Section shall survive the payment of the
Obligations and all other amounts payable hereunder and under the other Credit
Documents.
11.8 Agent in Its Individual Capacity. The Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower or any other Credit Party as though the
Agent were not Agent hereunder. With respect to the Loans made and all
Obligations owing to it, the Agent shall have the same rights and powers under
this Credit Agreement as any Lender and may exercise the same as though they
were not Agent, and the terms "Lender" and "Lenders" shall include the Agent in
their individual capacity.
11.9 Successor Agent. The Agent may, at any time, resign upon 20
days written notice to the Lenders. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Agent. If no successor
Agent shall have been so appointed by the Required Lenders,
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and shall have accepted such appointment, within 30 days after the notice of
resignation, then the retiring Agent shall select a successor Agent provided
such successor is a Lender hereunder or a commercial bank organized under the
laws of the United States of America or of any State thereof and has a combined
capital and surplus of at least $400,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations as Agent, as appropriate, under this Credit
Agreement and the other Credit Documents and the provisions of this Section
11.9 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Credit Agreement.
SECTION 12
MISCELLANEOUS
12.1 Notices. Except as otherwise expressly provided herein, all
notices and other communications shall have been duly given and shall be
effective (i) when delivered, (ii) when transmitted via telecopy (or other
facsimile device) to the number set out below, (iii) the Business Day following
the day on which the same has been delivered prepaid to a reputable national
overnight air courier service, or (iv) the third Business Day following the day
on which the same is sent by certified or registered mail, postage prepaid, in
each case to the respective parties at the address or telecopy numbers set
forth on Schedule 12.1, or at such other address as such party may specify by
written notice to the other parties hereto.
12.2 Right of Set-Off. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default and the commencement of
remedies described in Section 10.2 hereof, each Lender is authorized at any
time and from time to time, without presentment, demand, protest or other
notice of any kind (all of which rights being hereby expressly waived), to
set-off and to appropriate and apply any and all deposits (general or special)
and any other indebtedness at any time held or owing by such Lender (including,
without limitation branches, agencies or Affiliates of such Lender wherever
located) to or for the credit or the account of the Borrower or any other
Credit Party against obligations and liabilities of the Borrower or any other
Credit Party to the Lenders hereunder, under the Notes, the other Credit
Documents or otherwise, irrespective of whether the Agent or the Lenders shall
have made any demand hereunder and although such obligations, liabilities or
claims, or any of them, may be contingent or unmatured, and any such set-off
shall be deemed to have been made immediately upon the occurrence of an Event
of Default even though such charge is made or entered on the books of such
Lender subsequent thereto. The Credit Parties hereby agree that any Person
purchasing a participation in the Loans and Commitments hereunder pursuant to
Section 12.3(c) may exercise all rights of set-off with respect to its
participation interest as fully as if such Person were a Lender hereunder.
12.3 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided that the
Borrower may not assign and transfer any of its interests without
prior written consent of the Lenders; and provided further that the
rights of each Lender to transfer, assign or grant participations in
its rights and/or obligations hereunder shall be limited as set forth
in this Section 12.3. Notwithstanding the above, nothing herein shall
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prevent or prohibit any Lender from (i) pledging its Loans hereunder
to a Federal Reserve Bank in support of borrowings made by such Lender
from such Federal Reserve Bank, or (ii) granting assignments or
participation in such Lender's Loans and/or Commitments hereunder to
its parent company and/or to any Affiliate of such Lender.
(b) Assignments. Each Lender may, with the prior written
consent of the Borrower, each Issuing Lender (subject to the
limitations set forth below) and the Agent (provided that no consent
shall be required during the existence and continuation of an Event of
Default), which consent shall not be unreasonably withheld or delayed
(it being understood that the Borrower may refuse to consent to an
assignment to a potential competitor of the Borrower), assign all or a
portion of its rights and obligations hereunder pursuant to an
assignment agreement substantially in the form of Exhibit 12.3 to one
or more Eligible Assignees; provided that (i) any such assignment
shall be in a minimum aggregate amount of $5,000,000 of the
Commitments and in integral multiples of $1,000,000 (or the remaining
amount of Commitments held by such Lender) above such amount and (ii)
each such assignment shall be of a constant, not varying, percentage
of all of the assigning Lender's rights and obligations under the
Commitment being assigned. Any assignment hereunder shall be
effective only upon satisfaction of the conditions set forth above,
recordation of such assignment in the Register (as defined in (d)
below) and delivery to the Agent of a duly executed assignment
agreement together with a transfer fee of $3,500 payable to the Agent
for its own account. The consent of an Issuing Lender hereunder shall
only be required in connection with an assignment of all or a portion
of the Revolving Committed Amount or the Stand Alone LOC Committed
Amount, as applicable, and each Issuing Lender hereby agrees it will
consent to any assignee that is a commercial bank that (A) is rated
B/C or better by the Thompson Bankwatch and (B) has assets in excess
of $1,000,000,000. Upon the effectiveness of any such assignment, the
assignee shall become a "Lender" for all purposes of this Credit
Agreement and the other Credit Documents and, to the extent of such
assignment, the assigning Lender shall be relieved of its obligations
hereunder to the extent of the Loans and Commitment components being
assigned. Along such lines the Borrower agrees that upon notice of
any such assignment and surrender of the appropriate Note or Notes, it
will promptly provide to the assigning Lender and to the assignee
separate promissory notes in the amount of their respective interests
substantially in the form of the original Note or Notes (but with
notation thereon that it is given in substitution for and replacement
of the original Note or Notes or any replacement notes thereof).
(c) Participations. Each Lender may sell, transfer,
grant or assign participations in all or any part of such Lender's
interests and obligations hereunder; provided that (i) such selling
Lender shall remain a "Lender" for all purposes under this Credit
Agreement (such selling Lender's obligations under the Credit
Documents remaining unchanged) and the participant shall not
constitute a Lender hereunder, (ii) no such participant shall have, or
be granted, rights to approve any amendment or waiver relating to this
Credit Agreement or the other Credit Documents except to the extent
any such amendment or waiver would (A) reduce the principal of or rate
of interest on or fees in respect of any Loans in which the
participant is participating, (B) postpone the date fixed for any
payment of principal (including extension of the Termination Date),
interest or fees in which the participant is participating, or (C)
release all or substantially all of the collateral or guaranties
(except as expressly provided in the Credit Documents) supporting any
of the Loans or Commitments in which the participant is participating,
(iii) sub-participations by the participant (except to an Affiliate,
parent company or Affiliate of a parent company of the participant)
shall be prohibited and (iv) any such participations
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<PAGE> 80
shall be in a minimum aggregate amount of $2,000,000 of the
Commitments and in integral multiples of $500,000 in excess thereof.
In the case of any such participation, the participant shall not have
any rights under this Credit Agreement or the other Credit Documents
(the participant's rights against the selling Lender in respect of
such participation to be those set forth in the participation
agreement with such Lender creating such participation) and all
amounts payable by the Borrower hereunder shall be determined as if
such Lender had not sold such participation; provided, however, that
such participant shall be entitled to receive additional amounts under
Section 4.6 and 12.2 to the same extent that the Lender from which
such participant acquired its participation would be entitled to the
benefit of such cost protection provisions.
(d) Registration. The Agent, acting for this purpose
solely on behalf of the Borrower, shall maintain a register (the
"Register") for the recordation of the names and addresses of the
Lenders and the principal amount of the Loans owing to each Lender
from time to time. The entries in the Register shall be conclusive,
in the absence of manifest error, and the Borrower, the Agent and the
Lenders shall treat each Person whose name is recorded in the Register
as the owner of a Loan or other obligation hereunder for all purposes
of this Agreement and the other Credit Documents, notwithstanding
notice to the contrary. Any assignment of any Loan or other
obligation hereunder shall be effective only upon appropriate entries
with respect thereto being made in the Register. The Register shall
be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
12.4 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Agent or any Lender in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
the Borrower or any Credit Party and the Agent or any Lender shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies provided herein are
cumulative and not exclusive of any rights or remedies which the Agent or any
Lender would otherwise have. No notice to or demand on the Borrower in any
case shall entitle the Borrower or any Credit Party to any other or further
notice or demand in similar or other circumstances or constitute a waiver of
the rights of the Agent or the Lenders to any other or further action in any
circumstances without notice or demand.
12.5 Payment of Expenses; Indemnification. The Credit Parties
agree to: (i) pay all reasonable out-of-pocket costs and expenses of the Agent
and the Issuing Lenders in connection with the negotiation, preparation,
execution and delivery and administration of this Credit Agreement and the
other Credit Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees and expenses of Moore & Van
Allen, special counsel to the Agent, the fees and expenses of counsel in
connection with collateral or foreign issues and the fees and expenses of
counsel to the Issuing Lenders in connection with the amendments to the
Existing Letters of Credit), and any amendment, waiver or consent relating
hereto and thereto including, but not limited to, any amendments, waivers or
consents resulting from or related to any renegotiation or restructure relating
to the performance by the Borrower under this Credit Agreement and of the Agent
and the Lenders (during the existence of an Event of Default) in connection
with any work-out situation or enforcement of the Credit Documents and the
documents and instruments referred to therein and the protection of rights
thereunder (including, without limitation, in connection with any such
work-out, enforcement or protection, the reasonable fees and disbursements of
counsel for the Agent and each of the Lenders) and (ii) indemnify each Lender,
its officers, directors, employees, representatives and agents from and hold
each of them harmless against any and all losses, liabilities, claims, damages
or expenses
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incurred by any of them as a result of, or arising out of, or in any way
related to, or by reason of, any investigation, litigation or other proceeding
(whether or not any Lender is a party thereto) related to (A) the entering into
and/or performance of any Credit Document or the use of proceeds of any Loans
(including other extensions of credit) hereunder or the consummation of any
other transactions contemplated in any Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of gross negligence or willful misconduct on the part
of the Person to be indemnified) (B) any Environmental Claim and (C) any claims
for Taxes and Non-Excluded Taxes.
12.6 Amendments, Waivers and Consents. Neither this Credit
Agreement nor any other Credit Document nor any of the terms hereof or thereof
may be amended, changed, waived, discharged or terminated unless such
amendment, change, waiver, discharge or termination is in writing signed by the
Required Lenders; provided that no such amendment, change, waiver, discharge or
termination shall, without the consent of each Lender, (a) extend the scheduled
maturities (including the final maturity) or any Principal Amortization
Payments of any Loan, or any portion thereof, or reduce the rate or extend the
time of payment of interest (other than as a result of waiving the
applicability of any post-default increase in interest rates) thereon or fees
hereunder or reduce the principal amount thereof, or (other than as
contemplated pursuant to Section 9.1(f) hereof) increase the Commitments of the
Lenders or any individual Lender over the amount thereof in effect (it being
understood and agreed that a waiver of any Default or Event of Default shall
not constitute a change in the terms of any Commitment of any Lender), (b)
release all or substantially all of the Collateral securing the Credit Party
Obligations hereunder, (c) release the Borrower or substantially all of the
other Credit Parties from its obligations under the Credit Documents, (d)
amend, modify or waive any provision of this Section or Section 3.6, 3.8, 3.9,
4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 6.2, 10.1(a), 12.2, 12.3 or 12.5 hereof, (e)
reduce any percentage specified in, or otherwise modify, the definition of
Required Lenders, or (f) allow the assignment or transfer by the Borrower (or
another Credit Party) of any of its rights and obligations under (or in respect
of) the Credit Documents except as permitted by Section 9.4 hereof. No
amendment, change, waiver, discharge or termination shall, without the consent
of Lenders holding in the aggregate at least 51% of the outstanding Tranche A
Term Loans, extend the time for, or the amount or the manner of application of
proceeds of, any mandatory prepayment required by Section 3.2(b)(ii), (iii) or
(iv). No provision of Section 11 may be amended without the consent of the
Agent.
12.7 Counterparts. This Credit Agreement may be executed in any
number of counterparts, each of which where so executed and delivered shall be
an original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Credit Agreement to produce or
account for more than one such counterpart.
12.8 Headings. The headings of the sections and subsections hereof
are provided for convenience only and shall not in any way affect the meaning
or construction of any provision of this Credit Agreement.
12.9 Defaulting Lender. Each Lender understands and agrees that if
such Lender is a Defaulting Lender then it shall not be entitled to vote on any
matter requiring the consent of the Required Lenders or to object to any matter
requiring the consent of all the Lenders; provided, however, that all other
benefits and obligations under the Loan Documents shall apply to such
Defaulting Lender.
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12.10 Survival of Indemnification and Representations and Warranties.
All indemnities set forth herein and all representations and warranties made
herein shall survive the execution and delivery of this Credit Agreement, the
making of the Loans, and the repayment of the Loans and other obligations and
the termination of the Commitments hereunder.
12.11 Governing Law; Venue.
(a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL
BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. Any legal action or proceeding with
respect to this Agreement or any other Credit Document may be brought
in the courts of the State of North Carolina, or of the United States
for the Western District of North Carolina, and, by execution and
delivery of this Credit Agreement, each Credit Party hereby
irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of such courts. Each
Credit Party further irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to it at the address for notices pursuant to
Section 12.1, such service to become effective 30 days after such
mailing. Nothing herein shall affect the right of a Lender to serve
process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against a Credit Party in any
other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in
connection with this Agreement or any other Credit Document brought in
the courts referred to in subsection (a) hereof and hereby further
irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
12.12 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE OTHER
CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
12.13 Time. All references to time herein shall be references to
Eastern Standard Time or Eastern Daylight time, as the case may be, unless
specified otherwise.
12.14 Severability. If any provision of any of the Credit Documents is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
12.15 Binding Effect; Termination of Original Credit Agreement; Release
of Foreign Subsidiary Guarantors and Collateral. This Credit Agreement shall
become effective at such time, on or after the Closing Date, that the
conditions precedent set forth in Section 6.1 have been satisfied and when it
shall have been executed by each of the Credit Parties and the Agent,
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<PAGE> 83
and the Agent shall have received copies hereof (telefaxed or otherwise) which,
when taken together, bear the signatures of each Lender (including the Issuing
Lender), and thereafter this Credit Agreement shall be binding upon and inure
to the benefit of each Credit Party, each Lender (including the Issuing Lender)
and the Agent, together with their respective successors and assigns. The
Credit Parties and the Lenders (including the Issuing Lender) party to the
Original Credit Agreement each hereby agrees that, at such time as this Credit
Agreement shall have become effective pursuant to the terms of the immediately
preceding sentence, (a) the Original Credit Agreement automatically shall be
deemed amended and restated in its entirety by this Credit Agreement, (b) the
Commitments under the Original Credit Agreement (as defined therein)
automatically shall be terminated and the lenders party to the original Credit
Agreement shall no longer have any obligations thereunder, (c) all of the
promissory notes executed by the Borrower in connection with the Original
Credit Agreement automatically shall be canceled, and the Lenders agree to
promptly return such notes to the Borrower, (d) Ivex Corporation, Kama Europe
Limited, Ivex Holding, Ltd., M&R Plastics Inc., M&R Plastics Canada Inc. and
2528-5347 Quebec, Inc. automatically shall be released as Guarantors under the
Original Credit Agreement, and (e) the Liens on the personal property and real
estate owned by Ivex Corporation in Canada shall automatically be released.
The Lenders authorize the Agent to execute such releases as may be necessary to
give effect to this Section 12.15.
12.16 Entirety. This Credit Agreement together with the other Credit
Documents represent the entire agreement of the parties hereto and thereto, and
supersede all prior agreements and understandings, oral or written, if any,
including any commitment letters or correspondence relating to the Credit
Documents or the transactions contemplated herein and therein.
[Remainder of page intentionally left blank]
<PAGE> 84
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
BORROWER:
IPC, INC.
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
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<PAGE> 85
GUARANTORS: IVEX PACKAGING CORPORATION
a Delaware corporation
IVEX PAPER MILL CORPORATION
a Delaware corporation
IPMC HOLDING CORPORATION
a Delaware corporation
IPMC, INC.
a Delaware corporation
VALLEY EXPRESS LINES, INC.
a Delaware corporation
KAMA OF ILLINOIS CORPORATION
a Delaware corporation
PACKAGING PRODUCTS, INC.
a Delaware corporation
CFI INDUSTRIES, INC.
a Delaware corporation
CFI RECYCLING, INC.
a Delaware corporation
PLASTOFILM INDUSTRIES, INC.
a Delaware corporation
TRIO PRODUCTS, INC.
a Delaware corporation
By:____________________________
Name: Richard R. Cote
Title: Vice President and Treasurer
of each of the above named Guarantors
<PAGE> 86
LENDERS: NATIONSBANK, N.A.,
individually in its capacity as a
Lender and in its capacity as Agent
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 87
BANKERS TRUST COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 88
GENERAL ELECTRIC CAPITAL COMME
FINANCE
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 89
SOCIETE GENERALE, SOUTHWEST AGENCY
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 90
BANQUE PARIBAS
By:__________________________________
Name:________________________________
Title:_______________________________
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 91
ABN AMRO BANK N.A.
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 92
FIRST NATIONAL BANK OF BOSTON
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 93
FIRST BANK NATIONAL ASSOCIATION
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 94
IMPERIAL BANK
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 95
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 96
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 97
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as
Investment Advisor
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE> 1
EXHIBIT 10.37
AMENDED AND RESTATED
PLEDGE AGREEMENT
THIS AMENDED AND RESTATED PLEDGE AGREEMENT, dated as of March 24, 1997
(this "Pledge Agreement"), amends and restates that certain Amended and Restated
Pledge Agreement entered into as of September 16, 1996 among IPC, INC., a
Delaware corporation (the "Borrower"), IVEX PACKAGING CORPORATION, a Delaware
corporation ("Holdings"), certain Subsidiaries of the Borrower party thereto
(the "Prior Guarantors") and NATIONSBANK, N.A., in its capacity as agent (in
such capacity, the "Agent") for the lenders from time to time party to the
Original Credit Agreement described below (the "Prior Lenders").
RECITALS
WHEREAS, the Borrower, Holdings, the Prior Guarantors, the Prior Lenders
and the Agent entered into that certain Credit Agreement, dated as of December
7, 1995 (as amended and/or modified from time to time thereafter, the "Original
Credit Agreement");
WHEREAS, the Original Credit Agreement has been amended and restated
pursuant to that certain Amended and Restated Credit Agreement, dated as of the
date hereof (as amended, modified, extended, renewed or replaced from time to
time, the "Credit Agreement"), among the Borrower, Holdings, the Domestic
Subsidiaries of the Borrower party thereto (such Domestic Subsidiaries, together
with Holdings, individually a "Guarantor" and collectively the "Guarantors"),
the lenders from time to time party thereto (the "Lenders") and the Agent; and
WHEREAS, the Lenders have required that the Borrower and the Guarantors
(the Guarantors together with the Borrower, individually a "Pledgor", and
collectively the "Pledgors") secure or resecure, as applicable, their respective
obligations under the Credit Agreement and the other Credit Documents in
accordance with the terms of this Pledge Agreement.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein but not otherwise defined
shall have the meanings ascribed to such terms in the Credit Agreement.
2. Pledge and Grant of Security Interest. To secure the prompt payment
and performance in full when due, whether by lapse of time or otherwise, of the
Pledgor Obligations (as defined in Section 3 hereof), each Pledgor hereby
pledges and assigns to the Agent, for the benefit of the Lenders, and grants to
the Agent, for the benefit of the Lenders, a continuing security interest in any
and all right, title and interest of such Pledgor in and to the following,
whether now owned or existing or owned, acquired, or arising hereafter
(collectively, the "Pledged Collateral"):
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(a) Pledged Shares. (i) 100% (or, if less, the full amount owned by
such Pledgor) of the issued and outstanding shares of capital stock owned
by such Pledgor of each Domestic Subsidiary (as set forth on Schedule 2(a)
attached hereto) and (ii) 65% (or, if less, the full amount owned by such
Pledgor) of the issued and outstanding shares of each class of capital
stock or other ownership interests entitled to vote (within the meaning of
Treas. Reg. Section 1.956-2(c)(2)) ("Voting Equity") and 100% (or, if less,
the full amount owned by such Pledgor) of the issued and outstanding shares
of each class of capital stock or other ownership interests not entitled to
vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) ("Non-Voting
Equity") owned by such Pledgor of each first-tier Foreign Subsidiary (as
set forth on Schedule 2(a) attached hereto), in each case together with the
certificates (or other agreements or instruments), if any, representing
such shares, and all options and other rights, contractual or otherwise,
with respect thereto (collectively, together with the shares of capital
stock described in Section 2(b) and 2(c) below, the "Pledged Shares"),
including, but not limited to, the following:
(y) all shares or securities representing a dividend on any of
the Pledged Shares, or representing a distribution or return of
capital upon or in respect of the Pledged Shares, or resulting from a
stock split, revision, reclassification or other exchange therefor,
and any subscriptions, warrants, rights or options issued to the
holder of, or otherwise in respect of, the Pledged Shares; and
(z) without affecting the obligations of such Pledgor under any
provision prohibiting such action hereunder, in the event of any
consolidation or merger in which a Pledgor is not the surviving
corporation, all shares of each class of the capital stock of the
successor corporation formed by or resulting from such consolidation
or merger.
(b) Additional Shares. 100% (or, if less, the full amount owned by
such Pledgor) of the issued and outstanding shares of capital stock owned
by such Pledgor of any Person which hereafter becomes a Domestic Subsidiary
and 65% (or, if less, the full amount owned by such Pledgor) of the Voting
Equity and 100% (or, if less, the full amount owned by such Pledgor) of the
Non-Voting Equity owned by such Pledgor of any Person which hereafter
becomes a first-tier Foreign Subsidiary, including, without limitation, the
certificates representing such shares.
(c) Other Equity Interests. Any and all other equity interests of
each Pledgor in any Domestic Subsidiary or any first-tier Foreign
Subsidiary.
(d) Proceeds. All proceeds and products of the foregoing, however
and whenever acquired and in whatever form.
Without limiting the generality of the foregoing, it is hereby specifically
understood and agreed that a Pledgor may from time to time hereafter deliver
additional shares of stock to the Agent as collateral security for the Pledgor
Obligations. Upon delivery to the Agent, such additional
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shares of stock shall be deemed to be part of the Pledged Collateral of such
Pledgor and shall be subject to the terms of this Pledge Agreement whether or
not Schedule 2(a) is amended to refer to such additional shares.
3. Security for Pledgor Obligations. The security interest created
hereby in the Pledged Collateral of each Pledgor constitutes continuing
collateral security for all of the following, whether now existing or hereafter
incurred (the "Pledgor Obligations"):
(a) In the case of the Borrower, the prompt performance and
observance by the Borrower of all obligations of the Borrower under the
Credit Agreement, the Notes, this Pledge Agreement and the other Credit
Documents to which the Borrower is a party;
(b) In the case of the Guarantors, the prompt performance and
observance by such Guarantor of all obligations of such Guarantor under the
Credit Agreement, this Pledge Agreement and the other Credit Documents to
which such Guarantor is a party, including, without limitation, its
guaranty obligations arising under Section 5 of the Credit Agreement; and
(c) Subject to subclause 25(c)(iii) hereof, all other indebtedness,
liabilities and obligations of any kind or nature owing from any Pledgor to
any Lender or the Agent in connection with (i) this Pledge Agreement or any
other Credit Document, whether now existing or hereafter arising, due or to
become due, direct or indirect, absolute or contingent, and howsoever
evidenced, held or acquired, together with any and all modifications,
extensions, renewals and/or substitutions of any of the foregoing, (ii)
collecting and enforcing the Credit Party Obligations and (iii) liabilities
arising under interest rate protection agreements entered into pursuant to
the Credit Agreement.
4. Delivery of the Pledged Collateral. Each Pledgor hereby agrees that:
(a) Each Pledgor shall deliver to the Agent (i) simultaneously with
or prior to the execution and delivery of this Pledge Agreement, all
certificates representing the Pledged Shares of such Pledgor and (ii)
promptly upon the receipt thereof by or on behalf of a Pledgor, all other
certificates and instruments constituting Pledged Collateral of a Pledgor.
Prior to delivery to the Agent, all such certificates and instruments
constituting Pledged Collateral of a Pledgor shall be held in trust by such
Pledgor for the benefit of the Agent pursuant hereto. All such
certificates shall be delivered in suitable form for transfer by delivery
or shall be accompanied by duly executed instruments of transfer or
assignment in blank, in form provided in Schedule 4(a) attached hereto.
(b) Additional Securities. If such Pledgor shall receive by virtue
of its being or having been the owner of any Pledged Collateral, any (i)
stock certificate, including without limitation, any certificate
representing a stock dividend or distribution in connection with any
increase or reduction of capital, reclassification, merger, consolidation,
sale of assets, combination of shares, stock splits, spin-off or split-off,
promissory notes or other instrument; (ii) option or right, whether as an
addition to,
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substitution for, or an exchange for, any Pledged Collateral or otherwise;
(iii) dividends payable in securities; or (iv) distributions of securities
in connection with a partial or total liquidation, dissolution or reduction
of capital, capital surplus or paid-in surplus, then such Pledgor shall
receive such stock certificate, instrument, option, right or distribution
in trust for the benefit of the Agent, shall segregate it from such
Pledgor's other property and shall deliver it forthwith to the Agent in the
exact form received together with any necessary endorsement and/or
appropriate stock power duly executed in blank in the form provided in
Schedule 4(a), to be held by the Agent as Pledged Collateral and as further
collateral security for the Pledgor Obligations.
(c) Financing Statements. Each Pledgor shall execute and deliver to
the Agent such UCC or other applicable financing statements as may be
reasonably requested by the Agent in order to perfect and protect the
security interest created hereby in the Pledged Collateral of such Pledgor.
5. Representations and Warranties. Each Pledgor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Pledgor Obligations remain outstanding or any Credit Document is in effect
or any Letter of Credit shall remain outstanding, and until all of the
Commitments shall have been terminated:
(a) Authorization of Pledged Shares. The Pledged Shares are duly
authorized and validly issued, are fully paid and nonassessable and are not
subject to the preemptive rights of any Person. All other shares of stock
constituting Pledged Collateral will be duly authorized and validly issued,
fully paid and nonassessable and not subject to the preemptive rights of
any Person.
(b) Title. Each Pledgor has good and indefeasible title to the
Pledged Collateral of such Pledgor and will at all times be the legal and
beneficial owner of such Pledged Collateral free and clear of any Lien,
except for the security interest created by this Pledge Agreement and other
Permitted Liens. There exists no "adverse claim" within the meaning of
Section 8-302 of the Uniform Commercial Code as in effect in the State of
New York (the "UCC") with respect to the Pledged Shares of such Pledgor.
(c) Exercising of Rights. The exercise by the Agent of its rights
and remedies hereunder will not violate any law or governmental regulation
or any material contractual restriction binding on or affecting a Pledgor
or any of its property.
(d) Pledgor's Authority. No authorization, approval or action by,
and no notice or filing with any Governmental Authority or with the issuer
of any Pledged Stock is required either (i) for the pledge made by a
Pledgor or for the granting of the security interest by a Pledgor pursuant
to this Pledge Agreement; or (ii) for the exercise by the Agent or the
Lenders of their rights and remedies hereunder (except as may be required
by laws affecting the offering and sale of securities).
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(e) Security Interest/Priority. This Pledge Agreement creates a
valid security interest in favor of the Agent for the benefit of the
Lenders, in the Pledged Collateral. The taking possession by the Agent of
the certificates representing the Pledged Shares and all other certificates
and instruments constituting Pledged Collateral will perfect and establish
the first priority of the Agent's security interest in the Pledged Shares
and, when properly perfected by filing or registration, in all other
Pledged Collateral represented by such Pledged Shares and instruments
securing the Pledgor Obligations. Except as set forth in this Section
5(e), no action is necessary to perfect or otherwise protect such security
interest.
(f) No Other Shares. No Pledgor owns any shares of stock other than
as set forth on Schedule 2(a) attached hereto.
6. Covenants. Each Pledgor hereby covenants, that so long as any of the
Pledgor Obligations remain outstanding or any Credit Document is in effect
(other than any obligations with respect to the indemnities and the
representations and warranties set forth in the Credit Documents) or any Letter
of Credit shall remain outstanding, and until all of the Commitments shall have
been terminated, such Pledgor shall:
(a) Books and Records. Mark its books and records (and shall cause
the issuer of the Pledged Shares of such Pledgor to mark its books and
records) to reflect the security interest granted to the Agent, for the
benefit of the Lenders, pursuant to this Pledge Agreement.
(b) Defense of Title. Warrant and defend title to and ownership of
the Pledged Collateral of such Pledgor at its own expense against the
claims and demands of all other parties claiming an interest therein, keep
the Pledged Collateral free from all Liens, except for those created
hereunder and the security interest created hereby and except for Permitted
Liens, and not sell, exchange, transfer, assign, lease or otherwise dispose
of Pledged Collateral of such Pledgor or any interest therein, except as
permitted under the Credit Agreement and the other Credit Documents.
(c) Further Assurances. Promptly execute and deliver at its expense
all further instruments and documents and take all further action that may
be necessary and desirable or that the Agent may reasonably request in
order to (i) perfect and protect the security interest created hereby in
the Pledged Collateral of such Pledgor (including without limitation any
and all action necessary to satisfy the Agent that the Agent has obtained a
first priority perfected security interest in any other capital stock);
(ii) enable the Agent to exercise and enforce its rights and remedies
hereunder in respect of the Pledged Collateral of such Pledgor; and (iii)
otherwise effect the purposes of this Pledge Agreement, including, without
limitation and if requested by the Agent, delivering to the Agent
irrevocable proxies in respect of the Pledged Collateral of such Pledgor.
(d) Amendments. Not make or consent to any amendment or other
modification or waiver with respect to any of the Pledged Collateral of
such Pledgor or
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<PAGE> 6
enter into any agreement or allow to exist any restriction with respect to
any of the Pledged Collateral of such Pledgor other than pursuant hereto or
as may be permitted under the Credit Agreement.
(e) Compliance with Securities Laws. File all reports and other
information now or hereafter required to be filed by such Pledgor with the
United States Securities and Exchange Commission and any other state,
federal or foreign agency in connection with the ownership of the Pledged
Collateral of such Pledgor.
7. Advances by Lenders. On failure of any Pledgor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien, expenditures
made in defending against any adverse claim and all other expenditures which the
Agent or the Lenders may make for the protection of the security hereof or which
may be compelled to make by operation of law. All such sums and amounts so
expended shall be repayable by the Pledgors on a joint and several basis
(subject to Section 25 hereof) promptly upon timely notice thereof and demand
therefor, shall constitute additional Pledgor Obligations and shall bear
interest from the date said amounts are expended at the default rate provided in
Section 3.1(b) of the Credit Agreement for Revolving Loans that are Base Rate
Loans. No such performance of any covenant or agreement by the Agent or the
Lenders on behalf of any Pledgor, and no such advance or expenditure therefor,
shall relieve the Pledgors of any default under the terms of this Pledge
Agreement or the other Credit Documents. The Lenders may make any payment
hereby authorized in accordance with any bill, statement or estimate procured
from the appropriate public office or holder of the claim to be discharged
without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax assessment, sale, forfeiture, tax lien, title or claim
except to the extent such payment is being contested in good faith by a Pledgor
in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.
8. Events of Default. The occurrence of an event which under the Credit
Agreement would constitute an Event of Default shall be an Event of Default
hereunder (an "Event of Default").
9. Remedies Upon Default. If any Event of Default shall have occurred and
be continuing:
(a) Rights and Remedies. The Agent may exercise in respect of the
Pledged Collateral of any Pledgor, in addition to other rights and remedies
provided for herein or otherwise available to it, all rights and remedies
of a secured party on default under the UCC or any other applicable law.
(b) Sale of Pledged Collateral. Without limiting the generality of
this Section and without notice, the Agent may, in its sole discretion,
sell or otherwise dispose of or
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<PAGE> 7
realize upon the Pledged Collateral, or any part thereof, in one or more
parcels, at public or private sale, at any exchange or broker's board or
elsewhere, at such price or prices and on such other terms as the Agent may
deem commercially reasonable, for cash, credit or for future delivery or
otherwise in accordance with applicable law. To the extent permitted by
law, any Lender may in such event, bid for the purchase of such securities.
Each Pledgor agrees that, to the extent notice of sale shall be required by
law and has not been waived by such Pledgor, any requirement of reasonable
notice shall be met if notice, specifying the place of any public sale or
the time after which any private sale is to be made, is personally served
on or mailed, postage prepaid, to Holdings, on behalf of such Pledgor, in
accordance with the notice provisions of Section 12.1 of the Credit
Agreement at least 10 days before the time of such sale. The Agent shall
not be obligated to make any sale of Pledged Collateral of such Pledgor
regardless of notice of sale having been given. The Agent may adjourn any
public or private sale from time to time by announcement at the time and
place fixed therefore, and such sale may, without further notice, be made
at the time and place to which it was so adjourned.
(c) Private Sale. The Pledgors recognize that the Agent may deem it
impracticable to effect a public sale of all or any part of the Pledged
Shares or any of the securities constituting Pledged Collateral and that
the Agent may, therefore, determine to make one or more private sales of
any such securities to a restricted group of purchasers who will be
obligated to agree, among other things, to acquire such securities for
their own account, for investment and not with a view to the distribution
or resale thereof. Each Pledgor acknowledges that any such private sale
may be at prices and on terms less favorable to the seller than the prices
and other terms which might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Agent shall have no obligation to delay sale of any such securities for the
period of time necessary to permit the issuer of such securities to
register such securities for public sale under the Securities Act of 1933.
Each Pledgor further acknowledges and agrees that any offer to sell such
securities which has been (i) publicly advertised on a bona fide basis in a
newspaper or other publication of general circulation in the financial
community of New York, New York (to the extent that such offer may be
advertised without prior registration under the Securities Act of 1933), or
(ii) made privately in the manner described above shall be deemed to
involve a "public sale" under the UCC, notwithstanding that such sale may
not constitute a "public offering" under the Securities Act of 1933, and
the Agent may, in such event, bid for the purchase of such securities.
(d) Retention of Pledged Collateral. The Agent may, after providing
the notices required by Section 9-505(2) of the UCC or otherwise complying
with the requirements of applicable law of the relevant jurisdiction,
retain all or any portion of the Pledged Collateral in satisfaction of the
Pledgor Obligations. Unless and until the Agent shall have provided such
notices, however, the Agent shall not be deemed to have retained any
Pledged Collateral in satisfaction of any Pledgor Obligations for any
reason.
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<PAGE> 8
(e) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which the
Agent or the Lenders are legally entitled, the Pledgors shall be jointly
and severally liable (subject to Section 25 hereof) for the deficiency,
together with interest thereon at the default rate provided in Section
3.1(b) of the Credit Agreement for Revolving Loans that are Base Rate
Loans, together with the costs of collection and the reasonable fees of any
attorneys employed by the Agent to collect such deficiency. Any surplus
remaining after the full payment and satisfaction of the Pledgor
Obligations shall be returned to the Pledgors or to whomsoever a court of
competent jurisdiction shall determine to be entitled thereto.
10. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Pledgor hereby designates and appoints the Agent, on
behalf of the Lenders, and each of its designees or agents as
attorney-in-fact of such Pledgor, irrevocably and with power of
substitution, with authority to take any or all of the following actions
upon the occurrence and during the continuance of an Event of Default:
(i) to demand, collect, settle, compromise, adjust and give
discharges and releases concerning the Pledged Collateral of such
Pledgor, all as the Agent may reasonably determine;
(ii) to commence and prosecute any actions at any court for the
purposes of collecting any of the Pledged Collateral of such Pledgor
and enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action brought and, in
connection therewith, give such discharge or release as the Agent may
deem reasonably appropriate;
(iv) to pay or discharge taxes, liens, security interests, or
other encumbrances levied or placed on or threatened against the
Pledged Collateral of such Pledgor;
(v) to direct any parties liable for any payment under any of
the Pledged Collateral of such Pledgor to make payment of any and all
monies due and to become due thereunder directly to the Agent or as
the Agent shall direct;
(vi) to receive payment of and receipt for any and all monies,
claims, and other amounts due and to become due at any time in respect
of or arising out of any Pledged Collateral of such Pledgor;
(vii) to sign and endorse any drafts, assignments, proxies, stock
powers, verifications, notices and other documents relating to the
Pledged Collateral of such Pledgor;
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<PAGE> 9
(viii) to settle, compromise or adjust any suit, action or
proceeding described above and, in connection therewith, to give such
discharges or releases as the Agent may deem reasonably appropriate;
(ix) execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements, pledge
agreements, affidavits, notices and other agreements, instruments and
documents that the Agent reasonably may determine necessary in order
to perfect and maintain the security interests and liens granted in
this Pledge Agreement and in order to fully consummate all of the
transactions contemplated therein;
(ix) to exchange any of the Pledged Collateral or other property
upon any merger, consolidation, reorganization, recapitalization or
other readjustment of the issuer thereof and, in connection therewith,
deposit any of the Pledged Collateral of such Pledgor with any
committee, depository, transfer agent, registrar or other designated
agency upon such terms as the Agent may determine;
(xi) to vote for a shareholder resolution, or to sign an
instrument in writing, sanctioning the transfer of any or all of the
Pledged Shares of such Pledgor into the name of the Agent or one or
more of the Lenders or into the name of any transferee to whom the
Pledged Shares of such Pledgor or any part thereof may be sold
pursuant to Section 9 hereof; and
(xi) to do and perform all such other acts and things as the
Agent may reasonably deem to be necessary, proper or convenient in
connection with the Pledged Collateral of such Pledgor.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Pledgor Obligations remain
outstanding, any Credit Document is in effect (other than any obligations
with respect to the indemnities and the representations and warranties set
forth in the Credit Documents) or any Letter of Credit shall remain
outstanding and (ii) until all of the Commitments shall have been
terminated. The Agent shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges and options expressly or
implicitly granted to the Agent in this Pledge Agreement, and shall not be
liable for any failure to do so or any delay in doing so. The Agent shall
not be liable for any act or omission or for any error of judgment or any
mistake of fact or law in its individual capacity or its capacity as
attorney-in-fact except acts or omissions resulting from its gross
negligence or willful misconduct. This power of attorney is conferred on
the Agent solely to protect, preserve and realize upon its security
interest in Pledged Collateral.
(b) Performance by the Agent of Pledgor's Obligations. If any
Pledgor fails to perform any agreement or obligation contained herein,
after the occurrence and during the continuance of an Event of Default, the
Agent itself may perform, or cause performance
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<PAGE> 10
of, such agreement or obligation, and the expenses of the Agent incurred in
connection therewith shall be payable by the Pledgors on a joint and
several basis pursuant to Section 12 hereof.
(c) Assignment by the Agent. The Agent may from time to time assign
the Pledged Collateral and any portion thereof to another Person acting as
agent for the Lenders under the Credit Agreement, and the assignee shall be
entitled to all of the rights and remedies of the Agent under this Pledge
Agreement in relation thereto.
(d) The Agent's Duty of Care. Other than the exercise of reasonable
care to assure the safe custody of the Pledged Collateral while being held
by the Agent hereunder, the Agent shall have no duty or liability to
preserve rights pertaining thereto, it being understood and agreed that
Pledgors shall be responsible for preservation of all rights in the Pledged
Collateral of such Pledgor, and the Agent shall be relieved of all
responsibility for Pledged Collateral upon surrendering it or tendering the
surrender of it to the Pledgors. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded
treatment substantially equal to that which the Agent accords its own
property, which shall be no less than the treatment employed by a
reasonable and prudent agent in the industry, it being understood that the
Agent shall not have responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not the Agent has or
is deemed to have knowledge of such matters; or (ii) taking any necessary
steps to preserve rights against any parties with respect to any Pledged
Collateral.
(e) Voting Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default (as defined herein) shall
have occurred and be continuing, to the extent permitted by law, each
Pledgor may exercise any and all voting and other consensual rights
pertaining to the Pledged Collateral of such Pledgor or any part
thereof for any purpose not inconsistent with the terms of this Pledge
Agreement or the Credit Agreement; and
(ii) Upon the occurrence and during the continuance of an Event
of Default, all rights of a Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise
pursuant to paragraph (i) of this Section shall cease and all such
rights shall thereupon become vested in the Agent which shall
thereupon have the sole right to exercise such voting and other
consensual rights.
(f) Dividend Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have occurred and be
continuing and subject to Section 4(b) hereof, each Pledgor may
receive and
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<PAGE> 11
retain any and all dividends (other than stock dividends and other
dividends constituting Pledged Collateral which are addressed
hereinabove) or interest paid in respect of the Pledged Collateral to
the extent they are allowed under the Credit Agreement.
(ii) Upon the occurrence and during the continuance of an Event
of Default:
(A) all rights of a Pledgor to receive the dividends and
interest payments which it would otherwise be authorized to
receive and retain pursuant to paragraph (i) of this Section
shall cease and all such rights shall thereupon be vested in the
Agent which shall thereupon have the sole right to receive and
hold as Pledged Collateral such dividends and interest payments;
and
(B) all dividends and interest payments which are received
by a Pledgor contrary to the provisions of paragraph (A) of this
Section shall be received in trust for the benefit of the Agent,
shall be segregated from other property or funds of such Pledgor,
and shall be forthwith paid over to the Agent as Pledged
Collateral in the exact form received, to be held by the Agent as
Pledged Collateral and as further collateral security for the
Pledgor Obligations.
(g) Release of Pledged Collateral. The Agent may release any
of the Pledged Collateral from this Pledge Agreement or may substitute
any of the Pledged Collateral for other Pledged Collateral without
altering, varying or diminishing in any way the force, effect, lien,
pledge or security interest of this Pledge Agreement as to any Pledged
Collateral not expressly released or substituted, and this Pledge
Agreement shall continue as a first priority lien, security interest,
pledge and charge on all Pledged Collateral not expressly released or
substituted when any of the Pledgor Obligations remain outstanding
with respect to the Lenders.
11. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Pledgor
Obligations and any proceeds of any Pledged Collateral, when received by the
Agent or any of the Lenders in cash or its equivalent, will be applied in
reduction of the Pledgor Obligations in the order set forth in Section 3.7 of
the Credit Agreement, and each Pledgor irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
the Agent shall have the continuing and exclusive right to apply and reapply any
and all such payments and proceeds in the Agent's sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.
12. Costs of Counsel. At all times hereafter, the Pledgors agree to
promptly pay upon demand any and all reasonable documented costs and expenses of
the Agent or the Lenders, (i) as required under Section 12.5 of the Credit
Agreement and (ii) as necessary to protect the Pledged Collateral or to exercise
any rights or remedies under this Pledge Agreement or with respect to
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<PAGE> 12
any Pledged Collateral. All of the foregoing costs and expenses shall
constitute Pledgor Obligations hereunder.
13. Continuing Agreement.
(a) This Pledge Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long as the
Credit Agreement is in effect or any amounts payable thereunder or
under any other Credit Document or any Letter of Credit shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated (other than any obligations with respect to the indemnities
and the representations and warranties set forth in the Credit
Documents). Upon such payment and termination, this Pledge Agreement
shall be automatically terminated and, the Lenders shall, upon the
request and at the expense of the Pledgors, forthwith release all of
its liens and security interests hereunder. Notwithstanding the
foregoing all releases and indemnities provided hereunder shall
survive termination of this Pledge Agreement.
(b) This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment,
in whole or in part, of any of the Pledgor Obligations is rescinded or
must otherwise be restored or returned by the Agent or any Lender as a
preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been
made; provided that in the event payment of all or any part of the
Pledgor Obligations is rescinded or must be restored or returned, all
reasonable costs and expenses (including without limitation any
reasonable legal fees and disbursements) incurred by the Agent or any
Lender in defending and enforcing such reinstatement shall be deemed
to be included as a part of the Pledgor Obligations.
14. Amendments; Waivers; Modifications. This Pledge Agreement and
the provisions hereof may not be amended, waived, modified, changed, discharged
or terminated except as set forth in Section 12.6 of the Credit Agreement.
15. Successors in Interest. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Pledgor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their successors and assigns; provided, however, that none
of the Pledgors may assign its rights or delegate its duties hereunder without
the prior written consent of each Lender or the Required Lenders, as required by
the Credit Agreement. To the fullest extent permitted by law, each Pledgor
hereby releases the Agent and each Lender, and its successors and assigns, from
any liability for any act or omission relating to this Pledge Agreement or the
Collateral, except for any liability arising from the gross negligence or
willful misconduct of the Agent, or such Lender, or its officers, employees or
agents.
16. Notices. All notices required or permitted to be given under
this Pledge Agreement shall be in conformance with Section 12.1 of the Credit
Agreement.
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<PAGE> 13
17. Counterparts. This Pledge Agreement may be executed in any
number of counterparts, each of which where so executed and delivered shall be
an original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.
18. Headings. The headings of the sections and subsections hereof
are provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
19. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal
action or proceeding with respect to this Pledge Agreement may be
brought in the courts of the State of North Carolina, or of the United
States for the Western District of North Carolina, and, by execution
and delivery of this Pledge Agreement, each Pledgor hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of such courts. Each Pledgor
further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address for notices pursuant to Section 12.1 of
the Credit Agreement, such service to become effective 30 days after
such mailing. Nothing herein shall affect the right of the Agent to
serve process in any other manner permitted by law or to commence
legal proceedings or to otherwise proceed against any Pledgor in any
other jurisdiction.
(b) Each Pledgor hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Pledge Agreement brought in the courts referred to in subsection
(a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
20. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES TO THIS PLEDGE AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
21. Severability. If any provision of any of the Pledge Agreement
is determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
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<PAGE> 14
22. Entirety. This Pledge Agreement and the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
23. Survival. All representations and warranties of the Pledgors
hereunder shall survive the execution and delivery of this Pledge Agreement and
the other Credit Documents, the delivery of the Notes and the making of the
Loans and the issuance of the Letters of Credit under the Credit Agreement.
24. Other Security. To the extent that any of the Pledgor
Obligations are now or hereafter secured by property other than the Pledged
Collateral (including, without limitation, real property and securities owned by
an Pledgor), or by a guarantee, endorsement or property of any other Person,
then the Agent and the Lenders shall have the right to proceed against such
other property, guarantee or endorsement upon the occurrence of any Event of
Default, and the Agent and the Lenders have the right, in their sole discretion,
to determine which rights, security, liens, security interests or remedies the
Agent and the Lenders shall at any time pursue, relinquish, subordinate, modify
or take with respect thereto, without in any way modifying or affecting any of
them or any of the Agent's and the Lenders' rights or the Pledgor Obligations
under this Pledge Agreement or under any other of the Credit Documents.
25. Joint and Several Obligations of Pledgors.
(a) Subject to clause (c), each of the Pledgors is accepting
joint and several liability hereunder in consideration of the
financial accommodation to be provided by the Lenders under the Credit
Agreement, for the mutual benefit, directly and indirectly, of each of
the Pledgors and in consideration of the undertakings of each of the
Pledgors to accept joint and several liability for the obligations of
each of them.
(b) Subject to clause (c), each of the Pledgors jointly and
severally hereby irrevocably and unconditionally accepts, not merely
as a surety but also as a co-debtor, joint and several liability with
the other Pledgors with respect to the payment and performance of all
of the Pledgor Obligations arising under this Pledge Agreement and the
other Credit Documents, it being the intention of the parties hereto
that all the Pledgor Obligations shall be the joint and several
obligations of each of the Pledgors without preferences or distinction
among them.
(c) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents,
(i) to the extent the obligations of a Guarantor shall be
adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state
or federal law relating to fraudulent conveyances or transfers)
then the obligations of each Guarantor hereunder shall be limited
to the
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<PAGE> 15
maximum amount that is permissible under applicable law (whether
federal or state and including, without limitation, the
Bankruptcy Code), and
(ii) the obligations of Holdings hereunder shall be limited
hereunder and in all the Credit Documents, in the aggregate, to
an amount equal to $153,000,000.
26. Rights of Required Lenders. All rights of the Agent hereunder,
if not exercised by the Agent, may be exercised by the Required Lenders.
[remainder of page intentionally left blank]
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<PAGE> 16
Each of the Pledgors has caused a counterpart of this Amended and
Restated Pledge Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: IPC, INC.,
a Delaware corporation
By:
----------------------------------
Name:
--------------------------------
Title:
------------------------------
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<PAGE> 17
GUARANTORS: IVEX PACKAGING CORPORATION,
a Delaware corporation
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
IVEX PAPER MILL CORPORATION,
a Delaware corporation
IPMC HOLDING CORPORATION,
a Delaware corporation
IPMC, INC.,
a Delaware corporation
VALLEY EXPRESS LINES, INC.,
a Delaware corporation
KAMA OF ILLINOIS CORPORATION,
a Delaware corporation
PACKAGING PRODUCTS, INC.,
a Delaware corporation
CFI INDUSTRIES, INC.,
a Delaware corporation
PLASTOFILM INDUSTRIES, INC.,
a Delaware corporation
CFI RECYCLING, INC.,
a Delaware corporation
TRIO PRODUCTS, INC.,
a Delaware corporation
By:
-----------------------------
Name:
---------------------------
Title: of each of
--------------------------
the above named Guarantors
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<PAGE> 18
Accepted and agreed to as of the date first above written.
NATIONSBANK, N.A., as Agent
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
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<PAGE> 19
Schedule 4(a)
to
Amended and Restated
Pledge Agreement
dated as of March 24, 1997
in favor of NationsBank, N.A.
as Agent
Irrevocable Stock Power
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
the following shares of capital stock of _____________________, a ____________
corporation:
No. of Shares Certificate No.
and irrevocably appoints __________________________________ its agent and
attorney-in-fact to transfer all or any part of such capital stock and to take
all necessary and appropriate action to effect any such transfer. The agent
and attorney-in-fact may substitute and appoint one or more persons to act for
him. The effectiveness of a transfer pursuant to this stock power shall be
subject to any and all transfer restrictions referenced on the face of the
certificates evidencing such interest or in the certificate of incorporation or
bylaws of the subject corporation, to the extent they may from time to time
exist.
[Pledgor]
By:______________________________
Name:____________________________
Title:___________________________
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<PAGE> 1
EXHIBIT 10.38
AMENDED AND RESTATED
SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT, dated as of March 24,
1997 (this " Security Agreement"), amends and restates that certain Amended and
Restated Security Agreement entered into as of September 16, 1996 among IPC,
INC., a Delaware corporation (the "Borrower"), IVEX PACKAGING CORPORATION, a
Delaware corporation ("Holdings"), certain Subsidiaries of the Borrower party
thereto (the "Prior Guarantors") and NATIONSBANK, N.A., in its capacity as
agent (in such capacity, the "Agent") for the lenders from time to time party
to the Original Credit Agreement described below (the "Prior Lenders").
RECITALS
WHEREAS, the Borrower, Holdings, the Prior Guarantors, the Prior
Lenders and the Agent entered into that certain Credit Agreement, dated as of
December 7, 1995 (as amended and/or modified from time to time thereafter, the
"Original Credit Agreement");
WHEREAS, the Original Credit Agreement has been amended and restated
pursuant to that certain Amended and Restated Credit Agreement, dated as of the
date hereof (as amended, modified, extended, renewed or replaced from time to
time, the "Credit Agreement"), among the Borrower, Holdings, the Domestic
Subsidiaries of the Borrower party thereto (such Domestic Subsidiaries,
together with Holdings, individually a "Guarantor" and collectively the
"Guarantors"), the lenders from time to time party thereto (the "Lenders") and
the Agent; and
WHEREAS, the Lenders have required that the Borrower and the
Guarantors (the Guarantors together with the Borrower, individually an
"Obligor", and collectively the "Obligors") secure or resecure, as applicable,
their respective obligations under the Credit Agreement and the other Credit
Documents in accordance with the terms of this Security Agreement.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit
Agreement. All terms used in this Security Agreement that are
defined in the Uniform Commercial Code in effect in the State of New
York (the "UCC") and which are not otherwise defined herein shall have
the meanings set forth therein.
(b) In addition, the following terms shall have the following
meanings:
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"Copyright Licenses": any written agreement, naming any Obligor as
licensor, granting any right under any Copyright including, without
limitation, any thereof referred to in Schedule 7.19(a) to the Credit
Agreement.
"Copyrights": (i) all copyrights in all Works, now existing or
hereafter created or acquired, all registrations and recordings thereof, and
all applications in connection therewith, whether in the United States
Copyright Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in Schedule
7.19(a) to the Credit Agreement, and (ii) all renewals thereof including,
without limitation, any thereof referred to in Schedule 7.19(a) to the Credit
Agreement.
"Excluded Equipment": all de-inking equipment (not to exceed a
maximum aggregate value of $6,000,000) purchased from Milnor Corporation for
use at the Detroit, Michigan facility of IPMC, Inc.
"Patent License": all agreements, whether written or oral, providing
for the grant by or to an Obligor of any right to manufacture, use or sell any
invention covered by a Patent, including, without limitation, any thereof
referred to in Schedule 7.19(a) to the Credit Agreement.
"Patents": (a) all letters patent of the United States or any other
country and all reissues and extensions thereof, including, without limitation,
any thereof referred to in Schedule 7.19(a) to the Credit Agreement, and (b)
all applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof, including,
without limitation, any thereof referred to in Schedule 7.19(a) to the Credit
Agreement.
"Trademark License": means any agreement, written or oral, providing
for the grant by or to an Obligor of any right to use any Trademark, including,
without limitation, any thereof referred to in Schedule 7.19(a) to the Credit
Agreement.
"Trademarks": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, including, without
limitation, any thereof referred to in Schedule 7.19(a) to the Credit
Agreement, and (b) all renewals thereof including, without limitation, any
thereof referred to in Schedule 7.19(a) to the Credit Agreement.
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"Work": any work which is subject to copyright
protection pursuant to Title 17 of the United States Code or
the applicable copyright legislation of any other country.
2. Grant of Security Interest in the Collateral. To secure the
prompt payment and performance in full when due, whether by lapse of time,
acceleration or otherwise, of the Secured Obligations (as defined in Section 3
hereof), each Obligor hereby grants to the Agent, for the benefit of the
Lenders, a continuing security interest in, and a right to set off against, any
and all right, title and interest of such Obligor in and to the following,
whether now owned or existing or owned, acquired, or arising hereafter
(collectively, the "Collateral"):
(a) All equipment, including, without limitation, all
vehicles, rolling stock, machinery, tools, furniture, furnishings,
office equipment and trade fixtures, but excluding any computer
equipment in which ABB Credit has a first priority security interest
as of the date hereof; provided, however that no security interest
shall exist in the Excluded Equipment until such time as the
Michigan Department of Natural Resources shall have released its
security interest in the same;
(b) All accounts and receivables and all goods
represented by or securing accounts and receivables, including,
without limitation, all rents and tenant payments, if any; provided,
that such security interest will be released if, and to the extent
that, Receivables Transaction occurs;
(c) All inventory, including, without limitation, all raw
materials, all work in process and all goods held by an Obligor for
sale or lease;
(d) All contract rights, including, without limitation,
all rights under management agreements, tax sharing agreements and
lease agreements and all rights to payment of money, tax refunds and
insurance proceeds, but excluding (i) any contract identified on
Schedule 5(e) hereto, and (ii) any immaterial contract that expressly
prohibits a grant of security interest in such contract and that would
subject an Obligor to damages for such breach;
(e) All other general intangibles;
(f) All instruments, documents, chattel paper,
securities, policies and certificates of insurance, deposits, cash or
other goods;
(g) All books, records, files, computer software and
other similar writings or evidence of each Obligor's business;
(h) All Copyrights, Copyright Licenses, Patents, Patent
Licenses, Trademarks and Trademark Licenses;
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(i) All other personal property of any kind or type
whatsoever owned by an Obligor;
(j) All accessions and additions to, and substitutions
and replacements of, any and all of the foregoing, whether now
existing or hereafter arising; and
(k) All proceeds and products of the foregoing and all
insurance relating to the foregoing collateral and all proceeds
thereof (including, without limitation, insurance proceeds payable on
account of business interruption), whether now existing or hereafter
arising.
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that (i) the Collateral shall exclude the Newton Property
until such time as any Obligor shall obtain a fee interest in the Newton
Property and (ii) the security interest created hereby in the Collateral is not
to be construed as an assignment of any Copyrights, Copyright Licenses,
Patents, Patent Licenses, Trademarks or Trademark Licenses.
3. Security for Obligations. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following, whether now existing or hereafter incurred (the "Secured
Obligations"):
(a) In the case of the Borrower, the prompt performance
and observance by the Borrower of all obligations of the Borrower
under the Credit Agreement, the Notes, this Security Agreement and
the other Credit Documents to which the Borrower is a party;
(b) In the case of the Guarantors, the prompt performance
and observance by such Guarantor of all obligations of such Guarantor
under the Credit Agreement, this Security Agreement and the other
Credit Documents to which such Guarantor is a party, including,
without limitation, its guaranty obligations arising under Section 5
of the Credit Agreement; and
(c) Subject to clause 25(c)(iii) hereof, all other
indebtedness, liabilities and obligations of any kind or nature owing
from any Obligor to any Lender or the Agent in connection with (i)
this Security Agreement or any other Credit Document, whether now
existing or hereafter arising, due or to become due, direct or
indirect, absolute or contingent, and howsoever evidenced, held or
acquired, together with any and all modifications, extensions,
renewals and/or substitutions of any of the foregoing, (ii) collecting
and enforcing the Credit Party Obligations and (iii) liabilities
arising under interest rate protection agreements entered into
pursuant to the Credit Agreement.
4. Provisions Relating to Accounts Receivable.
(a) Anything herein to the contrary notwithstanding, each
of the Obligors shall remain liable under each of the accounts
receivable to observe and perform all the conditions and obligations
to be observed and performed by it thereunder, all in accordance
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with the terms of any agreement giving rise to each such account
receivable. Neither the Agent nor any Lender shall have any
obligation or liability under any account receivable (or any agreement
giving rise thereto) by reason of or arising out of this Security
Agreement or the receipt by the Agent or any Lender of any payment
relating to such account receivable pursuant hereto, nor shall the
Agent or any Lender be obligated in any manner to perform any of the
obligations of an Obligor under or pursuant to any account receivable
(or any agreement giving rise thereto), to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any
party under any account receivable (or any agreement giving rise
thereto), to present or file any claim, to take any action to enforce
any performance or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or
times; provided, however, that the Agent agrees to execute all
documents reasonably necessary to enable the Obligors to collect upon
any accounts receivable.
(b) Once during each calendar year or at any time after
the occurrence and during the continuation of an Event of Default, the
Agent shall have the right, but not the obligation, to make test
verifications of the accounts receivable in any manner and through any
medium that it reasonably considers advisable, and the Obligors shall
furnish all such assistance and information as the Agent may require
in connection with such test verifications. At any time and from time
to time, upon the Agent's request, the Obligors shall cause
independent public accountants or others satisfactory to the Agent to
furnish (once each calendar year at the expense of the Obligors and at
all other times at the expense of the Lenders) to the Agent reports
showing reconciliations, aging and test verifications of, and trial
balances for, the accounts receivable. The Agent in its own name or
in the name of others may communicate with account debtors on the
accounts receivable to verify with them to the Agent's satisfaction
the existence, amount and terms of any accounts receivable.
5. Representations and Warranties. Each Obligor hereby represents
and warrants to the Agent, for the benefit of the Lenders, that so long as any
of the Secured Obligations remain outstanding or any Credit Document is in
effect (other than any obligations with respect to the indemnities and the
representations and warranties set forth in the Credit Documents) or any Letter
of Credit shall remain outstanding, and until all of the Commitments shall have
been terminated:
(a) Chief Executive Office; Books & Records. Each Obligor's
chief executive office and chief place of business is (and for the
prior four months have been) located at the locations set forth on
Schedule 7.23(c) to the Credit Agreement, and each Obligor keeps its
books and records at such locations.
(b) Location of Collateral. The location of all tangible
property included in the Collateral owned by each Obligor is as shown
on Schedule 7.23(b) to the Credit Agreement; provided, however that
the Obligors, in the aggregate, may have up to $2,500,000 (determined
on the basis of Obligors' costs) of inventory held by customers
pursuant to consignment arrangements.
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(c) Ownership. Each Obligor is the legal and beneficial
owner of its Collateral and has the right to pledge, sell, assign or
transfer the same (excluding any Collateral which is non-assignable by
its terms). Each Obligor's legal name is as shown in this Security
Agreement and no Obligor has in the past four months changed its name,
been party to a merger, consolidation or other change in structure or
used any tradename except as set forth in Schedule 5(c) attached
hereto.
(d) Security Interest/Priority. This Security Agreement
creates a valid security interest in favor of the Agent, for the
benefit of the Lenders, in the Collateral (excluding any Collateral
which is non-assignable by its terms) of such Obligor and, when
properly perfected by filing or registration, shall constitute a valid
perfected security interest in such Collateral, to the extent such
security can be perfected by filing under the UCC or other applicable
personal property security legislation, free and clear of all Liens
except for Permitted Liens.
(e) Contracts; Agreements. Except as provided in
Schedule 5(e) attached hereto, the Borrower has no material contracts
or agreements which are non-assignable by their terms or which prevent
the granting of a security interest therein.
(f) Receivables. (i) Each receivable of the Obligors and the
papers and documents relating thereto are genuine and in all material
respects what they purport to be, (ii)_in the case of each receivable
which is an account receivable, each receivable arises out of (A) a
bona fide sale of goods sold and delivered by such Obligor (or is in
the process of being delivered) or (B) services theretofore actually
rendered by such Obligor to, the account debtor named therein, (iii)
no receivable (excluding inter-company receivables) of an Obligor is
evidenced by any instrument or chattel paper valued in excess of
$100,000, unless such instrument or chattel paper has been theretofore
endorsed over and delivered to the Agent and (iv) no surety bond was
required or given in connection with any receivables of an Obligor or
the contracts or purchase orders out of which they arose.
(g) Inventory. Except as permitted under Section 5(b)
hereof, no inventory is held by an Obligor pursuant to consignment,
sale or return, sale on approval or similar arrangement.
(h) Copyrights, Patents and Trademarks.
(i) Schedule 7.19(a) to the Credit Agreement
includes all material Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks and Trademark Licenses owned by
the Obligors in their own names as of the date hereof.
(ii) Except as set forth in Schedule 7.19(a) to
the Credit Agreement, to the best of each Obligor's knowledge,
each material Copyright, Patent and
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Trademark of such Obligor is valid, subsisting, unexpired,
enforceable and has not been abandoned.
(iii) Except as set forth in Schedule 7.19(a) to
the Credit Agreement and except for immaterial oral or written
non-commercial permissions, none of such material Copyrights,
Patents and Trademarks is the subject of any licensing or
franchise agreement.
(iv) No holding, decision or judgment has been
rendered by any Governmental Authority which would be
reasonably likely to limit, cancel or question the validity of
any material Copyright, Patent or Trademark.
(v) No action or proceeding is pending seeking to
limit, cancel or question the validity of any material
Copyright, Patent or Trademark, or which, if adversely
determined, would be reasonably likely to have a Material
Adverse Effect.
(vi) All applications pertaining to the material
Copyrights, Patents and Trademarks of each Obligor have been
duly and properly filed, and all registrations or letters
pertaining to such Copyrights, Patents and Trademarks have
been duly and properly filed and issued.
(vii) Except as permitted under the Credit
Agreement, no Obligor has made any assignment or agreement in
conflict with the security interest in the material
Copyrights, Patents or Trademarks of each Obligor hereunder.
6. Covenants. Each Obligor covenants that, so long as any of the
Secured Obligations remain outstanding or any Credit Document is in effect
(other than any obligations with respect to the indemnities and the
representations and warranties set forth in the Credit Documents) or any Letter
of Credit shall remain outstanding, and until all of the Commitments shall have
been terminated, such Obligor shall:
(a) Other Liens. Defend the Collateral against the
claims and demands of all other parties claiming an interest therein,
keep the Collateral free from all Liens, except for Permitted Liens
and Liens arising pursuant to consignment arrangements permitted under
Sections 5(b) and 5(g) hereto, and not sell, exchange, transfer,
assign, lease or otherwise dispose of the Collateral or any interest
therein, except as permitted under the Credit Agreement.
(b) Preservation of Collateral. Keep the Collateral in
good order, condition and repair in all material respects and not use
the Collateral in violation of the provisions of this Security
Agreement or any other agreement relating to the Collateral or any
policy insuring the Collateral or any applicable statute, law, bylaw,
rule, regulation or ordinance, except as permitted under the Credit
Agreement.
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(c) Instruments/Chattel Paper. Deliver to the Agent all
instruments and chattel paper valued in excess of $100,000 which
represents or relates to the Collateral.
(d) Change in Location. Not, without providing 30 days
prior written notice to the Agent and without filing such further
financing statements or amendments to any previously filed financing
statements as the Agent may require, (i) change the location of its
chief executive office and chief place of business (as well as its
books and records) from the locations set forth on Schedule 7.23(c)
to the Credit Agreement, (ii) change the location of its Collateral
from the locations set forth for such Obligor on Schedule 7.23(b) of
the Credit Agreement, except as otherwise permitted by Section 5(b)
hereof or as set forth in the Credit Agreement, or (iii) change its
name, be party to a merger, consolidation or other change in structure
or use any tradename other than as set forth on Schedule 5(c) attached
hereto.
(e) Inspection. Upon reasonable notice, and during
reasonable hours, at all times allow the Agent or its representatives
to visit and inspect the Collateral as set forth in Section 8.11 of
the Credit Agreement.
(f) Perfection of Security Interest. Execute and deliver
to the Agent such agreements, assignments or instruments (including
affidavits, notices, reaffirmations and amendments and restatements of
existing documents, as the Agent may reasonably request) and do all
such other things as the Agent may reasonably deem necessary or
appropriate (i) to assure to the Agent its security interests
hereunder, including, but not limited to, (A) such financing
statements (including renewal statements) or amendments thereof or
supplements thereto or other instruments as the Agent may from time to
time reasonably request in order to perfect and maintain the security
interests granted hereunder in accordance with the UCC, (B) with
regard to material Copyrights, a Notice of Grant of Security Interest
in Copyrights for filing with the United States Copyright Office in
the form of Schedule 6(f)-1 attached hereto, (C) with regard to
material Patents, a Notice of Grant of Security Interest in Patents
for filing with the United States Patent and Trademark Office in the
form of Schedule 6(f)-2 attached hereto, and (D) with regard to
material Trademarks, a Notice of Grant of Security Interest in
Trademarks for filing with the United States Patent and Trademark
Office in the form of Schedule 6(f)-3 attached hereto, (ii) to
consummate the transactions contemplated hereby and (iii) to otherwise
protect and assure the Agent of its rights and interests hereunder.
To that end, each Obligor agrees that the Agent may file one or more
financing statements disclosing the Agent's security interest in any
or all of the Collateral of such Obligor without, to the extent
permitted by law, such Obligor's signature thereon, and further each
Obligor also hereby irrevocably makes, constitutes and appoints the
Agent, its nominee or any other person whom the Agent may designate,
as such Obligor's attorney in fact with full power and for the limited
purpose to sign in the name of such Obligor any such financing
statements, or amendments and supplements to financing statements,
renewal financing statements, notices or any similar documents which
in the Agent's reasonable discretion would be necessary, appropriate
or convenient in order to perfect and maintain perfection of the
security interests granted hereunder, such power, being coupled with
an interest,
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being and remaining irrevocable so long as the Credit Agreement is in
effect (other than any obligations with respect to the indemnities and
the representations and warranties set forth in the Credit Documents)
or any amounts payable thereunder or under any other Credit Document
or any Letter of Credit shall remain outstanding, and until all of the
Commitments thereunder shall have terminated. Each Obligor hereby
agrees that a carbon, photographic or other reproduction of this
Security Agreement or any such financing statement is sufficient for
filing as a financing statement by the Agent without notice thereof to
such Obligor wherever the Agent may in its sole discretion desire to
file the same. In the event for any reason the law of any
jurisdiction other than New York becomes or is applicable to the
Collateral of any Obligor or any part thereof, or to any of the
Secured Obligations, such Obligor agrees to execute and deliver all
such instruments and to do all such other things as the Agent in its
sole discretion reasonably deems necessary or appropriate to preserve,
protect and enforce the security interests of the Agent under the law
of such other jurisdiction (and, if an Obligor shall fail to do so
promptly upon the request of the Agent, then the Agent may execute any
and all such requested documents on behalf of such Obligor pursuant to
the power of attorney granted hereinabove). If any Collateral is in
the possession or control of an Obligor's agents and the Agent so
requests, such Obligor agrees to notify such agents in writing of the
Agent's security interest therein and, upon the Agent's request,
instruct them to hold all such Collateral for the Lenders' account and
subject to the Agent's instructions. Each Obligor agrees to mark its
books and records to reflect the security interest of the Agent in the
Collateral.
(g) Treatment of Receivables. Not grant or extend the
time for payment of any receivable, or compromise or settle any
receivable for less than the full amount thereof, or release any
person or property, in whole or in part, from payment thereof, or
allow any credit or discount thereon, other than as normal and
customary in the ordinary course of an Obligor's business (including
the acceptance of certain notes by the Borrower in its sales of
polystyrene sheets and films).
(h) Covenants Relating to Copyrights. Except as
otherwise permitted by the Credit Agreement,
(i) Employ the Copyright for each material Work
with such notice of copyright as may be required by law to
secure copyright protection.
(ii) Not do any act or knowingly omit to do any
act whereby any material Copyright may become invalidated and
(A) not do any act, or knowingly omit to do any act, whereby
any material Copyright may become injected into the public
domain; (B) notify the Agent immediately if it knows, or has
reason to know, that any material Copyright may become
injected into the public domain or of any adverse
determination or development (including, without limitation,
the institution of, or any such determination or development
in, any court or tribunal in the United States or any other
country), other than a non-final determination of any such
court, regarding an Obligor's ownership of any such Copyright
or its
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validity; (C) take all necessary steps as it shall deem
appropriate under the circumstances to maintain and pursue
each application (and to use its best efforts to obtain the
relevant registration) and to maintain each registration of
each material Copyright owned by an Obligor including, without
limitation, filing of applications for renewal where
necessary; and (D) promptly notify the Agent of any material
infringement of any material Copyright of an Obligor of which
it becomes aware and take such actions as it shall reasonably
deem appropriate under the circumstances to protect such
Copyright, including, where appropriate, the bringing of suit
for infringement, seeking injunctive relief and seeking to
recover any and all damages for such infringement.
(iii) Not make any assignment or agreement in
conflict with the security interest in the Copyrights of each
Obligor hereunder.
(i) Covenants Relating to Patents and Trademarks.
(i) (A) Except as otherwise permitted by the
Credit Agreement, continue to use each material Trademark in
such a manner as to maintain such Trademark in full force free
from any claim of abandonment for non-use, (B) use its best
efforts to maintain as in the past the quality of products and
services offered under such Trademark, (C) employ such
Trademark with the appropriate notice of registration or
notice of trademark, as applicable, sufficient to protect such
Trademark, (D) not adopt or use any mark which is confusingly
similar or a colorable imitation of such Trademark unless the
Agent, for the ratable benefit of the Lenders, shall obtain a
perfected security interest in such mark pursuant to this
Security Agreement, and (E) except as otherwise permitted by
the Credit Agreement, not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any
act whereby any such Trademark may become invalidated.
(ii) Except as otherwise permitted by the Credit
Agreement, not do any act, or omit to do any act, whereby any
Patent may become abandoned or dedicated, if the same can be
reasonably expected to have a Material Adverse Effect.
(iii) Notify the Agent and the Lenders immediately
if it knows, or has reason to know, that any application or
registration relating to any material Patent or Trademark may
become abandoned or dedicated, or of any adverse determination
or development (including, without limitation, the institution
of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or
any court or tribunal in any country), other than non-final
determinations of any such office or court, regarding an
Obligor's ownership of any material Patent or Trademark or its
right to register the same or to keep and maintain the same.
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(iv) Take all reasonable and necessary steps, as
it shall deem appropriate under the circumstances, including,
without limitation, in any proceeding before the United States
Patent and Trademark Office, or any similar office or agency
in any other country or any political subdivision thereof, to
maintain and pursue each application (and use its best efforts
to obtain the relevant registration) and to maintain each
registration of the material Patents and Trademarks,
including, without limitation, filing of applications for
renewal, affidavits of use and affidavits of incontestability.
(v) Promptly notify the Agent and the Lenders
after it learns that any material Patent or Trademark included
in the Collateral is materially infringed, misappropriated or
diluted by a third party, and take such actions as it shall
reasonably deem appropriate under the circumstances to protect
such material Patent or Trademark, including, where
appropriate, the bringing of suit for infringement,
misappropriation or dilution, seeking injunctive relief where
appropriate and seeking to recover any and all damages for
such infringement, misappropriation or dilution.
(vi) Except as otherwise permitted by the Credit
Agreement, not make any assignment or agreement in conflict
with the security interest in the Patents or Trademarks of
each Obligor hereunder.
(j) New Patents, Copyrights and Trademarks. Whenever an
Obligor, either by itself or through an agent, employee, licensee or
designee, shall file an application for the registration of any
Copyright, Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country
or any political subdivision thereof, an Obligor shall report such
filing to the Agent and the Lenders within five Business Days after
the last day of the fiscal quarter in which such filing occurs. Upon
request of the Agent, an Obligor shall promptly provide the Agent with
(i) a listing of all such applications (together with a listing of the
issuance of registrations or letters on present applications), which
new applications and issued registrations or letters shall be subject
to the terms and conditions hereunder, and (ii) (A) with respect to
Copyrights, a duly executed amendment or modification to the Notice of
Security Interest in Copyrights, (B) with respect to Patents, a duly
executed amendment or modification to the Notice of Security Interest
in Patents, (C) with respect to Trademarks, a duly executed amendment
or modification to the Notice of Security Interest in Trademarks or
(D) such other duly executed documents as the Agent may request in a
form acceptable to counsel for the Agent and suitable for recording to
evidence the security interest in the Copyright, Patent or Trademark
which is the subject of such new application to the Agent as provided
in Section 2 hereof, and subject to all the terms hereof.
(k) Insurance. Insure, repair and replace the Collateral
of such Obligor as set forth in the Credit Agreement. All insurance
proceeds received in connection with the Collateral shall be subject
to the security interest of the Agent hereunder.
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7. Advances by Lenders. On failure of any Obligor to perform any
of the covenants and agreements contained herein, the Agent may, at its sole
option and in its sole discretion, perform the same and in so doing may expend
such sums as the Agent may reasonably deem advisable in the performance
thereof, including, without limitation, the payment of any insurance premiums,
the payment of any taxes, a payment to obtain a release of a Lien or potential
Lien, expenditures made in defending against any adverse claim and all other
expenditures which the Agent or the Lenders may make for the protection of the
security hereof or which may be compelled to make by operation of law. All
such sums and amounts so expended shall be repayable by the Obligors on a joint
and several basis promptly upon timely notice thereof and demand therefor,
shall constitute additional Secured Obligations and shall bear interest from
the date said amounts are expended at the default rate provided in Section
3.1(b) of the Credit Agreement for Revolving Loans that are Base Rate Loans.
No such performance of any covenant or agreement by the Agent or the Lenders on
behalf of any Obligor, and no such advance or expenditure therefor, shall
relieve the Obligors of any default under the terms of this Security Agreement
or the other Credit Documents. The Lenders may make any payment hereby
authorized in accordance with any bill, statement or estimate procured from the
appropriate public office or holder of the claim to be discharged without
inquiry into the accuracy of such bill, statement or estimate or into the
validity of any tax assessment, sale, forfeiture, tax lien, title or claim
except to the extent such payment is being contested in good faith by an
Obligor in appropriate proceedings and against which adequate reserves are
being maintained in accordance with GAAP.
8. Events of Default.
The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an Event of Default hereunder (an
"Event of Default").
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of
Default and during continuation thereof, the Lenders shall have, in
addition to the rights and remedies provided herein, in the Credit
Documents or by law (including, but not limited to, the rights and
remedies set forth in the Uniform Commercial Code of the jurisdiction
applicable to the affected Collateral), the rights and remedies of a
secured party under the UCC to the extent permitted by law (regardless
of whether the UCC is the law of the jurisdiction where the rights and
remedies are asserted and regardless of whether the UCC applies to the
affected Collateral), and further, the Agent may, with or without
judicial process or the aid and assistance of others, (i) enter on any
premises on which any of the Collateral may be located and, without
resistance or interference by the Obligors, take possession of the
Collateral, (ii) dispose of any Collateral on any such premises,
(iii) require the Obligors to assemble and make available to the Agent
at the expense of the Obligors any Collateral at any place and time
designated by the Agent which is reasonably convenient to both
parties, (iv) remove any Collateral from any such premises for the
purpose of effecting sale or other disposition thereof, and/or (v)
without demand and without advertisement, notice, hearing or process
of law, all of which each of the
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<PAGE> 13
Obligors hereby waives to the fullest extent permitted by law, at any
place and time or times, sell and deliver any or all Collateral held
by or for it at public or private sale, by one or more contracts, in
one or more parcels, for cash, upon credit or otherwise, at such
prices and upon such terms as the Agent deems advisable, in its sole
discretion (subject to any and all mandatory legal requirements). In
addition to all other sums due the Agent and the Lenders with respect
to the Secured Obligations, the Obligors shall pay the Agent and each
of the Lenders all reasonable documented costs and expenses incurred
by the Agent or any such Lender, including, but not limited to,
reasonable attorneys' fees and court costs, in obtaining or
liquidating the Collateral, in enforcing payment of the Secured
Obligations, or in the prosecution or defense of any action or
proceeding by or against the Agent or the Lenders or the Obligors
concerning any matter arising out of or connected with this Security
Agreement, any Collateral or the Secured Obligations, including,
without limitation, any of the foregoing arising in, arising under or
related to a case under the Bankruptcy Code. To the extent the rights
of notice cannot be legally waived hereunder, each Obligor agrees that
any requirement of reasonable notice shall be met if such notice is
personally served on or mailed, postage prepaid, to the Borrower in
accordance with the notice provisions of Section 12.1 of the Credit
Agreement at least 10 days before the time of sale or other event
giving rise to the requirement of such notice. The Agent and the
Lenders shall not be obligated to make any sale or other disposition
of the Collateral regardless of notice having been given. To the
extent permitted by law, any Lender may be a purchaser at any such
sale. To the extent permitted by applicable law, each of the Obligors
hereby waives all of its rights of redemption with respect to any such
sale. Subject to the provisions of applicable law, the Agent and the
Lenders may postpone or cause the postponement of the sale of all or
any portion of the Collateral by announcement at the time and place of
such sale, and such sale may, without further notice, to the extent
permitted by law, be made at the time and place to which the sale was
postponed, or the Agent and the Lenders may further postpone such sale
by announcement made at such time and place.
(b) Remedies relating to Receivables. Upon the
occurrence of an Event of Default and during the continuation thereof,
whether or not the Agent has exercised any or all of its rights and
remedies hereunder, each Obligor will promptly upon written request of
the Agent instruct all account debtors to remit all payments in
respect of the receivables to a mailing location selected by the
Agent. In addition, the Agent or its designee may notify any
Obligor's customers and account debtors that the receivables of such
Obligor have been assigned to the Agent or of the Agent's security
interest therein, and may (either in its own name or in the name of an
Obligor or both) demand, collect (including without limitation by way
of a lockbox arrangement), receive, take receipt for, sell, sue for,
compound, settle, compromise and give acquittance for any and all
amounts due or to become due on receivables, and, in the Agent's
discretion, file any claim or take any other action or proceeding to
protect and realize upon the security interest of the Lenders in the
receivables. Each Obligor acknowledges and agrees that the proceeds
of its receivables remitted to or on behalf of the Agent in accordance
with the provisions hereof shall be solely for the Agent's own
convenience and that such Obligor shall not have any right, title or
interest in such accounts or in any such other amounts except as
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<PAGE> 14
expressly provided herein. The Agent and the Lenders shall have no
liability or responsibility to any Obligor for acceptance of a check,
draft or other order for payment of money bearing the legend "payment
in full" or words of similar import or any other restrictive legend or
endorsement or be responsible for determining the correctness of any
remittance. Each Obligor hereby agrees to indemnify the Agent and the
Lenders from and against all liabilities, damages, losses, actions,
claims, judgments, costs, expenses, charges and reasonable attorneys'
fees suffered or incurred by the Agent or the Lenders because of the
maintenance of the foregoing arrangements except as relating to or
arising out of the gross negligence or willful misconduct of the Agent
or a Lender or its officers, employees or agents. The foregoing
indemnity shall survive the repayment of the Secured Obligations and
the termination of the Commitments.
(c) Access. In addition to the rights and remedies
hereunder, upon the occurrence of an Event of Default and during the
continuance thereof, the Agent shall have the right to enter and
remain upon the various premises of the Obligors without cost or
charge to the Agent, and use the same, together with materials,
supplies, books and records of the Obligors for the purpose of
collecting and liquidating the Collateral, or for preparing for sale
and conducting the sale of the Collateral, whether by foreclosure,
auction or otherwise. In addition, the Agent may remove Collateral,
or any part thereof, from such premises and/or any records with
respect thereto, in order to effectively collect or liquidate such
Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the
Agent or the Lenders to exercise any right, remedy or option under
this Agreement or any other Credit Document or as provided by law, or
any delay by the Agent or the Lenders in exercising the same, shall
not operate as a waiver of any such right, remedy or option. No
waiver hereunder shall be effective unless it is in writing, signed by
the party against whom such waiver is sought to be enforced and then
only to the extent specifically stated, which in the case of the Agent
or the Lenders shall only be granted as provided herein. To the
extent permitted by law, neither the Agent, the Lenders, nor any party
acting as attorney for the Agent or the Lenders, shall be liable
hereunder for any acts or omissions or for any error of judgment or
mistake of fact or law other than their gross negligence or willful
misconduct hereunder. The rights and remedies of the Agents and the
Lenders under this Agreement shall be cumulative and not exclusive of
any other right or remedy which the Agent or the Lenders may have.
(e) Retention of Collateral. The Agent may, after
providing the notices required by Section 9-505(2) of the UCC or
otherwise complying with the requirements of applicable law of the
relevant jurisdiction, to the extent the Agent is in possession of any
of the Collateral, retain the Collateral in satisfaction of the
Secured Obligations. Unless and until the Agent shall have provided
such notices, however, the Agent shall not be deemed to have retained
any Collateral in satisfaction of any Secured Obligations for any
reason.
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<PAGE> 15
(f) Deficiency. In the event that the proceeds of any
sale, collection or realization are insufficient to pay all amounts to
which the Agent or the Lenders are legally entitled, the Obligors
shall be jointly and severally liable for the deficiency, together
with interest thereon at the default rate specified in Section 3.1(b)
of the Credit Agreement for Revolving Loans that are Base Rate Loans,
together with the costs of collection and the reasonable fees of any
attorneys employed by the Agent to collect such deficiency. Any
surplus remaining after the full payment and satisfaction of the
Secured Obligations shall be returned to the Obligors or to whomsoever
a court of competent jurisdiction shall determine to be entitled
thereto.
10. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of
attorney contained herein, each Obligor hereby designates and appoints
the Agent, on behalf of the Lenders, and each of its designees or
agents, as attorney-in-fact of such Obligor, irrevocably and with
power of substitution, with authority to take any or all of the
following actions upon the occurrence and during the continuance of an
Event of Default:
(i) to demand, collect, settle, compromise,
adjust and give discharges and releases concerning the
Collateral, all as the Agent may reasonably determine;
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any Collateral and
enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action
brought and, in connection therewith, give such discharge or
release as the Agent may deem reasonably appropriate;
(iv) receive, open and dispose of mail addressed
to an Obligor and endorse checks, notes, drafts, acceptances,
money orders, bills of lading, warehouse receipts or other
instruments or documents evidencing payment, shipment or
storage of the goods giving rise to the Collateral of such
Obligor on behalf of and in the name of such Obligor, or
securing, or relating to such Collateral;
(v) sell, assign, transfer, make any agreement in
respect of, or otherwise deal with or exercise rights in
respect of, any Collateral or the goods or services which have
given rise thereto, as fully and completely as though the Bank
were the absolute owner thereof for all purposes;
(vi) adjust and settle claims under any insurance
policy relating thereto;
(vii) execute and deliver all assignments,
conveyances, statements, financing statements, renewal
financing statements, security agreements,
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<PAGE> 16
affidavits, notices and other agreements, instruments and
documents that the Agent may determine necessary in order to
perfect and maintain the security interests and liens granted
in this Security Agreement and in order to fully consummate
all of the transactions contemplated therein;
(viii) institute any foreclosure proceedings that
the Agent may deem appropriate; and
(ix) do and perform all such other acts and things
as the Agent may reasonably deem to be necessary, proper or
convenient in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding, any Credit Document is in effect or any Letter of Credit shall
remain outstanding and (ii) until all of the Commitments shall have been
terminated. The Agent shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges and options expressly or
implicitly granted to the Agent in this Security Agreement, and shall not be
liable for any failure to do so or any delay in doing so. The Agent shall not
be liable for any act or omission or for any error of judgment or any mistake
of fact or law in its individual capacity or its capacity as attorney-in-fact
except acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on the Agent solely to
protect, preserve and realize upon its security interest in the Collateral.
(b) Performance by the Agent of Obligations. If any
Obligor fails to perform any agreement or obligation contained herein,
the Agent itself may perform, or cause performance of, such agreement
or obligation, and the expenses of the Agent incurred in connection
therewith shall be payable by the Obligors on a joint and several
basis pursuant to Section 12 hereof.
(c) Assignment by the Agent. The Agent may from time to
time assign the Collateral and any portion thereof, and the assignee
shall be entitled to all of the rights and remedies of the Agent under
this Security Agreement in relation thereto.
(d) The Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while
being held by the Agent hereunder, the Agent shall have no duty or
liability to preserve rights pertaining thereto, it being understood
and agreed that the Obligors shall be responsible for preservation of
all rights in the Collateral, and the Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering
the surrender of it to the Obligors. The Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Agent accords its own property,
which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being understood that the
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<PAGE> 17
Agent shall not have responsibility for taking any necessary steps to
preserve rights against any parties with respect to any of the
Collateral.
11. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Agent or
any of the Lenders in cash or its equivalent, will be applied in reduction of
the Secured Obligations in the order set forth in Section 3.7 of the Credit
Agreement, and each Obligor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Agent shall have the continuing and exclusive right to apply and reapply any
and all such payments and proceeds in the Agent's sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.
12. Costs of Counsel. At all times hereafter, the Obligors agree
to promptly pay upon demand any and all reasonable documented costs and
expenses of the Agent or the Lenders, (i) as required under Section 12.5 of the
Credit Agreement and (ii) as necessary to protect the Collateral or to exercise
any rights or remedies under this Security Agreement or with respect to any
Collateral. All of the foregoing costs and expenses shall constitute Secured
Obligations hereunder.
13. Continuing Agreement.
(a) This Security Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect
so long as the Credit Agreement is in effect or any amounts payable
thereunder or under any other Credit Document or any Letter of Credit
shall remain outstanding, and until all of the Commitments thereunder
shall have terminated (other than any obligations with respect to the
indemnities and the representations and warranties set forth in the
Credit Documents). Upon such payment and termination, this Security
Agreement shall be automatically terminated and, the Agent and the
Lenders shall, upon the request and at the expense of the Obligors,
forthwith release all of its liens and security interests hereunder
and shall execute and deliver all UCC termination statements and/or
other documents reasonably requested by the Obligors evidencing such
termination. Notwithstanding the foregoing all releases and
indemnities provided hereunder shall survive termination of this
Security Agreement.
(b) This Security Agreement shall continue to be
effective or be automatically reinstated, as the case may be, if at
any time payment, in whole or in part, of any of the Secured
Obligations is rescinded or must otherwise be restored or returned by
the Agent or any Lender as a preference, fraudulent conveyance or
otherwise under any bankruptcy, insolvency or similar law, all as
though such payment had not been made; provided that in the event
payment of all or any part of the Secured Obligations is rescinded or
must be restored or returned, all reasonable costs and expenses
(including without limitation any reasonable legal fees and
disbursements) incurred by the Agent or any Lender in defending and
enforcing such reinstatement shall be deemed to be included as a part
of the Secured Obligations.
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<PAGE> 18
14. Amendments; Waivers; Modifications. This Security Agreement
and the provisions hereof may not be amended, waived, modified, changed,
discharged or terminated except as set forth in Section 12.6 of the Credit
Agreement.
15. Successors in Interest. This Security Agreement shall create
a continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the
Agent and the Lenders and their successors and assigns; provided, however, that
none of the Obligors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement. To the fullest extent permitted by law, each
Obligor hereby releases the Agent and each Lender, and its successors and
assigns, from any liability for any act or omission relating to this Security
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent, or such Lender, or its officers,
employees or agents.
16. Notices. All notices required or permitted to be given under
this Security Agreement shall be in conformance with Section 12.1 of the Credit
Agreement.
17. Counterparts. This Security Agreement may be executed in any
number of counterparts, each of which where so executed and delivered shall be
an original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
18. Headings. The headings of the sections and subsections hereof
are provided for convenience only and shall not in any way affect the meaning
or construction of any provision of this Security Agreement.
19. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS SECURITY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. Any legal action or proceeding with respect to this
Security Agreement may be brought in the courts of the State of North
Carolina, or of the United States for the Western District of North
Carolina, and, by execution and delivery of this Security Agreement,
each Obligor hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of such
courts. Each Obligor further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to it at the address for notices pursuant to
Section 12.1 of the Credit Agreement, such service to become
effective 30 days after such mailing. Nothing herein shall affect the
right of the Agent to serve process in any other manner permitted
by law or to commence legal proceedings or to otherwise proceed
against any Obligor in any other jurisdiction.
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<PAGE> 19
(b) Each Obligor hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection
with this Security Agreement brought in the courts referred to in
subsection (a) hereof and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an
inconvenient forum.
20. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
21. Severability. If any provision of any of the Security
Agreement is determined to be illegal, invalid or unenforceable, such provision
shall be fully severable and the remaining provisions shall remain in full
force and effect and shall be construed without giving effect to the illegal,
invalid or unenforceable provisions.
22. Entirety. This Security Agreement and the other Credit
Documents represent the entire agreement of the parties hereto and thereto, and
supersede all prior agreements and understandings, oral or written, if any,
including any commitment letters or correspondence relating to the Credit
Documents or the transactions contemplated herein and therein.
23. Survival. All representations and warranties of the Obligors
hereunder shall survive the execution and delivery of this Security Agreement
and the other Credit Documents, the delivery of the Notes and the making of the
Loans and the issuance of the Letters of Credit under the Credit Agreement.
24. Other Security. To the extent that any of the Secured
Obligations are now or hereafter secured by property other than the Collateral
(including, without limitation, real property and securities owned by an
Obligor), or by a guarantee, endorsement or property of any other Person, then
the Agent and the Lenders shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence of any Event of Default,
and the Agent and the Lenders have the right, in their sole discretion, to
determine which rights, security, liens, security interests or remedies the
Agent and the Lenders shall at any time pursue, relinquish, subordinate, modify
or take with respect thereto, without in any way modifying or affecting any of
them or any of the Agent's and the Lenders' rights or the Secured Obligations
under this Security Agreement or under any other of the Credit Documents.
25. Joint and Several Obligations of Obligors.
(a) Subject to clause (c), each of the Obligors is accepting
joint and several liability hereunder in consideration of the
financial accommodation to be provided by the Lenders under the Credit
Agreement, for the mutual benefit, directly and indirectly, of
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<PAGE> 20
each of the Obligors and in consideration of the undertakings of each
of the Obligors to accept joint and several liability for the
obligations of each of them.
(b) Subject to clause (c), each of the Obligors jointly and
severally hereby irrevocably and unconditionally accepts, not merely
as a surety but also as a co-debtor, joint and several liability with
the other Obligors with respect to the payment and performance of all
of the Secured Obligations arising under this Security Agreement and
the other Credit Documents, it being the intention of the parties
hereto that all the Obligations shall be the joint and several
obligations of each of the Obligors without preferences or distinction
among them.
(c) Notwithstanding any provision to the contrary
contained herein or in any other of the Credit Documents,
(i) to the extent the obligations of a Guarantor
shall be adjudicated to be invalid or unenforceable for any
reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent
conveyances or transfers) then the obligations of each
Guarantor hereunder shall be limited to the maximum amount
that is permissible under applicable law (whether federal or
state and including, without limitation, the Bankruptcy Code),
and
(ii) the obligations of Holdings hereunder shall
be limited hereunder and in all the Credit Documents, in the
aggregate, to an amount equal to $153,000,000.
26. Rights of Required Lenders. All rights of the Agent
hereunder, if not exercised by the Agent, may be exercised by the Required
Lenders.
[remainder of page intentionally left blank]
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<PAGE> 21
Each of the parties hereto has caused a counterpart of this Amended
and Restated Security Agreement to be duly executed and delivered as of the
date first above written.
BORROWER: IPC, INC.
a Delaware corporation
By:_____________________
Name:___________________
Title:__________________
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<PAGE> 22
GUARANTORS: IVEX PACKAGING CORPORATION,
a Delaware corporation
By:______________________
Name:____________________
Title:___________________
IVEX PAPER MILL CORPORATION,
a Delaware corporation
IPMC HOLDING CORPORATION,
a Delaware corporation
IPMC, INC.,
a Delaware corporation
VALLEY EXPRESS LINES, INC.,
a Delaware corporation
KAMA OF ILLINOIS CORPORATION,
a Delaware corporation
PACKAGING PRODUCTS, INC.,
a Delaware corporation
CFI INDUSTRIES, INC.,
a Delaware corporation
PLASTOFILM INDUSTRIES, INC.,
a Delaware corporation
CFI RECYCLING, INC.,
a Delaware corporation
TRIO PRODUCTS, INC.,
a Delaware corporation
By:________________________
Name:______________________
Title:_____________________ of each of
the above named Guarantors
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<PAGE> 23
Accepted and agreed to as of the date first above written.
NATIONSBANK, N.A., as Agent
By:_____________________
Name:___________________
Title:__________________
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<PAGE> 24
SCHEDULE 6(f)-1
to
Amended and Restated
Security Agreement
dated as of March 24, 1997
in favor of NationsBank, N.A.,
as Agent
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
COPYRIGHTS
United States Copyright Office
Gentlemen:
Please be advised that pursuant to the Amended and Restated Security Agreement
dated as of March 24, 1997 (as the same may be amended, modified, extended or
restated from time to time, the "Security Agreement") by and among the Obligors
party thereto (each an "Obligor" and collectively, the "Obligors") and
NationsBank, N.A., as Agent (the "Agent") for the lenders referenced therein
(the "Lenders"), the undersigned Obligor has granted a continuing security
interest in and continuing lien upon, the copyrights and copyright applications
shown below to the Agent for the ratable benefit of the Lenders:
COPYRIGHTS
Date of
Copyright No. Description of Copyright Copyright
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<PAGE> 25
Copyright Applications
Copyright Description of Copyright Date of Copyright
Applications No. Applied For Applications
The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest in the attached copyrights and
copyright applications (i) may only be terminated in accordance with the terms
of the Security Agreement and (ii) is not to be construed as an assignment of
any copyright or copyright application.
Very truly yours,
__________________________________
[Obligor]
By:___________________________
Name:_________________________
Title:________________________
Acknowledged and Accepted:
NATIONSBANK, N.A., as Agent
By:__________________________
Name:________________________
Title:_______________________
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<PAGE> 26
SCHEDULE 6(f)-2
to
Amended and Restated
Security Agreement
dated as of March 24, 1997
in favor of NationsBank, N.A.,
as Agent
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
PATENTS
United States Patent and Trademark Office
Gentlemen:
Please be advised that pursuant to the Amended and Restated Security Agreement
dated as of March 24, 1997 (as the same may be amended, modified, extended or
restated from time to time, the "Security Agreement") by and among the Obligors
party thereto (each an "Obligor" and collectively, the "Obligors") and
NationsBank, N.A., as Agent (the "Agent") for the lenders referenced therein
(the "Lenders"), the undersigned Obligor has granted a continuing security
interest in and continuing lien upon, the patents and patent applications shown
below to the Agent for the ratable benefit of the Lenders:
PATENTS
Description of Patent Date of
Patent No. Item Patent
Patent Applications
Patent Description of Patent Date of Patent
Applications No. Applied For Applications
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<PAGE> 27
The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the attached patents and patent
applications (i) may only be terminated in accordance with the terms of the
Security Agreement and (ii) is not to be construed as an assignment of any
patent or patent application.
Very truly yours,
__________________________________
[Obligor]
By:__________________________
Name:________________________
Title:_______________________
Acknowledged and Accepted:
NATIONSBANK, N.A., as Agent
By:__________________________
Name:________________________
Title:_______________________
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<PAGE> 28
SCHEDULE 6(f)-3
to
Amended and Restated
Security Agreement
dated as of March 24, 1997
in favor of NationsBank, N.A.,
as Agent
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
TRADEMARKS
United States Patent and Trademark Office
Gentlemen:
Please be advised that pursuant to the Amended and Restated Security Agreement
dated as of March 24, 1997 (as the same may be amended, modified, extended or
restated from time to time, the "Security Agreement") by and among the Obligors
party thereto (each an "Obligor" and collectively, the "Obligors") and
NationsBank, N.A., as Agent (the "Agent") for the lenders referenced therein
(the "Lenders"), the undersigned Obligor has granted a continuing security
interest in and continuing lien upon, the trademarks and trademark applications
shown below to the Agent for the ratable benefit of the Lenders:
TRADEMARKS
Description of Trademark Date of
Trademark No. Item Trademark
Trademark Applications
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<PAGE> 29
Trademark Description of Trademark Date of Trademark
Applications No. Applied For Applications
The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the attached trademarks and trademark
applications (i) may only be terminated in accordance with the terms of the
Security Agreement and (ii) is not to be construed as an assignment of any
trademark or trademark application.
Very truly yours,
__________________________________
[Obligor]
By:___________________________
Name:_________________________
Title:________________________
Acknowledged and Accepted:
NATIONSBANK, N.A., as Agent
By:__________________________
Name:________________________
Title:_______________________
-31-
<PAGE> 1
EXHIBIT 10.46
LEASE AGREEMENT
(Tax Retention Operating Lease)
Dated as of December 5, 1996
between
STATE STREET BANK AND TRUST COMPANY,
not individually,
but solely as the Owner Trustee
under the IPC Real Estate Trust 1996-1,
as Lessor
IPC, INC.,
as Lessee
________________________________________________________________________________
This Lease Agreement is subject to a security interest in favor of NationsBanc
Leasing Corporation of North Carolina, as the Agent (the "Agent") under a
Security Agreement dated as of December 5, 1996, between State Street Bank and
Trust Company, not individually except as expressly stated therein, but solely
as the Owner Trustee under the IPC Real Estate Trust 1996-1 and the Agent, as
amended, modified, extended, supplemented, restated and/or replaced from time
to time in accordance with the applicable provisions thereof. This Lease
Agreement has been executed in several counterparts. To the extent, if any,
that this Lease Agreement constitutes chattel paper (as such term is defined in
the Uniform Commercial Code as in effect in any applicable jurisdiction), no
security interest in this Lease Agreement may be created through the transfer
or possession of any counterpart other than the original counterpart containing
the receipt therefor executed by the Agent on the signature page hereof.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation . . . . . . . . . . . . . . . . . 1
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Property . . . . . . . . . . . . . . . . . . . . 2
2.2 Lease Term . . . . . . . . . . . . . . . . . . . 2
2.3 Title . . . . . . . . . . . . . . . . . . . . . 2
2.4 Lease Supplements . . . . . . . . . . . . . . . 2
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Rent . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Payment of Basic Rent . . . . . . . . . . . . . 3
3.3 Supplemental Rent . . . . . . . . . . . . . . . 4
3.4 Performance on a Non-Business Day . . . . . . . 4
3.5 Rent Payment Provisions . . . . . . . . . . . . 4
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Taxes; Utility Charges . . . . . . . . . . . . . 5
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 Quiet Enjoyment . . . . . . . . . . . . . . . . 5
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.1 Net Lease . . . . . . . . . . . . . . . . . . . 6
6.2 No Termination or Abatement . . . . . . . . . . 6
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.1 Ownership of the Property . . . . . . . . . . . 7
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.1 Condition of the Property . . . . . . . . . . . 8
8.2 Possession and Use of the Property . . . . . . . 9
8.3 [Intentionally Omitted] . . . . . . . . . . . . 10
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1 Compliance With Legal Requirements and Insurance
Requirements . . . . . . . . . . . . . . . . . . 10
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.1 Maintenance and Repair; Return . . . . . . . . . 10
10.2 Environmental Inspection . . . . . . . . . . . . 12
10.3 Performance under Olympia Marble Lease and
Cross Easement Agreement. . . . . . . . . . . . 12
ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.1 Modifications . . . . . . . . . . . . . . . . . 13
ARTICLE XII . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.1 Warranty of Title . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE XIII . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13.1 Permitted Contests Other Than in Respect of
Indemnities . . . . . . . . . . . . . . . . . . 14
ARTICLE XIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.1 Commercial General Liability and Workers'
Compensation Insurance . . . . . . . . . . . . . 15
14.2 Permanent Hazard and Other Insurance . . . . . . 16
14.3 Coverage . . . . . . . . . . . . . . . . . . . . 16
ARTICLE XV . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.1 Casualty and Condemnation . . . . . . . . . . . 17
15.2 Environmental Matters . . . . . . . . . . . . . 20
15.3 Notice of Environmental Matters . . . . . . . . 21
ARTICLE XVI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16.1 Termination Upon Certain Events . . . . . . . . 21
16.2 Procedures . . . . . . . . . . . . . . . . . . . 21
ARTICLE XVII . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
17.1 Lease Events of Default . . . . . . . . . . . . 22
17.2 Surrender of Possession . . . . . . . . . . . . 24
17.3 Reletting . . . . . . . . . . . . . . . . . . . 25
17.4 Damages . . . . . . . . . . . . . . . . . . . . 25
17.5 Statutory Power of Sale. . . . . . . . . . . . . 26
17.6 Mandatory Purchase Option . . . . . . . . . . . 26
17.7 Environmental Costs . . . . . . . . . . . . . . 27
17.8 Waiver of Certain Rights . . . . . . . . . . . . 27
17.9 Assignment of Rights Under Contracts . . . . . . 27
17.10 Remedies Cumulative . . . . . . . . . . . . . . 27
17.11 Lessee's Purchase Option Upon Occurrence of
Lease Event of Default . . . . . . . . . . . . . 28
ARTICLE XVIII . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
18.1 Lessor's Right to Cure Lessee's Lease Defaults . 28
ARTICLE XIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
19.1 Provisions Relating to Lessee's Exercise of
its Purchase Option . . . . . . . . . . . . . . 28
19.2 No Purchase, Termination or Extension With
Respect to Less than All of the Property . . . . 29
ARTICLE XX . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
20.1 Purchase Option or Sale Option-General Provision 29
20.2 Lessee Purchase Option . . . . . . . . . . . . . 29
20.3 Third Party Sale Option . . . . . . . . . . . . 30
ARTICLE XXI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
21.1 [Intentionally Omitted] . . . . . . . . . . . . 31
ARTICLE XXII . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
22.1 Sale Procedure . . . . . . . . . . . . . . . . . 31
22.2 Application of Proceeds of Sale . . . . . . . . 33
22.3 Indemnity for Excessive Wear . . . . . . . . . . 34
22.4 Appraisal Procedure . . . . . . . . . . . . . . 34
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
22.5 Certain Obligations Continue . . . . . . . . . . 35
ARTICLE XXIII . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
23.1 Holding Over . . . . . . . . . . . . . . . . . . 35
ARTICLE XXIV . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
24.1 Risk of Loss . . . . . . . . . . . . . . . . . . 35
ARTICLE XXV . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
25.1 Assignment . . . . . . . . . . . . . . . . . . . 36
25.2 Subleases . . . . . . . . . . . . . . . . . . . 36
ARTICLE XXVI . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
26.1 No Waiver . . . . . . . . . . . . . . . . . . . 37
ARTICLE XXVII . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
27.1 Acceptance of Surrender . . . . . . . . . . . . 37
27.2 No Merger of Title . . . . . . . . . . . . . . . 37
ARTICLE XXVIII . . . . . . . . . . . . . . . . . . . . . . . . . . 37
28.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE XXIX . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
29.1 Notices . . . . . . . . . . . . . . . . . . . . 37
ARTICLE XXX . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
30.1 Miscellaneous . . . . . . . . . . . . . . . . . 39
30.2 Amendments and Modifications . . . . . . . . . . 39
30.3 Successors and Assigns . . . . . . . . . . . . . 39
30.4 Headings and Table of Contents . . . . . . . . . 39
30.5 Counterparts . . . . . . . . . . . . . . . . . . 40
30.6 GOVERNING LAW . . . . . . . . . . . . . . . . . 40
30.7 Calculation of Rent . . . . . . . . . . . . . . 40
30.8 Severability . . . . . . . . . . . . . . . . . . 40
30.9 Allocations between the Lender and the Holder . 40
30.10 Limitations on Recourse . . . . . . . . . . . . 40
30.11 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . 41
30.12 Exercise of Lessor Rights . . . . . . . . . . . 41
30.14 USURY SAVINGS PROVISION . . . . . . . . . . . . 41
SCHEDULE
- ---------
SCHEDULE I - Legal Description
EXHIBIT
- -------
EXHIBIT A - Lease Supplement No. ___
APPENDIX
- --------
APPENDIX A - Rules of Usage and Definitions
</TABLE>
iii
<PAGE> 5
LEASE AGREEMENT
(Tax Retention Operating Lease Agreement)
THIS LEASE AGREEMENT (Tax Retention Operating Lease) (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Lease"), dated as of December 5, 1996, is between STATE STREET BANK
AND TRUST COMPANY, a Massachusetts trust company, having its principal
corporate trust business at Two International Place, Boston, Massachusetts
02110, not individually, but solely as the Owner Trustee under the IPC Real
Estate Trust 1996-1, as lessor (the "Lessor"), and IPC, INC., a Delaware
corporation, having its principal place of business at 100 Tri-State Drive,
Suite 200, Lincolnshire, Illinois 60069, as lessee (the "Lessee").
W I T N E S S E T H:
A. WHEREAS, subject to the terms and conditions of the
Participation Agreement, Lessor will purchase the Property (as defined herein
below), which will (or may) have existing Improvements (as defined herein
below), thereon, from a third party designated by Lessee; and
B. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires
to lease from Lessor, the Property;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
1.1 Definitions. Capitalized terms used but not otherwise defined
in this Lease have the respective meanings specified in Appendix A attached to
this Lease.
1.2 Interpretation. The rules of usage set forth in Appendix A
attached hereto shall apply to this Lease.
<PAGE> 6
ARTICLE II
2.1 Property. Subject to the terms and conditions hereinafter set
forth and contained in the Lease Supplement relating to the Property, Lessor
hereby leases to Lessee and Lessee hereby leases from Lessor, the Property
located on the real property described in Schedule I attached hereto and made a
part hereof. To the extent Lessee exercises, or causes to be exercised, the
option of Lessee to purchase the property subject to the Option Agreement dated
as of the Closing Date between L&CP Realty Corporation and Lessee (the "Option
Property"), Lessee shall cause (a) good title to the Option Property to be
conveyed to Lessor pursuant to a deed (in form and substance satisfactory to
the Lessor and the Agent), (b) the Mortgage and the Security Agreement to be
modified to grant a mortgage lien and security interest, respectively, to the
Agent regarding the Option Property and (c) such other documentation to be
executed, delivered and recorded regarding the Option Property as is reasonably
requested by Lessor or the Agent. Thereafter, without further action, the
Option Property shall be deemed to constitute a part of the Property for
purposes of this Lease and all other Operative Agreements.
2.2 Lease Term. The basic term of this Lease with respect to the
Property (the "Basic Term") shall begin upon the Closing Date (the "Basic Term
Commencement Date") and shall end on the fifth annual anniversary of the
Closing Date (the "Basic Term Expiration Date"), unless the Basic Term is
earlier terminated in accordance with the provisions of this Lease.
Upon notice to Agent and Lessor in accordance with Article XX hereof
and receipt of the prior written consent of the Holder and the Lender, Lessee
may exercise its Extension Option under Article XX hereof, and the Term of this
Lease shall be extended for an additional one (1) year, but not to exceed three
(3) such extension terms (each an "Extension Term").
2.3 Title. Subject to the first sentence of Section 12.1, the
Property is leased to Lessee without any representation or warranty, express or
implied, by Lessor and subject to the rights of parties in possession (if any),
the existing state of title (including without limitation the Permitted
Exceptions) and all applicable Legal Requirements. Lessee shall in no event
have any recourse against Lessor for any defect in Lessor's title to the
Property or any interest of Lessee therein other than for Lessor Liens.
2.4 Lease Supplements. On or prior to the Basic Term Commencement
Date, Lessee and Lessor shall execute and deliver a Lease Supplement for the
Property effective as of the Basic Term Commencement Date in substantially the
form of Exhibit A hereto.
2.5 Olympia Marble Lease. Pursuant to the execution of the
Assignment and Assumption Agreement, the parties agree that Lessor shall be
deemed the "lessor" under the Olympia Marble
2
<PAGE> 7
Lease. Lessor hereby appoints Lessee as agent for Lessor to act in all
respects as the "lessor" thereunder (including without limitation for purposes
of collecting and retaining for the account of Lessee all payments made to
"lessor" thereunder, paying all amounts owed by "lessor" thereunder and
performing all obligations of "lessor" thereunder); provided, upon the
occurrence of a Lease Event of Default and/or the termination of this Lease for
any reason, the agency appointment of Lessee under this Section 2.5 shall
automatically terminate. Upon the exercise of the Purchase Option or the Sale
Option or any purchase of the Property by Lessee in accordance with the
provisions of Section 17.11, Lessor shall assign its right, title and interest
in the Olympia Marble Lease to Lessee or a third party purchaser, as
applicable, free and clear of the Lien of this Lease, the Lien of the Credit
Documents and any Lessor Liens.
ARTICLE III
3.1 Rent.
(a) Lessee shall pay Basic Rent to Lessor in arrears on
each Payment Date during the Term, and on any date on which this Lease
shall terminate; provided, to the extent this Lease terminates on a
day which is not a Payment Date, Lessee shall also pay Basic Rent
(calculated on a per diem basis) for the period from the last
occurring Payment Date to such date of termination; provided, further,
at any time Lessor makes a payment of Termination Value (including
without limitation any Basic Rent then due and payable or accrued),
Lessee shall not be obligated under this Section 3.1(a) to pay such
Basic Rent a second time.
(b) Basic Rent shall be due and payable in lawful money
of the United States and shall be paid by wire transfer of immediately
available funds on the due date therefor (or within the applicable
grace period) to such account or accounts at such bank or banks as
Lessor shall from time to time direct in writing.
(c) Lessee's inability or failure to take possession of
all or any portion of the Property when delivered by Lessor, whether
or not attributable to any act or omission of Lessor, Lessee or any
other Person or for any other reason whatsoever, shall not delay or
otherwise affect Lessee's obligation to pay Rent for the Property in
accordance with the terms of this Lease.
3.2 Payment of Basic Rent. Basic Rent shall be paid absolutely
net to Lessor or its designee, so that this Lease shall yield to Lessor the
full amount thereof, without setoff, deduction or reduction.
3
<PAGE> 8
3.3 Supplemental Rent. Lessee shall pay to Lessor or the Person
entitled thereto, as applicable, any and all Supplemental Rent when and as the
same shall become due and payable, and if Lessee fails to pay any Supplemental
Rent, Lessor shall have all rights, powers and remedies provided for herein or
by law or equity or otherwise in the case of nonpayment of Basic Rent. All
such payments of Supplemental Rent shall be in the full amount thereof, without
setoff, deduction or reduction. Lessee shall pay to Lessor or the Person
entitled thereto, as applicable, as Supplemental Rent due and owing to Lessor,
among other things, on demand, to the extent permitted by applicable Legal
Requirements, (a) any and all unpaid fees, charges, payments, amounts and other
obligations (other than the obligations of Lessor to pay the principal amount
of and interest (excluding interest calculated at the Overdue Rate) on the Loan
and the Holder Amount) due and owing by Lessor, in any capacity, under the
Credit Agreement, under the Trust Agreement and/or under any other Operative
Agreement (including without limitation any amounts owing to the Lender under
Section 2.11, Section 2.12, Section 2.13 and Section 9.5 of the Credit
Agreement and any amounts owing to the Holder under Section 3.9 or Section 3.10
of the Trust Agreement) and (b) interest at the applicable Overdue Rate on any
installment of Basic Rent not paid when due (subject to the applicable grace
period) for the period for which the same shall be overdue and on any payment
of Supplemental Rent not paid when due or demanded by the appropriate Person
(subject to any applicable grace period) for the period from the due date or
the date of any such demand, as the case may be, until the same shall be paid;
provided, however, Lessee shall not be responsible for the payment of any such
amounts arising out of Lessor's failure to pay over any amounts Lessor has
received from Lessee in accordance with the Operative Agreements to satisfy the
obligations of Lessee (as Supplemental Rent or otherwise) under the Credit
Agreement, the Trust Agreement and/or any other Operative Agreement. The
expiration or other termination of Lessee's obligations to pay Basic Rent
hereunder shall not limit or modify the obligations of Lessee with respect to
Supplemental Rent. Unless expressly provided otherwise in this Lease, in the
event of any failure on the part of Lessee to pay and discharge any
Supplemental Rent as and when due, Lessee shall also promptly pay and discharge
any fine, penalty, interest or cost which may be assessed or added for
nonpayment or late payment of such Supplemental Rent, all of which shall also
constitute Supplemental Rent.
3.4 Performance on a Non-Business Day. If any Basic Rent is
required hereunder on a day that is not a Business Day, then such Basic Rent
shall be due on the corresponding Scheduled Interest Payment Date (subject to
Section 2.10 of the Credit Agreement). If any Supplemental Rent is required
hereunder on a day that is not a Business Day, then such Supplemental Rent
shall be due on the next succeeding Business Day.
3.5 Rent Payment Provisions. Lessee shall make payment of all
Basic Rent and Supplemental Rent when due (subject to the applicable grace
periods) regardless of whether any of the
4
<PAGE> 9
Operative Agreements pursuant to which same is calculated and is owing shall
have been rejected, avoided or disavowed in any bankruptcy or insolvency
proceeding involving any of the parties to any of the Operative Agreements.
Such provisions of such Operative Agreements and their related definitions are
incorporated herein by reference and shall survive any termination, amendment
or rejection of any such Operative Agreements.
ARTICLE IV
4.1 Taxes; Utility Charges. Lessee shall pay or cause to be paid
all Impositions with respect to the Property and/or the use, occupancy,
operation, repair, access, maintenance or operation thereof and all charges for
electricity, power, gas, oil, water, telephone, sanitary sewer service and all
other rents, utilities and operating expenses of any kind or type used in or on
the Property and related real property during the Term, except that Lessee
shall not be responsible for paying any such Impositions attributable to a
transfer by Lessor of the Property or any interest therein, unless such
transfer arises as a result of (a) the occurrence of an Event of Default (b)
the exercise by Lessee of its Purchase Option or Sale Option pursuant to
Article XX hereof or (c) any other transfer consented to by Lessee. Upon
Lessor's request, Lessee shall provide from time to time Lessor with evidence
of all such payments referenced in the foregoing sentence. Lessee shall be
entitled to retain any credit or refund received by Lessee in connection with
any Imposition or utility charge paid by Lessee. Unless an Event of Default
shall have occurred and be continuing, the amount of any credit or refund
received by Lessor in connection with any Imposition or utility charge paid by
Lessee, net of the costs and expenses incurred by Lessor in obtaining such
credit or refund, shall be promptly paid over to Lessee. All charges for
Impositions or utilities imposed with respect to the Property during any period
occurring before the expiration or termination of this Lease but ending
thereafter shall be adjusted and prorated on a daily basis between Lessor and
Lessee and shall be paid by Lessor. Upon receipt of a copy of the
documentation of Lessor evidencing such payments, Lessee shall promptly
reimburse Lessor for Lessee's pro rata share of such payments.
ARTICLE V
5.1 Quiet Enjoyment. Subject to the rights of Lessor contained in
Sections 17.2, 17.3 and 20.3 and the other terms of this Lease and the other
Operative Agreements and so long as no Event of Default shall have occurred and
be continuing, Lessee shall peaceably and quietly have, hold and enjoy the
Property for the applicable Term, free of any claim or other action by Lessor
or anyone rightfully claiming by, through or under Lessor (other
5
<PAGE> 10
than Lessee) with respect to any matters arising from and after the Basic Term
Commencement Date.
ARTICLE VI
6.1 Net Lease. This Lease shall constitute a net lease, and the
obligations of Lessee hereunder are absolute and unconditional. Lessee shall
pay all operating expenses arising out of the use, operation and/or occupancy
of the Property. Any present or future law to the contrary notwithstanding,
this Lease shall not terminate, nor shall Lessee be entitled to any abatement,
suspension, deferment, reduction, setoff, counterclaim, or defense with respect
to the Rent, nor shall the obligations of Lessee hereunder be affected (except
as expressly herein permitted and by performance of the obligations in
connection therewith) for any reason whatsoever, including without limitation
by reason of: (a) any damage to or destruction of the Property or any part
thereof; (b) any taking of the Property or any part thereof or interest therein
by Condemnation or otherwise; (c) any prohibition, limitation, restriction or
prevention of Lessee's use, occupancy or enjoyment of the Property or any part
thereof, or any interference with such use, occupancy or enjoyment by any
Person or for any other reason; (d) any title defect, Lien or any matter
affecting title to the Property; (e) any eviction by paramount title or
otherwise; (f) any default by Lessor hereunder; (g) any action for bankruptcy,
insolvency, reorganization, liquidation, dissolution or other proceeding
relating to or affecting the Agent, the Lender, Lessor, Lessee, the Holder or
any Governmental Authority; (h) the impossibility or illegality of performance
by Lessor, Lessee or both; (i) any action of any Governmental Authority or any
other Person; (j) Lessee's acquisition of ownership of all or part of the
Property; (k) breach of any warranty or representation with respect to the
Property or any Operative Agreement; (l) any defect in the condition, quality
or fitness for use of the Property or any part thereof; or (m) any other cause
or circumstance whether similar or dissimilar to the foregoing and whether or
not Lessee shall have notice or knowledge of any of the foregoing. The parties
intend that the obligations of Lessee hereunder shall be covenants, agreements
and obligations that are separate and independent from any obligations of
Lessor hereunder and shall continue unaffected unless such covenants,
agreements and obligations shall have been modified or terminated in accordance
with an express provision of this Lease. Notwithstanding the other provisions
of this Lease but subject to Section 30.10, Lessee may seek damages from Lessor
for breach by Lessor of its obligations under this Lease in an independent
lawsuit, at law, in equity or otherwise. Lessor and Lessee acknowledge and
agree that the provisions of this Section 6.1 have been specifically reviewed
and subject to negotiation.
6.2 No Termination or Abatement. Lessee shall remain obligated
under this Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Lease,
6
<PAGE> 11
notwithstanding any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution, or other proceeding affecting any Person or any
Governmental Authority, or any action with respect to this Lease or any
Operative Agreement which may be taken by any trustee, receiver or liquidator
of any Person or any Governmental Authority or by any court with respect to any
Person, or any Governmental Authority. Lessee hereby waives all right (a) to
terminate or surrender this Lease (except as permitted under the terms of the
Operative Agreements) or (b) to avail itself of any abatement, suspension,
deferment, reduction, setoff, counterclaim or defense with respect to any Rent.
Lessee shall remain obligated under this Lease in accordance with its terms and
Lessee hereby waives any and all rights now or hereafter conferred by statute
or otherwise to modify or to avoid strict compliance with its obligations under
this Lease. Notwithstanding any such statute or otherwise, Lessee shall be
bound by all of the terms and conditions contained in this Lease.
ARTICLE VII
7.1 Ownership of the Property.
(a) Lessor and Lessee intend that (i) for financial
accounting purposes with respect to Lessee (A) this Lease will be
treated as an "operating lease" pursuant to Statement of Financial
Accounting Standards No. 13, as amended, (B) Lessor will be treated as
the owner and lessor of the Property and (C) Lessee will be treated as
the lessee of the Property, but (ii) for federal and all state and
local income tax purposes, bankruptcy purposes, regulatory purposes,
commercial law and real estate purposes and all other purposes (A)
this Lease will be treated as a financing arrangement and (B) Lessee
will be treated as the owner of the Property and will be entitled to
all tax benefits ordinarily available to owners of property similar to
the Property for such tax purposes. Notwithstanding the foregoing,
neither party hereto has made, or shall be deemed to have made, any
representation or warranty as to the availability of any of the
foregoing treatments under applicable accounting rules, tax,
bankruptcy, regulatory, commercial or real estate law or under any
other set of rules. Lessee shall claim the cost recovery deductions
associated with the Property, and Lessor shall not, to the extent not
prohibited by Law, take on its tax return a position inconsistent with
Lessee's claim of such deductions. To the extent reasonably requested
by Lessee, Lessor shall cooperate with Lessee to allow Lessee to
obtain the contemplated tax benefits of this Lease referenced above,
including without limitation the filing of any statements with respect
to tax abatements or requirements; provided, any such statements
and/or other documentation so required of Lessor (1) shall be produced
by Lessee for signature by Lessor and (2) shall be reasonably
acceptable
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to Lessor and any professionals selected by Lessor for such review.
Lessee shall pay all out-of-pocket amounts arising with respect to the
matters described in the preceding sentence, including without
limitation the fees and out-of-pocket expenses of any and all
professionals working on behalf of Lessor with regard to any such
matter.
(b) For all purposes other than as set forth in Section
7.1(a), Lessor and Lessee intend this Lease to constitute a finance
lease and not a true lease. Lessor and Lessee further intend and
agree that, for the purpose of securing Lessee's obligations
hereunder, (i) this Lease shall be deemed to be a security agreement
and financing statement within the meaning of Article 9 of the Uniform
Commercial Code with respect to the Property and all proceeds
(including without limitation insurance proceeds thereof) to the
extent such is personal property and an irrevocable grant and
conveyance of a lien and mortgage on the Property and all proceeds
(including without limitation insurance proceeds thereof) to the
extent such is real property; (ii) the acquisition of title in the
Property referenced in Article II shall be deemed to be a grant by
Lessee to Lessor of, and Lessee hereby grants to Lessor, a lien on and
security interest, mortgage lien and deed of trust in all of Lessee's
right, title and interest in and to the Property and all proceeds
(including without limitation insurance proceeds thereof) of the
conversion, voluntary or involuntary, of the foregoing into cash,
investments, securities or other property, whether in the form of
cash, investments, securities or other property, and an assignment of
all rents, profits and income produced by the Property; and (iii)
notifications to Persons holding such property, and acknowledgements,
receipts or confirmations from financial intermediaries, bankers or
agents (as applicable) of Lessee shall be deemed to have been given
for the purpose of perfecting such lien, security interest, mortgage
lien and deed of trust under applicable law. Lessor and Lessee shall
promptly take such actions as may be necessary or advisable in either
party's opinion (including without limitation the filing of Uniform
Commercial Code fixture filings and notices of this Lease and the
various Lease Supplements) to ensure that the lien, security interest,
mortgage lien and deed of trust in the Property and the other items
referenced above will be deemed to be a perfected lien, security
interest, mortgage lien and deed of trust of first priority under
applicable law and will be maintained as such throughout the Term.
ARTICLE VIII
8.1 Condition of the Property. LESSEE ACKNOWLEDGES AND AGREES
THAT IT IS LEASING THE PROPERTY "AS-IS WHERE-IS" WITHOUT REPRESENTATION,
WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY
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LESSOR AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE
RIGHTS OF ANY PARTIES IN POSSESSION THEREOF (IF ANY), (C) ANY STATE OF FACTS
REGARDING ITS PHYSICAL CONDITION OR WHICH AN ACCURATE SURVEY MIGHT SHOW, (D)
ALL APPLICABLE LEGAL REQUIREMENTS AND (E) VIOLATIONS OF LEGAL REQUIREMENTS
WHICH MAY EXIST ON THE DATE HEREOF AND/OR THE DATE OF THE APPLICABLE LEASE
SUPPLEMENT. NEITHER LESSOR NOR THE AGENT NOR THE LENDER NOR THE HOLDER HAS
MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT
(EXPRESS OR IMPLIED) EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES MADE BY
LESSOR IN THE FIRST SENTENCE OF SECTION 12.1 OR SHALL BE DEEMED TO HAVE ANY
LIABILITY WHATSOEVER AS TO THE TITLE, VALUE, HABITABILITY, USE, CONDITION,
DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF THE PROPERTY (OR ANY
PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY (OR ANY PART THEREOF), AND
NEITHER LESSOR NOR THE AGENT NOR THE LENDER NOR THE HOLDER SHALL BE LIABLE FOR
ANY LATENT, HIDDEN, OR PATENT DEFECT THEREON OR THE FAILURE OF THE PROPERTY, OR
ANY PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT. LESSEE HAS OR PRIOR TO
THE BASIC TERM COMMENCEMENT DATE WILL HAVE BEEN AFFORDED FULL OPPORTUNITY TO
INSPECT THE PROPERTY AND THE IMPROVEMENTS THEREON (IF ANY), IS OR WILL BE
(INSOFAR AS LESSOR, THE AGENT, THE LENDER AND THE HOLDER ARE CONCERNED)
SATISFIED WITH THE RESULTS OF ITS INSPECTIONS AND IS ENTERING INTO THIS LEASE
SOLELY ON THE BASIS OF THE RESULTS OF ITS OWN INSPECTIONS, AND ALL RISKS
INCIDENT TO THE MATTERS DESCRIBED IN THE PRECEDING SENTENCE, AS BETWEEN LESSOR,
THE AGENT, THE LENDER AND THE HOLDER, ON THE ONE (1) HAND, AND LESSEE, ON THE
OTHER HAND, ARE TO BE BORNE BY LESSEE.
8.2 Possession and Use of the Property.
(a) At all times during the Term, the Property shall be a
Permitted Facility and shall be used by Lessee in the ordinary course
of its business. Lessee shall pay, or cause to be paid, all charges
and costs required in connection with the use of the Property as
contemplated by this Lease. Lessee shall not commit or permit any
waste of the Property or any part thereof.
(b) The address stated in Section 29.1 of this Lease is
the chief place of business and chief executive office of Lessee (as
such terms are used in Section 9-103(3) of the Uniform Commercial Code
of any applicable jurisdiction), and Lessee will provide Lessor with
prior written notice of any change of location of its chief place of
business or chief executive office. Regarding the Property, the Lease
Supplement correctly identifies the initial location of the
Improvements and contains an accurate legal description for the
related parcel of Land. Lessee has no other places of business where
the Improvements will be located other than those identified on the
Lease Supplement.
(c) [Intentionally Omitted].
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(d) On the Basic Term Commencement Date, Lessor and
Lessee shall execute a Lease Supplement which shall contain an
Improvement Schedule that has a complete description of each
Improvement and a legal description of the Land to be leased hereunder
as of such date. Simultaneously with the execution and delivery of
each Lease Supplement, Improvements, Land and the remainder of the
Property shall be deemed to have been accepted by Lessee for all
purposes of this Lease and to be subject to this Lease.
(e) At all times during the Term with respect to the
Property, Lessee will comply with all obligations under, and (to the
extent no Event of Default exists and provided that such exercise will
not impair the value, utility or remaining useful life of the
Property) shall be permitted to exercise all rights and remedies
under, all operation and easement agreements and related or similar
agreements applicable to the Property.
8.3 [Intentionally Omitted].
ARTICLE IX
9.1 Compliance With Legal Requirements and Insurance Requirements.
Subject to the terms of Article XIII relating to permitted contests, Lessee, at
its sole cost and expense, shall (a) comply with all applicable Legal
Requirements (including without limitation all Environmental Laws), and all
Insurance Requirements relating to the Property, including without limitation
the acquisition, installation, testing, use, development, construction,
operation, maintenance, repair, refurbishment and restoration thereof, whether
or not compliance therewith shall require structural or extraordinary changes
in the Property or interfere with the use and enjoyment of the Property, except
to the extent that the failure to so comply will not, individually or in the
aggregate, have a Material Adverse Effect, and (b) procure, maintain and comply
with all material licenses, permits, orders, approvals, consents and other
authorizations required for the acquisition, installation, testing, use,
development, construction, operation, maintenance, repair, refurbishment and
restoration of the Property. Lessor agrees to take such actions as may be
reasonably requested by Lessee in connection with the compliance by Lessee of
its obligations under this Section 9.1.
ARTICLE X
10.1 Maintenance and Repair; Return.
(a) Lessee, at its sole cost and expense, shall maintain
the Property in good condition, repair and working order (ordinary
wear and tear excepted) and in the repair
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and condition as when originally delivered to Lessor and make all
necessary repairs thereto and replacements thereof, of every kind and
nature whatsoever, whether interior or exterior, ordinary or
extraordinary, structural or nonstructural or foreseen or unforeseen,
in each case as required by all Legal Requirements, Insurance
Requirements, and manufacturer's specifications and standards and on a
basis consistent with the operation and maintenance of properties
comparable in type and function to the Property, such that the
Property is capable of being immediately utilized by a third party and
in compliance with standard industry practice subject, however, to the
provisions of Article XV with respect to Casualty and Condemnation.
(b) Lessee shall not use or locate any component of the
Property outside of Massachusetts. Lessee shall not move or relocate
any component of the Property beyond the boundaries of the Land
described in the Lease Supplement.
(c) If any component of the Property becomes worn out,
lost, destroyed, damaged beyond repair or otherwise permanently
rendered unfit for use and the failure to replace such component would
have a Material Adverse Effect, Lessee, at its own expense, will
within a reasonable time replace such component with a replacement
component which is free and clear of all Liens (other than Permitted
Liens) and has a value, utility and useful life at least equal to the
component replaced (assuming the component replaced had been
maintained and repaired in accordance with the requirements of this
Lease). All components which are added to the Property shall
immediately become the property of (and title thereto shall vest in)
Lessor and shall be deemed incorporated in the Property and subject to
the terms of this Lease as if originally leased hereunder.
(d) Upon reasonable advance notice, Lessor and its agents
shall have the right to inspect the Property and all maintenance
records with respect thereto at any reasonable time during normal
business hours but shall not, in the absence of an Event of Default,
materially disrupt the business of Lessee. Each such notice shall be
received by Lessee no less than 10 days in advance of the proposed
inspection date unless a Default or an Event of Default has occurred
and is continuing, in which case 3 days advance notice shall be deemed
reasonable.
(e) Lessee shall cause to be delivered to Lessor (at
Lessee's sole expense) one (1) or more additional Appraisals (or
reappraisals of Property) as Lessor may reasonably request if any one
(1) of Lessor, the Agent, the Trust Company, the Lender or the Holder
is required pursuant to any applicable Legal Requirement to obtain
such Appraisals (or reappraisals) and upon the occurrence and during
the continuation of any Event of Default.
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(f) Lessor shall under no circumstances be required to
build any improvements or install any equipment on the Property, make
any repairs, replacements, alterations or renewals of any nature or
description to the Property, make any expenditure whatsoever in
connection with this Lease or maintain the Property in any way.
Lessor shall not be required to maintain, repair or rebuild all or any
part of the Property, and Lessee waives the right to (i) require
Lessor to maintain, repair, or rebuild all or any part of the
Property, or (ii) make repairs at the expense of Lessor pursuant to
any Legal Requirement, Insurance Requirement, contract, agreement,
covenants, condition or restriction at any time in effect.
(g) Lessee shall, upon the expiration or earlier
termination of this Lease with respect to the Property, if Lessee
shall not have exercised its Purchase Option with respect to the
Property and purchased the Property, surrender the Property to Lessor
pursuant to (i) the exercise of certain remedies upon the occurrence
of a Lease Event of Default or (ii) the second paragraph of Section
22.1(a) hereof, or the third party purchaser, as the case may be,
subject to Lessee's obligations under this Lease (including without
limitation the obligations of Lessee at the time of such surrender
under Sections 9.1, 10.1(a)-(f), 10.2, 11.1, 12.1, 22.1 and 23.1).
10.2 Environmental Inspection. If Lessee has not given notice of
exercise of its Purchase Option on the Expiration Date pursuant to Section 20.1
or for whatever reason Lessee does not purchase the Property in accordance with
the terms of this Lease, then not more than one hundred twenty (120) days nor
less than sixty (60) days prior to the Expiration Date, Lessee at its expense
shall cause to be delivered to Lessor a Phase I environmental site assessment
recently prepared (no more than thirty (30) days prior to the date of delivery)
by an independent recognized professional reasonably acceptable to Lessor, the
Holder, the Lender and the Agent, and in form, scope and content reasonably
satisfactory to Lessor, the Holder, the Lender and the Agent.
10.3 Performance under Olympia Marble Lease and Cross Easement
Agreement. Lessee hereby agrees to pay all amounts and perform all obligations
owed by Lessor under the Olympia Marble Lease and the Cross Easement Agreement.
Lessor hereby assigns, conveys and transfers to Lessee all of the right, title
and interest of Lessor in and to the Olympia Marble Lease; provided, such
assignment, conveyance and transfer shall terminate and be of no further force
or effect without further action when and if the Property is either retained by
Lessor or sold to a third party upon termination of this Lease (including
without limitation upon the occurrence of a Casualty, the occurrence of an
Environmental Violation, the exercise of remedies, upon the occurrence of an
Event of Default and/or Lessee's exercise of its Sale Option); provided,
further, Lessee shall remain obligated to
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perform any and all obligations of Lessor under the Olympia Marble Lease
notwithstanding any such termination (referenced in the preceding proviso) of
the assignment, conveyance and transfer unless such termination is with respect
to Lessee's exercise of its Sale Option.
ARTICLE XI
11.1 Modifications. Lessee at its sole cost and expense, at any
time and from time to time without the consent of Lessor may make
modifications, alterations, renovations, improvements and additions to the
Property or any part thereof and substitutions and replacements therefor
(collectively, "Modifications"), and Lessee shall make any and all
Modifications required to be made pursuant to any Legal Requirement; provided,
that: (i) except for any Modification required to be made pursuant to a Legal
Requirement, no Modification shall materially impair the value, utility or
useful life of the Property from that which existed immediately prior to such
Modification; (ii) each Modification shall be done expeditiously and in a good
and workmanlike manner; (iii) Lessee shall comply with all Legal Requirements
(including without limitation all Environmental Laws) and Insurance
Requirements applicable to any Modification, including without limitation the
obtaining of all permits, licenses, consents and certificates of occupancy, and
the structural integrity of the Property shall not be adversely affected,
except to the extent that the failure to so comply will not, individually or in
the aggregate, have a Material Adverse Effect; (iv) to the extent required by
Section 14.2(a), Lessee shall maintain builders' risk insurance at all times
when a Modification is in progress; (v) subject to the terms of Article XIII
relating to permitted contests, Lessee shall pay all costs and expenses and
discharge any Liens arising with respect to any Modification; (vi) each
Modification shall comply with the requirements of this Lease (including
without limitation Sections 8.2 and 10.1); and (vii) no Improvement shall be
demolished or otherwise rendered unfit for use unless Lessee shall finance the
proposed replacement Modification outside of this lease facility. All
Modifications shall immediately and without further action upon their
incorporation into the Property (1) become property of Lessor, (2) be subject
to this Lease and (3) be titled in the name of Lessor. Lessee shall not remove
or attempt to remove any Modification from the Property. Lessee, at its own
cost and expense, will pay for the repairs of any damage to the Property caused
by the removal or attempted removal of any Modification.
ARTICLE XII
12.1 Warranty of Title.
(a) Lessor represents and warrants to Lessee that on the
Closing Date, Lessor shall have received whatever title
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to the Property that was conveyed to it pursuant to the Deed and the
Cross Easement Agreement, free of Lessor's Liens attributable to
Lessor. Lessee represents and warrants that title in the Property
shall immediately and without further action vest in and such shall
become the property of Lessor and be subject to the terms of this
Lease from and after the date hereof or such date of incorporation
into the Property. Lessee agrees that, subject to the terms of
Article XIII relating to permitted contests, Lessee shall not directly
or indirectly create or allow to remain, and shall promptly discharge
at its sole cost and expense, any Lien, defect, attachment, levy,
title retention agreement or claim upon the Property, any component
thereof or any Modifications or any Lien, attachment, levy or claim
with respect to the Rent or with respect to any amounts held by
Lessor, the Lender, the Agent or the Holder pursuant to any Operative
Agreement, other than Permitted Liens and Lessor Liens. Lessee shall
promptly notify Lessor in the event it receives actual knowledge that
a Lien other than a Permitted Lien or Lessor Lien has occurred with
respect to the Property, the Rent or any other such amounts, and
Lessee represents and warrants to, and covenants with, Lessor that the
Liens in favor of Lessor created by the Operative Agreements are first
priority perfected Liens subject only to Permitted Liens.
(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of Lessor, expressed or implied,
to or for the performance by any contractor, mechanic, laborer,
materialman, supplier or vendor of any labor or services or for the
furnishing of any materials for any construction, alteration,
addition, repair or demolition of or to the Property or any part
thereof. NOTICE IS HEREBY GIVEN THAT LESSOR IS NOT AND SHALL NOT BE
LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE
FURNISHED TO LESSEE, OR TO ANYONE HOLDING THE PROPERTY OR ANY PART
THEREOF THROUGH OR UNDER LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS
FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT
THE INTEREST OF LESSOR IN AND TO THE PROPERTY.
ARTICLE XIII
13.1 Permitted Contests Other Than in Respect of Indemnities.
Except to the extent otherwise provided for in Section 13 of the Participation
Agreement, Lessee, on its own or on Lessor's behalf but at Lessee's sole cost
and expense, may contest, by appropriate administrative or judicial proceedings
conducted in good faith and with due diligence, the amount, validity or
application, in whole or in part, of any Legal Requirement, or utility charges
payable pursuant to Section 4.1 or any Lien, attachment, levy, encumbrance or
encroachment, and Lessor agrees not to pay, settle or otherwise compromise any
such item unless Lessor has notified Lessee in writing of its
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intention to do so not less than thirty (30) days in advance. If such action
is required within such thirty (30) day period, Lessor shall give Lessee no
less than two (2) days written notice prior to taking such action. Lessor
further agrees not to pay, settle or otherwise compromise any such item,
provided, that (a) the commencement and continuation of such proceedings shall
suspend the collection of any such contested amount from, and suspend the
enforcement thereof against, the Property, Lessor, the Holder, the Agent and
the Lender; (b) there shall not be imposed a Lien (other than Permitted Liens)
on the Property and no part of the Property nor any Rent would be in any danger
of being sold, forfeited, lost or deferred; (c) at no time during the permitted
contest shall there be a risk of the imposition of criminal liability or
material civil liability on Lessor, the Holder, the Agent or the Lender for
failure to comply therewith; and (d) in the event that, at any time, there
shall be a material risk of extending the application of such Legal
Requirement, utility charge, Lien, attachment, levy, encumbrance or
encroachment beyond the end of the Term, then Lessee shall deliver to Lessor an
Officer's Certificate certifying as to the matters set forth in clauses (a),
(b) and (c) of this Section 13.1. Lessor, at Lessee's sole cost and expense,
shall execute and deliver to Lessee such authorizations and other documents as
may reasonably be required in connection with any such contest and, if
reasonably requested by Lessee, shall join as a party therein at Lessee's sole
cost and expense.
ARTICLE XIV
14.1 Commercial General Liability and Workers' Compensation
Insurance. During the Term Lessee shall procure and carry, at Lessee's sole
cost and expense, commercial general liability and umbrella liability insurance
for claims for injuries or death sustained by persons or damage to property
while on the Property and such other public liability coverages as are then
customarily carried by similarly situated companies conducting business similar
to that conducted by Lessee. Such insurance shall be on terms and in amounts
that are no less favorable than insurance maintained by Lessee with respect to
similar properties and equipment that it owns and are then carried by similarly
situated companies conducting business similar to that conducted by Lessee, and
in no event shall have a minimum combined single limit per occurrence coverage
(i) for commercial general liability of less than $1,000,000 and (ii) for
umbrella liability of less than $50,000,000. The policies shall name Lessee as
the insured and shall be endorsed to name Lessor, the Holder, the Agent and the
Lender as additional insureds. The policies shall also specifically provide
that such policies shall be considered primary insurance which shall apply to
any loss or claim before any contribution by any insurance which Lessor, the
Holder, the Agent or the Lender may have in force. During the Term, Lessee
shall, in the operation and use of the Property, maintain workers' compensation
insurance consistent with that carried by
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similarly situated companies conducting business similar to that conducted by
Lessee and containing minimum liability limits of no less than $1,000,000. In
the operation of the Property, Lessee shall comply with applicable workers'
compensation laws and protect Lessor, the Holder, the Agent and the Lender
against any liability under such laws.
14.2 Permanent Hazard and Other Insurance.
(a) During the Term Lessee shall keep the Property
insured against all risk of physical loss or damage by fire and other
risks and shall maintain builders' risk insurance during construction
of any Improvements or Modifications in each case in amounts no less
than the Property Cost as of the Closing Date on terms that (i) are no
less favorable than insurance covering other similar properties owned
by Lessee and (ii) are then carried by similarly situated companies
conducting business similar to that conducted by Lessee. The policies
shall name Lessee as the insured and shall be endorsed to name Lessor
as a named additional insured and loss payee and the Agent, on behalf
of the Holder and the Lender to the extent of their respective
interests, as mortgagee and loss payee; provided, so long as no
Default or Event of Default exists, any loss payable under the
insurance policies required by this Section will be paid to Lessee.
(b) If, during the Term the area in which the Property is
located is designated a "flood-prone" area pursuant to the Flood
Disaster Protection Act of 1973, or any amendments or supplements
thereto or is in a zone designated A or V, then Lessee shall comply
with the National Flood Insurance Program as set forth in the Flood
Disaster Protection Act of 1973. In addition, Lessee will fully
comply with the requirements of the National Flood Insurance Act of
1968 and the Flood Disaster Protection Act of 1973, as each may be
amended from time to time, and with any other Legal Requirement,
concerning flood insurance to the extent that it applies to the
Property. In the operation of the Property, Lessee shall comply with
workers' compensation laws applicable to Lessee, and protect Lessor,
the Holder, the Agent and the Lender against any liability under such
laws, except to the extent that the failure to so comply will not,
individually or in the aggregate, have a Material Adverse Effect.
14.3 Coverage.
(a) As of the date of this Lease and annually thereafter
during the Term, Lessee shall furnish Lessor, the Holder, the Agent
and the Lender with certificates prepared by the insurers or insurance
broker of Lessee showing the insurance required under Sections 14.1
and 14.2 to be in effect, naming (to the extent of their respective
interests) Lessor, the Holder, the Agent and the Lender as additional
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insureds (regarding coverages under Section 14.1) and loss payees
(regarding coverages under Section 14.2) and evidencing the other
requirements of this Article XIV. All such insurance shall be at the
cost and expense of Lessee and provided by nationally recognized,
financially sound insurance companies having an A+ or better rating by
A.M. Best's Key Rating Guide. Lessee shall cause such certificates to
include a provision for thirty (30) days' advance written notice by
the insurer to Lessor, the Holder, the Agent and the Lender in the
event of cancellation or material alteration of such insurance. If an
Event of Default has occurred and is continuing and Lessor so requests
in writing, Lessee shall deliver to Lessor copies of all insurance
policies required by Sections 14.1 and 14.2.
(b) Lessee agrees that the insurance policy or policies
required by Sections 14.1, 14.2(a) and 14.2(b) shall include an
appropriate clause pursuant to which any such policy shall provide
that it will not be invalidated should Lessee or any contractor, as
the case may be, waive, at any time, any or all rights of recovery
against any party for losses covered by such policy or due to any
breach of warranty, fraud, action, inaction or misrepresentation by
Lessee or any Person acting on behalf of Lessee. Lessee hereby waives
any and all such rights against Lessor, the Holder, the Agent and the
Lender to the extent of payments made to any such Person under any
such policy.
(c) Neither Lessor nor Lessee shall carry separate
insurance concurrent in kind or form or contributing in the event of
loss with any insurance required under this Article XIV, unless such
insurance would not conflict with or otherwise limit the availability
of or coverage afforded by insurance required to be maintained under
Sections 14.1 and 14.2, and except that Lessor may carry separate
liability insurance at Lessor's sole cost so long as (i) Lessee's
insurance is designated as primary and in no event excess or
contributory to any insurance Lessor may have in force which would
apply to a loss covered under Lessee's policy and (ii) each such
insurance policy will not cause Lessee's insurance required under this
Article XIV to be subject to a coinsurance exception of any kind.
(d) Lessee shall pay as they become due all premiums for
the insurance required by Section 14.1 and Section 14.2, shall renew
or replace each policy prior to the expiration date thereof or
otherwise maintain the coverage required by such Sections without any
lapse in coverage.
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ARTICLE XV
15.1 Casualty and Condemnation.
(a) Subject to the provisions of this Article XV and
Article XVI (in the event Lessee delivers, or is obligated to deliver
or is deemed to have delivered, a Termination Notice), and prior to
the occurrence and continuation of a Default or an Event of Default,
Lessee shall be entitled to receive (and Lessor hereby irrevocably
assigns to Lessee all of Lessor's right, title and interest in) any
award, compensation or insurance proceeds under Sections 14.2(a) or
(b) hereof to which Lessee or Lessor may become entitled by reason of
their respective interests in the Property (i) if all or a portion of
the Property is damaged or destroyed in whole or in part by a Casualty
or (ii) if the use, access, occupancy, easement rights or title to the
Property or any part thereof is the subject of a Condemnation;
provided, however, if a Default or an Event of Default shall have
occurred and be continuing, then such award, compensation or insurance
proceeds shall be paid directly to Lessor or, if received by Lessee,
shall be held in trust for Lessor, and shall be paid over by Lessee to
Lessor and held in accordance with the terms of this paragraph (a).
All amounts held by Lessor hereunder on account of any award,
compensation or insurance proceeds either paid directly to Lessor or
turned over to Lessor shall be held as security for the performance of
Lessee's obligations hereunder and under the other Operative
Agreements and shall be paid over to Lessee upon the cure or waiver of
the Default or the Event of Default.
(b) Lessee may appear in any proceeding or action to
negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any such Casualty or
Condemnation and shall pay all expenses thereof. At Lessee's
reasonable request, and at Lessee's sole cost and expense, Lessor and
the Agent shall participate in any such proceeding, action,
negotiation, prosecution or adjustment. Lessor and Lessee agree that
this Lease shall control the rights of Lessor and Lessee in and to any
such award, compensation or insurance payment.
(c) If Lessee shall receive notice of a Casualty or a
Condemnation of the Property or any interest therein where damage to
the Property is estimated to equal or exceed $250,000, Lessee shall
give notice thereof to Lessor and to the Agent promptly after Lessee's
receipt of such notice. In the event a Casualty or Condemnation
occurs (regardless of whether Lessee gives notice thereof) where
damage to the Property is reasonably estimated to equal or exceed
$2,500,000, then Lessee shall be deemed to have delivered a
Termination Notice to Lessor and the Agent and the provisions of
Sections 16.1 and 16.2 shall apply.
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(d) In the event of a Casualty or a Condemnation
(regardless of whether notice thereof must be given pursuant to
paragraph (c)), this Lease shall terminate with respect to the
Property in accordance with Section 16.1 if Lessee, within thirty (30)
days after such occurrence, delivers to Lessor and the Agent a notice
to such effect.
(e) If pursuant to this Section 15.1 this Lease shall
continue in full force and effect following a Casualty or Condemnation
with respect to the Property, Lessee shall, at its sole cost and
expense and using, if available, the proceeds of any award,
compensation or insurance with respect to such Casualty or
Condemnation (including without limitation any such award,
compensation or insurance which has been received by the Agent and
which should be turned over to Lessee pursuant to the terms of the
Operative Agreements, and if not available or sufficient, using its
own funds), promptly and diligently repair in a workmanlike manner any
damage to the Property caused by such Casualty or Condemnation in
conformity with the requirements of Sections 10.1 and 11.1, using the
manufacturer's specifications for the applicable Improvements, or
other components of the Property (as modified to give effect to any
subsequent Modifications, any Condemnation affecting the Property and
all applicable Legal Requirements), so as to restore the Property to
substantially the same remaining economic value, useful life, utility,
condition, operation and function as existed immediately prior to such
Casualty or Condemnation (assuming all maintenance and repair
standards have been satisfied). In such event, title to the Property
shall remain with Lessor.
(f) In no event shall a Casualty or Condemnation affect
Lessee's obligations to pay Rent pursuant to Article III unless
terminated pursuant to Section 16.1.
(g) Notwithstanding anything to the contrary set forth in
Section 15.1(a) or Section 15.1(e), if during the Term with respect to
the Property a Casualty occurs with respect to the Property or Lessee
receives notice of a Condemnation with respect to the Property, and
either (i) following such Casualty or Condemnation, it is reasonable
to believe that the Property cannot be restored, repaired or replaced
on or before the earlier of (x) the date of one hundred eighty (180)
days prior to the Expiration Date or (y) the date twelve (12) months
after the occurrence of such Casualty or Condemnation (such earlier
date referred to herein as the "Restoration Date ") to the
substantially same remaining economic value, useful life, utility,
condition, operation and function as existed with respect to the
Property immediately prior to such Casualty or Condemnation (assuming
all maintenance and repair standards have been satisfied), or (ii) if
clause (i) above does not apply, on or before the Restoration Date the
Property is not in fact so restored, repaired or replaced, then in
either such event Lessee shall
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be required to exercise its Purchase Option for the Property on the
next Payment Date occurring no less than thirty (30) days after such
event, or, if earlier, the Expiration Date (notwithstanding the limits
on such exercise contained in Sections 20.1 and 20.2) and pay Lessor
the Termination Value for the Property; provided, however, if any
Default or Event of Default has occurred and is continuing, Lessee
shall also promptly pay over to Lessor any award, compensation or
insurance proceeds received on account of any Casualty or Condemnation
with respect to the Property (and in any event within three (3)
Business Days of Lessee's receipt of any such amount). After such
application and payment in full of all amounts then due and owing to
Lessor, Lender, the Holder and/or the Agent under any and all of the
Operative Agreements, any amounts remaining shall be paid over to
Lessee.
15.2 Environmental Matters. Promptly upon Lessee's actual
knowledge of the presence of Hazardous Substances in any portion of the
Property in concentrations and conditions that constitute an Environmental
Violation and which, in the reasonable opinion of Lessee, the cost to undertake
any legally required response, clean up, remedial or other action is likely to
result in a cost to Lessee of more than $250,000, Lessee shall notify Lessor in
writing of such condition. Lessee shall deliver a Termination Notice with
respect to the Property when the cost of remediation is reasonably expected to
equal or exceed $2,500,000. In the event of any Environmental Violation
(regardless of whether notice thereof must be given), Lessee shall, not later
than thirty (30) days after Lessee has actual knowledge of such Environmental
Violation, either deliver to Lessor a Termination Notice with respect to the
Property pursuant to Section 16.2, if applicable, or, at Lessee's sole cost and
expense, promptly and diligently undertake and complete any response, clean up,
remedial or other action (including without limitation the pursuit by Lessee of
appropriate action against any off-site or third party source for
contamination) necessary to remove, cleanup or remedy the Environmental
Violation in accordance with all Environmental Laws, except to the extent that
the failure to so comply will not, individually or in the aggregate, have a
Material Adverse Effect. Any such undertaking shall be timely completed in
accordance with prudent industry standards. If Lessee does not deliver a
Termination Notice with respect to the Property pursuant to Section 16.2,
Lessee shall, upon completion of remedial action by Lessee, cause to be
prepared by a reputable environmental consultant reasonably acceptable to
Lessor a report describing the Environmental Violation and the actions taken by
Lessee (or its agents) in response to such Environmental Violation, and a
statement by the consultant that the Environmental Violation has been remedied
in full compliance with applicable Environmental Law, except to the extent that
the failure to so comply will not, individually or in the aggregate, have a
Material Adverse Effect. Not less than sixty (60) days prior to any time that
Lessee elects to cease operations with respect to the Property or to remarket
the Property pursuant to
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Section 20.1 hereof or any other provision of any Operative Agreement, Lessee
at its expense shall cause to be delivered to Lessor a Phase I environmental
site assessment with respect to the Property recently prepared (no more than
thirty (30) days prior to the date of delivery) by an independent recognized
professional reasonably acceptable to Lessor, the Holder, the Lender and the
Agent and in form, scope and content reasonably satisfactory to Lessor, the
Holder, the Lender and the Agent. Notwithstanding any other provision of any
Operative Agreement, if Lessee fails to comply with the foregoing obligation
regarding the Phase I environmental site assessment, Lessee shall be obligated
to purchase the Property for its Termination Value and shall not be permitted
to exercise (and Lessor shall have no obligation to honor any such exercise)
any rights under any Operative Agreement regarding a sale of the Property to a
Person other than Lessee or any Affiliate of Lessee.
15.3 Notice of Environmental Matters. Promptly, but in any event
within five (5) Business Days from the date Lessee has actual knowledge
thereof, Lessee shall provide to Lessor written notice of any pending or
threatened claim, action or proceeding involving any Environmental Law or any
Release on or in connection with the Property. All such notices shall describe
in reasonable detail the nature of the claim, action or proceeding and Lessee's
proposed response thereto. In addition, Lessee shall provide to Lessor, within
five (5) Business Days of Lessee's receipt thereof, copies of all material
written communications with any Governmental Authority relating to any
Environmental Law in connection with the Property. Lessee shall also promptly
provide such detailed reports of any such material environmental claims as may
reasonably be requested by Lessor.
ARTICLE XVI
16.1 Termination Upon Certain Events. If Lessee has delivered
written notice of a termination of this Lease with respect to the Property to
Lessor and the Agent in the form described in Section 16.2(a) (a "Termination
Notice") pursuant to Sections 15.1(d) or 15.2, or is deemed to have delivered
such notice pursuant to Section 15.1(c), then (a) following the applicable
Casualty or Condemnation, this Lease shall terminate with respect to the
Property on the Termination Date (as defined herein below) or (b) pursuant to
the second sentence of Section 15.2, due to the occurrence of an Environmental
Violation, this Lease shall terminate with respect to the Property on the
Termination Date.
16.2 Procedures.
(a) A Termination Notice shall contain: (i) notice of
termination of this Lease with respect to the Property on a Payment
Date not more than sixty (60) days after Lessor's receipt of such
Termination Notice (the "Termination Date");
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and (ii) a binding and irrevocable agreement of Lessee to pay the
Termination Value for the Property and purchase the Property on such
Termination Date.
(b) On each Termination Date, Lessee shall pay to Lessor
the Termination Value for the Property, and Lessor shall convey the
Property or the remaining portion thereof, if any, to Lessee (or
Lessee's designee), all in accordance with Section 20.2.
ARTICLE XVII
17.1 Lease Events of Default. If any one (1) or more of the
following events (each a "Lease Event of Default") shall occur:
(a) Lessee shall fail to make payment of (i) any Basic
Rent (except as set forth in clause (ii)) within three (3) days after
the same has become due and payable or (ii) any Termination Value, on
the date any such payment is due and payable, or any payment of Basic
Rent or Supplemental Rent due on the due date of any such payment of
Termination Value, or any amount due on the Expiration Date;
(b) Lessee shall fail to make payment of any Supplemental
Rent (other than Supplemental Rent referred to in Section 17.1(a)(ii))
which has become due and payable within ten (10) days after receipt of
notice that such payment is due;
(c) Lessee shall fail (i) to maintain insurance as
required by Article XIV of this Lease or (ii) to deliver any requisite
annual certificate with respect thereto within ten (10) days of the
date such certificate is due under the terms hereof and the failure to
deliver such certificate is not remedied within ten (10) days after
the earlier date as of which Lessee gains knowledge thereof or
receives written notice from Lessor with respect thereto;
(d) Lessee shall fail to observe or perform any material
term, covenant or condition of Lessee under this Lease (including
without limitation the Incorporated Covenants) or any other Operative
Agreement to which Lessee is a party other than those set forth in
Sections 17.1(a), (b) or (c) hereof, or Lessee shall fail to pay, or
cause to be paid, any Imposition or shall fail to observe any Legal
Requirement regarding the Property and in each case, such failure
shall continue for a period of thirty (30) days after the earlier date
as of which Lessee gains knowledge thereof or receives written notice
from Lessor with respect thereto, or any representation or warranty
made by Lessee set forth in this Lease (including without limitation
the Incorporated Representation and Warranties) or in any other
Operative Agreement or in any document entered into in
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connection herewith or therewith or in any document, report,
instrument, certificate or financial or other statement delivered in
connection herewith or therewith by Lessee shall be false or
misleading or inaccurate in any material way when made or delivered;
(e) With respect to any Indebtedness (other than
Indebtedness outstanding under this Lease) of Lessee or any of its
Subsidiaries in a principal amount in excess of $7,500,000 Lessee
shall default in any payment (beyond the applicable grace period with
respect thereto, if any) with respect to any such Indebtedness;
(f) The occurrence of any of the following with respect
to Lessee: (i) a court or governmental agency having jurisdiction in
the Property shall enter a decree or order for relief in respect of
Lessee in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or appoint
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of Lessee or for any substantial part of its property
or ordering the winding up or liquidation of its affairs; or (ii) an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect is commenced against Lessee and
such petition remains unstayed and in effect for a period of 60
consecutive days; or (iii) Lessee shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or consent to the entry of an order for relief
in an involuntary case under any such law, or consent to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of such Person or
any substantial part of its property or make any general assignment
for the benefit of creditors; or (iv) Lessee shall admit in writing
its inability to pay its debts generally as they become due or is not
generally paying its debts as they become due; or (v) Lessee shall
take any action in furtherance of any of the aforesaid purposes;
(g) One or more judgments, orders, or decrees shall be
entered against Lessee involving a liability of $1,000,000 or more, in
the aggregate, (to the extent not paid or covered by insurance
provided by a carrier who has acknowledged coverage) and such
judgments, orders or decrees shall continue unsatisfied, undischarged
and unstayed for a period ending on the first to occur of (i) the last
day on which such judgment, order or decree becomes final and
unappealable or (ii) 60 days;
(h) [Intentionally Omitted];
(i) Any Lessee Credit Agreement Event of Default shall
have occurred and be continuing and shall not have been waived;
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(j) Any of the following events or conditions which in
the aggregate would have a Material Adverse Effect: (1) any
"accumulated funding deficiency," as such term is defined in Section
302 of ERISA and Section 412 of the Code, whether or not waived, shall
exist with respect to any Plan, or any lien shall arise on the assets
of Lessee in favor of the PBGC or a Plan; (2) a Termination Event
shall occur with respect to a Single Employer Plan, which is the
termination of such Plan for purposes of Title IV of ERISA; (3) a
Termination Event shall occur with respect to a Multiemployer Plan or
Multiple Employer Plan, which is (i) the termination of such Plan for
purposes of Title IV of ERISA, or (ii) Lessee incurring liability in
connection with a withdrawal from, reorganization of (within the
meaning of Section 4241 of ERISA), or insolvency of (within the
meaning of Section 4245 of ERISA) such Plan; or (4) any prohibited
transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) or breach of fiduciary responsibility shall occur
which subjects Lessee to any liability under Sections 406, 409,
502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any
agreement or other instrument pursuant to which Lessee or any of its
Subsidiaries has agreed or is required to indemnify any person against
any such liability; or
(k) Any Operative Agreement shall cease to be in full
force and effect;
then, in any such event Lessor may, in addition to the other rights and
remedies provided for in this Article XVII and in Section 18.1, terminate this
Lease by giving Lessee no less than five (5) days prior written notice of such
termination (which five (5) day period may run concurrently with the five (5)
day period referred to in Section 17.11), and this Lease shall terminate
(provided, this Lease shall automatically terminate upon the occurrence of a
Lease Event of Default described in Section 17.1(f) without any requirement of
Lessor to give such notice), and all rights and obligations of Lessee under
this Lease shall cease except for the obligations of Lessee under this Lease
which arise with respect to or, by the express provisions of this Lease or any
other Operative Agreement, continue subsequent to the occurrence of a Lease
Event of Default; provided, notwithstanding the foregoing, upon the occurrence
of a Lease Event of Default, (except a Lease Event of Default described in
Section 17.1(f)), the exercise of remedies by Lessor shall be subject to the
provisions of Section 17.11. Lessee shall, to the fullest extent permitted by
law, pay as Supplemental Rent all costs and expenses incurred by or on behalf
of Lessor, including without limitation reasonable fees and expenses of
counsel, as a result of any Lease Event of Default hereunder.
17.2 Surrender of Possession. If a Lease Event of Default shall
have occurred and be continuing, and whether or not this Lease shall have been
terminated pursuant to Section 17.1 unless
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Lessee has exercised its purchase option pursuant to Section 17.11, Lessee
shall, upon thirty (30) days prior written notice, surrender to Lessor
possession of the Property. Upon thirty (30) days prior written notice, Lessor
may enter upon and repossess the Property by such means as are available at law
or in equity, and may remove Lessee and all other Persons and any and all
personal property and Lessee's equipment and personalty and severable
Modifications from the Property. Lessor shall have no liability by reason of
any such entry, repossession or removal performed in accordance with applicable
law. Upon the written demand of Lessor, Lessee shall return the Property
promptly to Lessor, in the manner and condition required by, and otherwise in
accordance with the provisions of, Section 22.1(c) hereof.
17.3 Reletting. If a Lease Event of Default shall have occurred
and be continuing, and whether or not this Lease shall have been terminated
pursuant to Section 17.1 unless Lessee has exercised its purchase option
pursuant to Section 17.11, Lessor may, but shall be under no obligation to,
relet the Property, for the account of Lessee or otherwise, for such term or
terms (which may be greater or less than the period which would otherwise have
constituted the balance of the Term) and on such conditions (which may include
concessions or free rent) and for such purposes as Lessor may reasonably
determine, and Lessor may collect, receive and retain the rents resulting from
such reletting; provided, that, any such proceeds shall be used to reduce any
liability of Lessee to Lessor pursuant to Section 17.4 hereof. Lessor shall
not be liable to Lessee for any failure to relet the Property or for any
failure to collect any rent due upon such reletting.
17.4 Damages. Neither (a) the termination of this Lease pursuant
to Section 17.1; (b) the repossession of the Property; nor (c) the failure of
Lessor to relet the Property, the reletting of any portion thereof, nor the
failure of Lessor to collect or receive any rentals due upon any such
reletting, shall relieve Lessee of its liabilities and obligations hereunder,
all of which shall survive any such termination, repossession or reletting. If
any Lease Event of Default shall have occurred and be continuing and
notwithstanding any termination of this Lease pursuant to Section 17.1, Lessee
shall forthwith pay to Lessor all Rent and other sums due and payable hereunder
to and including without limitation the date of such termination. Thereafter,
on the days on which the Basic Rent or Supplemental Rent, as applicable, are
payable under this Lease or would have been payable under this Lease if the
same had not been terminated pursuant to Section 17.1 and until the end of the
Term hereof or what would have been the Term in the absence of such
termination, Lessee shall pay Lessor, as current liquidated damages (it being
agreed that it would be impossible accurately to determine actual damages) an
amount equal to the Basic Rent and Supplemental Rent that are payable under
this Lease or would have been payable by Lessee hereunder if this Lease had not
been terminated pursuant to Section 17.1, less the net proceeds, if any, which
are actually received by Lessor with respect to the period in
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question of any reletting of the Property or any portion thereof; provided,
that Lessee's obligation to make payments of Basic Rent and Supplemental Rent
under this Section 17.4 shall continue only so long as Lessor shall not have
received the amounts specified in Section 17.6. In calculating the amount of
such net proceeds from reletting, there shall be deducted all of Lessor's, the
Holder's, the Agent's and the Lender's reasonable expenses in connection
therewith, including without limitation repossession costs, brokerage or sales
commissions, fees and expenses for counsel and any necessary repair or
alteration costs and expenses incurred in preparation for such reletting. To
the extent Lessor receives any damages pursuant to this Section 17.4, such
amounts shall be regarded as amounts paid on account of Rent. Lessee
specifically acknowledges and agrees that its obligations under this Section
17.4 shall be absolute and unconditional under any and all circumstances and
shall be paid and/or performed, as the case may be, without notice or demand
and without any abatement, reduction, diminution, setoff, defense, counterclaim
or recoupment whatsoever.
17.5 Statutory Power of Sale. Without limiting any other remedies
set forth in this Lease, in the event that a court of competent jurisdiction
rules that this Lease constitutes a mortgage, deed of trust or other secured
financing as is the intent of the parties, then Lessor and Lessee agree that
Lessee has granted, pursuant to Section 7.1(b) hereof and each Lease
Supplement, A MORTGAGE ON THE PROPERTY WITH MORTGAGE COVENANTS AND ON THE
STATUTORY CONDITION FOR ANY BREACH OF WHICH OR A BREACH OF ANY OTHER CONDITION
OR OBLIGATION HEREUNDER, LESSOR AS MORTGAGEE SHALL HAVE THE STATUTORY POWER OF
SALE, and that, upon the occurrence and during the continuance of any Lease
Event of Default unless Lessee has exercised its purchase option pursuant to
Section 17.11, Lessor shall have the power and authority, to the extent
provided by law, after ten (10) Business Days prior written notice to Lessee
and lapse of such time as may be required by law, to foreclose its interest (or
cause such interest to be foreclosed) in the Property, with proceeds from such
foreclosure sale to be applied in accordance with the provisions of Section
10.7 of the Participation Agreement.
17.6 Mandatory Purchase Option. If a Lease Event of Default shall
have occurred and be continuing, whether or not this Lease shall have been
terminated pursuant to Section 17.1 and whether or not Lessor shall have
collected any current liquidated damages pursuant to Section 17.4, Lessor in
its discretion may elect under this Section 17.6 by written demand to Lessee to
require Lessee to purchase the Property. Upon such election by Lessor, Lessee
shall pay to Lessor the Termination Value. Upon payment of the Termination
Value, Lessee shall be entitled to receive from Lessor, either at Lessee's
request or upon Lessor's election, in either case at Lessee's cost, in each
case in recordable form and otherwise in conformity with local custom, (a) a
quitclaim Deed conveying the Property to Lessee free and clear of the Lien of
this Lease, the Lien of the Credit Documents and any Lessor Liens; (b) any real
estate tax affidavit or other
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document required by law to be executed and filed in order to record the
applicable Deed and (c) FIRPTA affidavits. The Property shall be conveyed to
Lessee "AS-IS, WHERE-IS" and in its then present physical condition. If any
statute or rule of law shall limit the amount under this Section 17.6 to less
than the amount agreed upon, Lessor shall be entitled to the maximum amount
allowable under such statute or rule of law; provided, however, Lessee shall
not be entitled to receive an assignment of Lessor's interest in the Property,
the Improvements, Fixtures, Modifications or the components thereof unless
Lessee shall have paid in full the Termination Value. Lessee specifically
acknowledges and agrees that its obligations under this Section 17.6 shall be
absolute and unconditional under any and all circumstances and shall be paid
and/or performed, as the case may be, without notice or demand and without any
abatement, reduction, diminution, setoff, defense, counterclaim or recoupment
whatsoever.
17.7 Environmental Costs. If a Lease Event of Default shall have
occurred and be continuing, and whether or not this Lease shall have been
terminated pursuant to Section 17.1, Lessee shall pay directly to any third
party (or at Lessor's election, reimburse Lessor) for the cost of any
environmental testing and/or remediation work undertaken respecting the
Property, as such testing or work is deemed appropriate in the reasonable
judgment of Lessor. Lessee shall pay all amounts referenced in the immediately
preceding sentence within ten (10) days after Lessee's receipt of any request
by Lessor for such payment upon presentation of documentation evidencing such
amounts, as such documentation is regularly provided by the party undertaking
such testing and/or remediation work. The provisions of this Section 17.7 shall
not limit the obligations of Lessee under any Operative Agreement regarding
indemnification obligations, environmental testing, remediation and/or work.
17.8 Waiver of Certain Rights. If this Lease shall be terminated
pursuant to Section 17.1, Lessee waives, to the fullest extent permitted by
Law, (a) any notice of re-entry or the institution of legal proceedings to
obtain re-entry or possession; (b) any right of redemption, re-entry or
possession; (c) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt; and (d) any other rights which
might otherwise limit or modify any of Lessor's rights or remedies under this
Article XVII.
17.9 Assignment of Rights Under Contracts. If a Lease Event of
Default shall have occurred and be continuing, and whether or not this Lease
shall have been terminated pursuant to Section 17.1, Lessee shall upon Lessor's
demand immediately assign, transfer and set over to Lessor all of Lessee's
right, title and interest in and to each agreement executed by Lessee in
connection with the acquisition, installation, testing, use, development,
construction, operation, maintenance, repair, refurbishment and restoration of
the Property (including without limitation all right, title and interest of
Lessee with respect
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to all warranty, performance, service and indemnity provisions), as and to the
extent that the same relate to the acquisition, installation, testing, use,
development, construction, operation, maintenance, repair, refurbishment and
restoration of the Property, except to the extent any of the foregoing by its
terms expressly prohibits assignment.
17.10 Remedies Cumulative. The remedies herein provided shall be
cumulative and in addition to (and not in limitation of) any other remedies
available at law, equity or otherwise, including without limitation any
mortgage foreclosure remedies.
17.11 Lessee's Purchase Option Upon Occurrence of Lease Event of
Default. Upon the occurrence of any Lease Event of Default (except under
Section 17.1(f)), Lessor shall refrain for a period of five (5) days (which
period may run concurrently with any applicable time period under Sections
17.1-17.10) from exercising any remedy provided for in the Lease or otherwise
available at Law. During such five (5) day period, Lessee may elect to purchase
the Property for an amount equal to the Termination Value upon a date to be
designated by Lessor. Upon payment in full of the Termination Value on such
designated date, Lessor shall execute, acknowledge (where required) and deliver
to Lessee, at Lessee's cost and expense, each of the following: (a) a quitclaim
Deed conveying the Property to Lessee free and clear of the Lien of this Lease,
the Lien of the Credit Documents and any Lessor Liens; (b) any real estate tax
affidavit or other document required by law to be executed and filed in order to
record the applicable Deed and (c) FIRPTA affidavits. The Property shall be
conveyed to Lessee "AS-IS, WHERE- IS" and in then present physical condition.
ARTICLE XVIII
18.1 Lessor's Right to Cure Lessee's Lease Defaults. Lessor,
without waiving or releasing any obligation or Lease Event of Default, may (but
shall be under no obligation to) remedy any Lease Event of Default for the
account and at the sole cost and expense of Lessee, including without
limitation the failure by Lessee to maintain the insurance required by Article
XIV, and may, to the fullest extent permitted by law, and notwithstanding any
right of quiet enjoyment in favor of Lessee, enter upon the Property, and take
all such action thereon as may be necessary or appropriate therefor. No such
entry shall be deemed an eviction of any lessee. All out-of-pocket costs and
expenses so incurred (including without limitation fees and expenses of
counsel), shall be paid by Lessee to Lessor on demand of Lessor within ten (10)
Business Days after Lessee's receipt of such demand accompanied by
documentation evidencing such costs and expenses, as such documentation is
regularly provided by the party to whom such payment is owed. If Lessee fails
to pay any such costs and expenses within such ten (10) Business Day period,
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interest shall accrue on the amount due from and after the end of such period
to the date such amount is paid at the Overdue Rate.
ARTICLE XIX
19.1 Provisions Relating to Lessee's Exercise of its Purchase
Option. Subject to Section 19.2, in connection with any termination of this
Lease pursuant to the terms of Section 16.2, or in connection with Lessee's
exercise of its Purchase Option, upon the date on which this Lease is to
terminate, and upon tender by Lessee of the amounts set forth in Sections
16.2(b) or 20.1, as applicable, Lessor shall execute and deliver to Lessee (or
to Lessee's designee) at Lessee's cost and expense, in each case in recordable
form and otherwise in conformity with local custom, (a) a quitclaim Deed
conveying the Property to Lessee (or to Lessee's designee) free and clear of
the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens;
(b) any real estate tax affidavit or other document required by law to be
executed and filed in order to record the applicable Deed and (c) FIRPTA
affidavits. The Property shall be conveyed to Lessee "AS-IS, WHERE-IS" and in
then present physical condition.
19.2 No Purchase, Termination or Extension With Respect to Less
than All of the Property. Lessee shall not be entitled to exercise its
Purchase Option, the Sale Option, or Extension Option separately with respect
to a portion of the Property consisting of Land and/or Improvements but shall
be required to exercise its Purchase Option or the Sale Option with respect to
the entire Property.
ARTICLE XX
20.1 Purchase Option or Sale Option-General Provisions. Not less
than one hundred eighty (180) days and no more than three hundred sixty (360)
days prior to the Expiration Date (the "Notice Period"), Lessee may give Lessor
and the Agent irrevocable written notice (the "Election Notice") that Lessee is
electing to exercise either (a) the option to purchase all the Property on such
Expiration Date (the "Purchase Option"), (b) if Lessee has made a good faith
determination that the Property is surplus to Lessee's requirements or obsolete
to Lessee and shall have provided with the Election Notice a certificate of a
responsible officer of Lessee to that effect, the option to remarket the
Property to a Person other than Lessee or any Affiliate of Lessee and cause a
sale of the Property to occur on the Expiration Date pursuant to the terms of
Section 22.1 (the "Sale Option") or (c) unless such Expiration Date is the
final Expiration Date for which the Term may be extended, renew this Lease in
accordance with Section 2.2 hereof (the "Extension Option"). If Lessee does
not give such Election Notice within the Notice Period then Lessee shall be
deemed to have elected the Purchase Option. If Lessee shall either (i) elect
(or be deemed
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to have elected) to exercise the Purchase Option or (ii) elect the Sale Option
and subsequently fail to cause the Property to be sold in accordance with the
terms of Section 22.1 on the Expiration Date, then in either case Lessee shall
pay to Lessor on the date on which such purchase or sale is scheduled to occur
an amount equal to the Termination Value for the Property (which the parties do
not intend to be a "bargain" purchase), and, upon receipt of such amounts and
satisfaction of such obligations, Lessor shall transfer to Lessee all of
Lessor's right, title and interest in and to the Property in accordance with
Section 20.2.
20.2 Lessee Purchase Option. Subject to Section 19.2, in
connection with any termination of this Lease with respect to the Property
pursuant to the terms of Section 16.2, or in connection with Lessee's exercise
of its Purchase Option, upon the date on which this Lease is to terminate with
respect to the Property, and upon tender by Lessee of the amounts set forth in
Section 16.2(b) or Section 20.1, as applicable, Lessor shall execute,
acknowledge (where required) and deliver to Lessee, at Lessee's cost and
expense, each of the following: (a) a quitclaim Deed conveying the Property to
Lessee free and clear of the Lien of this Lease, the Lien of the Credit
Documents and any Lessor Liens; (b) any real estate tax affidavit or other
document required by law to be executed and filed in order to record the
applicable Deed and (c) FIRPTA affidavits. The Property shall be conveyed to
Lessee "AS-IS, WHERE-IS" and in then present physical condition.
If the Property is the subject of remediation efforts respecting
Hazardous Substances at the Expiration Date which could materially and
adversely impact the Fair Market Sales Value of the Property, then Lessee shall
be obligated to repurchase the Property pursuant to this Section 20.2.
On the Expiration Date and/or any Payment Date on which Lessee has
elected to exercise its Purchase Option, unless such amounts have been
otherwise paid at such time, Lessee shall pay (or cause to be paid) to Lessor
and all other parties, as appropriate, the sum of all costs and expenses
referred to in clause FIRST of Section 22.2, and the balance of the Termination
Value.
20.3 Third Party Sale Option. In the event Lessee exercises the
Sale Option in accordance with Section 20.1, Lessee shall (i) undertake to
cause a sale of the Property on the Expiration Date in accordance with the
provisions of Section 22.1 hereof and (ii) as soon as practicable and
in all events not less than sixty (60) days prior to the Expiration Date,
Lessee at its expense shall cause to be delivered to Lessor a Phase I
environmental site assessment for the Property recently prepared (no more than
thirty (30) days old prior to the date of delivery) by an independent
recognized professional acceptable to Lessor, the Holder, the Lender and the
Agent and in form, scope and content satisfactory to Lessor, the Holder, the
Lender and the Agent. In the event that Lessor and the Agent shall not have
received such
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environmental site assessment by the date sixty (60) days prior to the
Expiration Date or in the event that such environmental assessment shall reveal
the existence of any material violation of Environmental Laws, other material
Environmental Violation or potential material Environmental Violation (with
materiality determined in each case in Lessor's sole discretion), then Lessee
on the Expiration Date shall pay to Lessor an amount equal to the Termination
Value for the Property and any and all other amounts due and owing hereunder.
Upon receipt of such payment and all other amounts due under the Operative
Agreements, Lessor shall transfer to Lessee all of Lessor's right, title and
interest in and to the Property in accordance with Section 19.1.
ARTICLE XXI
21.1 [Intentionally Omitted].
ARTICLE XXII
22.1 Sale Procedure.
(a) During the Marketing Period, Lessee, on behalf of
Lessor, shall obtain bids for the cash purchase of the Property in
connection with a sale to one (1) or more third party purchasers to be
consummated on the Expiration Date (the "Sale Date") for the highest
price available, shall notify Lessor promptly of the name and address
of each prospective purchaser and the cash price which each
prospective purchaser shall have offered to pay for the Property and
shall provide Lessor with such additional information about the bids
and the bid solicitation procedure as Lessor may reasonably request
from time to time. All such prospective purchasers must be Persons
other than Lessee or any Affiliate of Lessee. On the Sale Date unless
such amounts have been otherwise paid at such time, Lessee shall pay
(or cause to be paid) to Lessor and all other parties, as appropriate,
the sum of all costs and expenses referred to in clause FIRST of
Section 22.2, all Rent and all other amounts then due and payable or
accrued under this Lease and/or any other Operative Agreement.
Before any bids have been accepted and at least sixty (60)
days prior to the Expiration Date, Lessor may reject any and all bids
and may assume sole responsibility for obtaining bids by giving Lessee
written notice to that effect; provided, however, that notwithstanding
the foregoing, Lessor may not reject the bids submitted by Lessee if
such bids, in the aggregate, are greater than or equal to the Limited
Recourse Amount and represent bona fide offers from one (1) or more
third party purchasers. If the price which a prospective purchaser or
the prospective purchasers shall have offered to pay for the Property
on the
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Expiration Date is less than the Limited Recourse Amount or if such
bids do not represent bona fide offers from one (1) or more third
parties, Lessor may elect to retain the Property by giving Lessee
prior written notice of Lessor's election to retain the Property, and
upon the Expiration Date, Lessee shall surrender, or cause to be
surrendered, the Property in accordance with the terms and conditions
of Section 10.1.
To the extent the Sale Option has been elected in accordance
with this Lease, unless Lessor shall have elected to retain the
Property pursuant to the provisions of the final sentence of the
preceding paragraph, Lessee shall arrange for Lessor to sell the
Property and Lessor shall sell the Property free and clear of the Lien
of this Lease, the Lien of the Credit Agreement and any Lessor Liens
attributable to it, without recourse or warranty (of title or
otherwise), for cash on the Sale Date to the purchaser or purchasers
identified by Lessee or Lessor, as the case may be; provided, however,
solely as to Lessor or the Trust Company, in its individual capacity,
any Lessor Lien shall not constitute a Lessor Lien so long as Lessor
or the Trust Company, in its individual capacity, is diligently
contesting such Lessor Lien by appropriate proceedings. To effect
such transfer and assignment, Lessor shall execute, acknowledge (where
required) and deliver to the appropriate purchaser each of the
following: (a) a quitclaim Deed conveying the Property to the
appropriate purchaser free and clear of the Lien of this Lease, the
Lien of the Credit Documents and any Lessor Liens; (b) any real estate
tax affidavit or other document required by law to be executed and
filed in order to record each Deed; and (c) FIRPTA affidavits, as
appropriate. Lessee shall surrender the Property so sold or subject
to such documents to each purchaser in the condition specified in
Section 10.1. Neither Lessor nor Lessee shall take or fail to take
any action which would have the effect of unreasonably discouraging
bona fide third party bids for the Property. If the Property is not
either (i) sold on the Sale Date in accordance with the terms of this
Section 22.1, or (ii) retained by Lessor pursuant to an affirmative
election made by Lessor pursuant to the second sentence of the second
paragraph of this Section 22.1(a), then Lessee shall be obligated to
pay Lessor on the Sale Date an amount equal to the aggregate
Termination Value less any sales proceeds received and to comply with
the terms and provisions of Section 22.1(c).
(b) If the Property is sold on a Sale Date to one (1)
or more third party purchasers in accordance with the terms of Section
22.1(a) and the aggregate purchase price paid for the Property is less
than the Property Cost for the Property (hereinafter such difference
shall be referred to as the "Deficiency Balance"), then Lessee hereby
unconditionally promises to pay to Lessor on the Sale Date
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the lesser of (i) the Deficiency Balance, or (ii) the Maximum Residual
Guarantee Amount for the Property. On a Sale Date if (w) no Event of
Default has occurred and is continuing, (x) Lessor receives the
Termination Value for the Property from one (1) or more third party
purchasers, (y) Lessor receives all other amounts specified in the
last sentence of the first paragraph of Section 22.1(a)(but in all
cases without duplication of amounts paid pursuant to subsection (x)
immediately above) and (z) the aggregate purchase price paid for the
Property on such date exceeds the Property Cost for the Property, then
Lessor shall rebate such excess to the extent previously received by
Lessor. If the Property is retained by Lessor pursuant to an
affirmative election made by Lessor pursuant to the provisions of
Section 22.1(a), then Lessee hereby unconditionally promises to pay to
Lessor on the Sale Date an amount equal to the Maximum Residual
Guarantee Amount for the Property. Any payment of the foregoing
amounts described in this Section 22.1(b) shall be made together with
a payment of all other amounts referenced in the last sentence of the
first paragraph of Section 22.1(a).
(c) In the event that the Property is either sold to one
(1) or more third party purchasers on the Sale Date or retained by
Lessor in connection with an affirmative election made by Lessor
pursuant to the provisions of Section 22.1(a), then in either case on
the applicable Sale Date Lessee shall provide Lessor or such third
party purchaser with (i) all permits, certificates of occupancy,
governmental licenses and authorizations which are necessary to use,
operate, repair, access and maintain the Property as a Permitted
Facility, (ii) such manuals, permits, easements, licenses,
intellectual property, know-how, rights-of-way and other rights and
privileges in the nature of an easement as are reasonably necessary or
desirable in connection with the use, operation, repair, access to or
maintenance of the Property as a Permitted Facility (and a
royalty-free license or similar agreement to effectuate the foregoing
on terms reasonably agreeable to Lessor or such third party
purchaser(s), as applicable), and (iii) a services agreement covering
such services and supplies to be provided by Lessee as Lessor or such
third party purchaser(s) may request in order to use and operate the
Property for its intended purposes at such rates (not in excess of
arm's-length fair market rates) as shall be acceptable to Lessee and
Lessor or such third party purchaser(s). All assignments, licenses,
easements, agreements and other deliveries required by clauses (i),
(ii) and (iii) of this paragraph (c) shall be in form reasonably
satisfactory to Lessor or such third party purchaser(s), as
applicable, and shall be fully assignable (including without
limitation both primary assignments and assignments given in the
nature of security) without payment of any fee, cost or other charge.
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22.2 Application of Proceeds of Sale. Lessor shall apply the
proceeds of sale of the Property in the following order of priority:
(a) FIRST, to pay or to reimburse Lessor for the payment
of all reasonable costs and expenses incurred by Lessor in connection
with the sale;
(b) SECOND, so long as the Credit Agreement is in effect
and the Holder Advance or any other amount is owing to the Holder
under any Operative Agreement, to the Agent to be applied pursuant to
intercreditor provisions between the Lender and the Holder contained
in the Operative Agreements; and
(c) THIRD, to Lessee.
22.3 Indemnity for Excessive Wear. If the proceeds of the sale
described in Section 22.1 with respect to the Property, less all expenses
incurred by Lessor in connection with such sale, shall be less than the Limited
Recourse Amount with respect to the Property, and at the time of such sale it
shall have been reasonably determined (pursuant to the Appraisal Procedure)
that the Fair Market Sales Value of the Property, shall have been impaired by
greater than expected wear and tear during the term of the Lease, Lessee shall
pay to Lessor within ten (10) days after receipt of Lessor's written statement
(i) the amount of such excess wear and tear determined by the Appraisal
Procedure or (ii) the amount of the Net Sale Proceeds Shortfall, whichever
amount is less.
22.4 Appraisal Procedure. For determining the Fair Market Sales
Value of the Property or any other amount which may, pursuant to any provision
of any Operative Agreement, be determined by an appraisal procedure, Lessor and
Lessee shall use the following procedure (the "Appraisal Procedure"). Lessor
and Lessee shall endeavor to reach a mutual agreement as to such amount for a
period of ten (10) days from commencement of the Appraisal Procedure under the
applicable section of the Lease, and if they cannot agree within ten (10) days,
then two (2) qualified appraisers, one (1) chosen by Lessee and one (1) chosen
by Lessor, shall mutually agree thereupon, but if either party shall fail to
choose an appraiser within twenty (20) days after its receipt of a written
notice from the other party of the selection of its appraiser, then the
appraisal by such appointed appraiser shall be binding on Lessee and Lessor.
If the two (2) appraisers cannot agree within twenty (20) days after both shall
have been appointed, then a third appraiser shall be selected by the two (2)
appraisers or, failing agreement as to such third appraiser within thirty (30)
days after both shall have been appointed, by the by the President of the
Greater Boston Real Estate Board (unless such President has any conflict with,
or any interest in, any party involved in the transactions set forth in the
Operative Agreements and in any such event, such President shall appoint a
disinterested officer of the Greater Boston Real
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Estate Board to appoint such third appraiser) or if such is not in existence,
then the President of the Boston Bar Association (unless such President has any
conflict with, or any interest in, any party involved in the transactions set
forth in the Operative Agreements and in any such event, such President shall
appoint a disinterested officer of the Boston Bar Association to appoint such
third appraiser). The decisions of the three (3) appraisers shall be given
within twenty (20) days of the appointment of the third appraiser and the
decision of the appraiser most different from the average of the other two (2)
shall be discarded and such average shall be binding on Lessor and Lessee;
provided, that if the highest appraisal and the lowest appraisal are
equidistant from the third appraisal, the third appraisal shall be binding on
Lessor and Lessee. The fees and expenses of the appraiser appointed by Lessee
shall be paid by Lessee; the fees and expenses of the appraiser appointed by
Lessor shall be paid by Lessor (such fees and expenses are not indemnifiable
pursuant to Section 13 of the Participation Agreement); and the fees and
expenses of the third appraiser shall be divided equally between Lessee and
Lessor.
22.5 Certain Obligations Continue. During the Marketing Period,
the obligation of Lessee to pay Rent (including without limitation the
installment of Basic Rent due on the Expiration Date) shall continue
undiminished until payment in full to Lessor of the sale proceeds, if any, the
Maximum Residual Guarantee Amount, the amount due under Section 22.3, if any,
and all other amounts due to Lessor or any other Person with respect to the
Property or any Operative Agreement. Lessor shall have the right, but shall be
under no duty, to solicit bids, to inquire into the efforts of Lessee to obtain
bids or otherwise to take action in connection with any such sale, other than
as expressly provided in this Article XXII.
ARTICLE XXIII
23.1 Holding Over. If Lessee shall for any reason remain in
possession of the Property after the expiration or earlier termination of this
Lease as to the Property (unless the Property is conveyed to Lessee), such
possession shall be as a tenancy at sufferance during which time Lessee shall
continue to pay Supplemental Rent that would be payable by Lessee hereunder
were the Lease then in full force and effect with respect to the Property and
Lessee shall continue to pay Basic Rent at one hundred ten percent (110%) of
the Basic Rent that would otherwise be due and payable at such time. Such
Basic Rent shall be payable from time to time upon demand by Lessor and such
additional ten percent (10%) amount shall be applied by Lessor to the payment
of the Loan pursuant to the Credit Agreement and the Holder Advance pursuant to
the Trust Agreement pro rata between the Loan and the Holder Advance. During
any period of tenancy at sufferance, Lessee shall, subject to the second
preceding sentence, be obligated to perform and observe all of the terms,
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covenants and conditions of this Lease, but shall have no rights hereunder
other than the right, to the extent given by law to tenants at sufferance, to
continue their occupancy and use of the Property. Nothing contained in this
Article XXIII shall constitute the consent, express or implied, of Lessor to
the holding over of Lessee after the expiration or earlier termination of this
Lease as to the Property (unless the Property is conveyed to Lessee) and
nothing contained herein shall be read or construed as preventing Lessor from
maintaining a suit for possession of the Property or exercising any other
remedy available to Lessor at law or in equity.
ARTICLE XXIV
24.1 Risk of Loss. During the Term, unless Lessee shall not be in
actual possession of the Property in question solely by reason of Lessor's
exercise of its remedies of dispossession under Article XVII or by reason of
Lessor's breach of the provisions of Article V, the risk of loss or decrease in
the enjoyment and beneficial use of the Property as a result of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise is assumed by Lessee, and Lessor shall in no event be answerable or
accountable therefor.
ARTICLE XXV
25.1 Assignment.
(a) Except for the Collateral Assignment, Lessee may not
assign this Lease or any of its rights or obligations hereunder or
with respect to the Property in whole or in part to any Person without
the prior written consent of the Agent, the Lender, the Holder and
Lessor.
(b) No assignment by Lessee (referenced in this Section
25.1 or otherwise) or other relinquishment of possession to the
Property shall in any way discharge or diminish any of the obligations
of Lessee to Lessor hereunder and Lessee shall remain directly and
primarily liable under this Lease as to any assignment regarding this
Lease.
(c) Lessor may not assign its interest in the Lease
and/or Property, except as otherwise provided in Section 10.2(b) of
the Participation Agreement.
25.2 Subleases.
(a) Promptly, but in any event within five (5) Business
Days, following the execution and delivery of any sublease permitted
by this Article XXV, Lessee shall notify Lessor and the Agent of the
execution of such sublease. As
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of the date of the Lease Supplement, Lessee shall lease the Property
described in the Lease Supplement from Lessor, and any existing tenant
with respect to the Property shall automatically be deemed to be a
subtenant of Lessee and not a tenant of Lessor.
(b) Subject to the other provisions of this Section 25.2,
Lessee may sublet the Property or portion thereof to any wholly- owned
Subsidiary of Lessee without the prior written consent of the Agent,
the Lender, the Holder or Lessor. Except as referenced in the
immediately preceding sentence and except with respect to the Olympia
Marble Lease, no other subleases shall be permitted unless consented
to in writing by the Agent, the Lender, the Holder and Lessor, not to
be unreasonably withheld or delayed.
(c) No sublease (referenced in this Section 25.2 or
otherwise) or other relinquishment of possession of the Property shall
in any way discharge or diminish any of Lessee's obligations to Lessor
hereunder and Lessee shall remain directly and primarily liable under
this Lease. During the Basic Term, the term of any such sublease
shall not extend beyond the Basic Term. During any Extension Term,
the term of any such sublease shall not extend beyond such Extension
Term. Except for the Olympia Marble Lease, each sublease shall be,
and expressly state that it is, subject and subordinate to this Lease.
ARTICLE XXVI
26.1 No Waiver. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
upon a Lease Default or Lease Event of Default, and no acceptance of full or
partial payment of Rent during the continuance of any such Lease Default or
Lease Event of Default shall constitute a waiver of any such Lease Default or
Lease Event of Default or of any such term. To the fullest extent permitted by
law, no waiver of any default shall affect or alter this Lease, and this Lease
shall continue in full force and effect with respect to any other then existing
or subsequent default.
ARTICLE XXVII
27.1 Acceptance of Surrender. No surrender to Lessor of this Lease
or of the Property or of any part thereof or of any interest therein shall be
valid or effective unless agreed to and accepted in writing by Lessor and the
Agent and no act by Lessor or the Agent or any representative or agent of
Lessor or the Agent, other than a written acceptance, shall constitute an
acceptance of any such surrender.
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27.2 No Merger of Title. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, in whole or in part,
(a) this Lease or the leasehold estate created hereby or any interest in this
Lease or such leasehold estate, (b) any right, title or interest in the
Property, (c) the Note, (d) the Certificate or (e) the beneficial interest in
Lessor.
ARTICLE XXVIII
28.1 [Intentionally Omitted].
ARTICLE XXIX
29.1 Notices. All notices required or permitted to be given under
this Lease shall be in writing. Notices may be served by certified or
registered mail, postage paid with return receipt requested; by private
courier, prepaid; by telex, facsimile, or other telecommunication device
capable of transmitting or creating a written record; or personally. Mailed
notices shall be deemed delivered and received five (5) days after mailing,
properly addressed. Couriered notices shall be deemed delivered and received
when delivered as addressed, or if the addressee refuses delivery, when
presented for delivery notwithstanding such refusal. Telex or telecommunicated
notices shall be deemed delivered and received when receipt is either confirmed
by confirming transmission equipment or acknowledged by the addressee or its
office. Personal delivery shall be effective when accomplished. Unless a
party changes its address by giving notice to the other party as provided
herein, notices shall be delivered to the parties at the following addresses:
If to Lessee:
IPC, Inc.
100 Tri-State Drive
Suite 200
Lincolnshire, Illinois 60069
Attention: Frank V. Tannura
Telephone No.: (847) 945-9100
Telecopy No.: (847) 945-9184
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With a copy to:
IPC, Inc.
100 Tri-State Drive
Suite 200
Lincolnshire, Illinois 60069
Attention: G. Douglas Patterson
Telephone No.: (847) 945-9184
Telecopy No.: (847) 945-2355
If to Lessor:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Telephone No.: (617) 664-5603
Telecopy No.: (617) 664-5371
with a copy to the Holder:
NationsBanc Leasing Corporation of North Carolina
NationsBank Plaza, NC1-002-38-20
101 South Tryon Street
Charlotte, North Carolina 28255
Attention: Manager of Corporate Lease
Administration
Telephone No.: (704) 386-7783
Telecopy No.: (704) 386-0892
with a further copy to Lender:
Societe Generale, Southwest Agency
2001 Ross, Suite 4800
Dallas, Texas 75201
Attention: Molly Franklin
Telephone No.: (214) 979-2743
Telecopy No.: (214) 754-0171
or such additional parties and/or other address as such party may hereafter
designate, and shall be effective upon receipt or refusal thereof.
ARTICLE XXX
30.1 Miscellaneous. Anything contained in this Lease to the
contrary notwithstanding, all claims against and liabilities of Lessee or
Lessor arising from events commencing prior to the expiration or earlier
termination of this Lease shall survive
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such expiration or earlier termination. If any provision of this Lease shall
be held to be unenforceable in any jurisdiction, such unenforceability shall
not affect the enforceability of any other provision of this Lease and such
jurisdiction or of such provision or of any other provision hereof in any other
jurisdiction.
30.2 Amendments and Modifications. Neither this Lease, the Lease
Supplement nor any provision hereof may be amended, waived, discharged or
terminated except by an instrument in writing in recordable form signed by
Lessor and Lessee, subject to Sections 10.2 and 14.5 of the Participation
Agreement.
30.3 Successors and Assigns. All the terms and provisions of this
Lease shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
30.4 Headings and Table of Contents. The headings and table of
contents in this Lease are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
30.5 Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one (1) and the same instrument.
30.6 GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
30.7 Calculation of Rent. All calculation of Rent payable
hereunder shall be computed based on the actual number of days elapsed over a
year of three hundred sixty (360) days or, to the extent such Rent is based on
the Prime Lending Rate, three hundred sixty-five (365) (or three hundred
sixty-six (366), as applicable) days.
30.8 Severability. To the fullest extent permitted by Law, any
provision of this Lease that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
30.9 Allocations between the Lender and the Holder.
Notwithstanding any other term or provision of this Lease to the contrary, the
allocations of the proceeds of the Property and any and all other Rent and
other amounts received hereunder shall be subject to the inter- creditor
provisions between the Lender and the Holder contained in the Operative
Agreements (or as otherwise agreed between the Lender and the Holder from time
to time).
30.10 Limitations on Recourse. Notwithstanding anything contained
in this Lease to the contrary, Lessee agrees to look
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solely to Lessor's estate and interest in the Property (and in no circumstance
to the Agent, the Lender, the Holder or otherwise to Lessor) for the collection
of any judgment requiring the payment of money by Lessor in the event of
liability by Lessor, and no other property or assets of Lessor or any
shareholder, owner or partner (direct or indirect) in or of Lessor, or any
director, officer, employee, beneficiary, Affiliate of any of the foregoing
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of the remedies of Lessee under or with respect to this Lease, the
relationship of Lessor and Lessee hereunder or Lessee's use of the Property or
any other liability of Lessor to Lessee; provided, however, nothing in this
Section 30.10 shall relieve Lessor or any Exculpated Person from liability and
responsibility for any fraud, gross negligence or willful misconduct on the
part of Lessor or any such Exculpated Person, or for the amount of any Excess
Proceeds or other amounts held by Lessor or any such Exculpated Person that
should be returned to Lessee pursuant to the terms of this Lease or any other
Operative Agreements. Nothing in this Section shall be interpreted so as to
limit the terms of Sections 6.1 or 6.2.
30.11 WAIVERS OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, LESSOR AND LESSEE IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL
BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LEASE OR ANY
COUNTERCLAIM THEREIN.
30.12 Exercise of Lessor Rights. Lessee hereby acknowledges and
agrees that the rights and powers of Lessor under this Lease have been assigned
to the Agent pursuant to the terms of the Security Agreement and the other
Operative Agreements.
30.13 [Intentionally Omitted].
30.14 USURY SAVINGS PROVISION. IT IS THE INTENT OF THE PARTIES
HERETO TO CONFORM TO AND CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY
LAW FROM TIME TO TIME IN EFFECT. TO THE EXTENT ANY RENT OR PAYMENTS HEREUNDER
ARE HEREINAFTER CHARACTERIZED BY ANY COURT OF COMPETENT JURISDICTION AS THE
REPAYMENT OF PRINCIPAL AND INTEREST THEREON, THIS SECTION 30.14 SHALL APPLY.
ANY SUCH RENT OR PAYMENTS SO CHARACTERIZED AS INTEREST MAY BE REFERRED TO
HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO ARE HEREBY
LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL
ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER
WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING WITHOUT
LIMITATION PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY OBLIGATION), SHALL
ANY INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS
LEASE OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER
APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE OPERATIVE
AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, INTEREST WOULD OTHERWISE BE
PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION
SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH AMOUNTS UNDER
SUCH
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DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE MAXIMUM
NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE NECESSITY OF
EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF LESSOR SHALL EVER
RECEIVE ANYTHING OF VALUE WHICH IS CHARACTERIZED AS INTEREST WITH RESPECT TO
THE OBLIGATIONS OWED HEREUNDER OR UNDER APPLICABLE LAW AND WHICH WOULD, APART
FROM THIS PROVISION, BE IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL
TO THE AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE INTEREST SHALL, WITHOUT PENALTY,
BE APPLIED TO THE REDUCTION OF THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL
AND NOT TO THE PAYMENT OF INTEREST, OR REFUNDED TO LESSEE OR ANY OTHER PAYOR
THEREOF, IF AND TO THE EXTENT SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE
EXCEEDS THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND
PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES NOT
INCLUDE THE RIGHT TO RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON
THE DATE OF SUCH DEMAND, AND LESSOR DOES NOT INTEND TO CHARGE OR RECEIVE ANY
UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND. ALL INTEREST PAID OR AGREED TO
BE PAID TO LESSOR SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE
AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE FULL STATED TERM
(INCLUDING WITHOUT LIMITATION ANY RENEWAL OR EXTENSION) OF THIS LEASE SO THAT
THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT EXCEED THE MAXIMUM
NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW.
[Signature pages follow]
42
<PAGE> 47
IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed and delivered as of the date first above written.
IPC, INC., as Lessee
By:____________________________
Name:__________________________
Title:_________________________
STATE STREET BANK AND TRUST COMPANY,
not individually, but solely
as the Owner Trustee under the
IPC Real Estate Trust 1996-1,
as Lessor
By:____________________________
Name:__________________________
Title:_________________________
Receipt of this original
counterpart of the foregoing
Lease is hereby acknowledged
as the date hereof
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA,
as the Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
<PAGE> 48
STATE OF ________________________ Section
Section
COUNTY OF ________________________ Section
On this ___ day of December, 1996, before me personally appeared
____________, to me personally known, who, being duly sworn, did say that he is
the ___________________________________________________ of IPC, Inc., a
Delaware corporation, and that the foregoing instrument was signed and sealed in
behalf of said corporation by authority of its Board of Directors, and
acknowledged said instrument to be the free act and deed of said corporation.
____________________________________
Notary Public, State of ____________
____________________________________
(Print Name of Notary Public)
____________________________________
Date Commission Expires
___________________________
(Seal)
<PAGE> 49
STATE OF ______________________ Section
Section
COUNTY OF ______________________ Section
On this ___ day of December, 1996, before me personally appeared
____________, to me personally known, who, being duly sworn, did say that he is
the ______________ of State Street Bank and Trust Company, a Massachusetts trust
company, in its individual capacity and in its capacity as Owner Trustee of the
IPC Real Estate Trust 1996-1, and that the foregoing instrument was signed and
sealed on behalf of said banking association, and acknowledged said instrument
to be free act and deed of said corporation.
____________________________________
Notary Public, State of ____________
____________________________________
(Print Name of Notary Public)
____________________________________
Date Commission Expires
(Seal)
<PAGE> 50
STATE OF ____________________ Section
Section
COUNTY OF ____________________ Section
On this ___ day of December, 1996, before me personally appeared
______________________________________, to me personally known, who, being duly
sworn, did say that he is the ___________________________ of NationsBanc Leasing
Corporation of North Carolina, a North Carolina corporation, and that the
foregoing instrument was signed and sealed in behalf of said corporation by
authority of its Board of Directors, and acknowledged said instrument to be the
free act and deed of said corporation.
____________________________________
Notary Public, State of ____________
____________________________________
(Print Name of Notary Public)
____________________________________
Date Commission Expires
(Seal)
<PAGE> 51
SCHEDULE I TO
THE LEASE
LEGAL DESCRIPTION
<PAGE> 52
EXHIBIT A TO
THE LEASE
LEASE SUPPLEMENT NO. ___
THIS LEASE SUPPLEMENT NO. ___ (this "Lease Supplement") dated as of
December __, 1996 between STATE STREET BANK AND TRUST COMPANY, not
individually, but solely as the Owner Trustee under the IPC Real Estate Trust
1996-1, as lessor (the "Lessor"), and IPC, INC., as lessee (the "Lessee").
WHEREAS, Lessor is the owner or will be the owner of the Property
described on Schedule 1 hereto (the "Leased Property") and wishes to lease the
same to Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS; RULES OF USAGE. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in Appendix A to the Participation
Agreement, dated as of December 5, 1996, among Lessee, Lessor, not
individually, except as expressly stated therein, but solely as the Owner
Trustee under the IPC Real Estate Trust 1996-1, NationsBanc Leasing Corporation
of North Carolina, and each subsequent holder, as the Holder, Societe Generale,
Southwest Agency and each subsequent lender, as the Lender and NationsBanc
Leasing Corporation of North Carolina, as the Agent for the Lender, as such may
be amended, modified, extended, supplemented, restated and/or replaced from
time to time.
SECTION 2. THE PROPERTY. Attached hereto as Schedule 1 is the
description of the Leased Property. Effective upon the execution and delivery
of this Lease Supplement by Lessor and Lessee, the Leased Property shall be
subject to the terms and provisions of the Lease.
SECTION 3. USE OF PROPERTY. At all times during the Term, Lessee
will comply with all obligations under and (to the extent no Event of Default
exists and provided, that such exercise will not impair the value of the
Property) shall be permitted to exercise all rights and remedies under, all
operation and easement agreements and related or similar agreements applicable
to the Property.
SECTION 4. RATIFICATION; INCORPORATION BY REFERENCE; SUPERIORITY OF
LEASE. Except as specifically modified hereby, the terms and provisions of the
Lease and the Operative Agreements are hereby ratified and confirmed and remain
in full
<PAGE> 53
force and effect. The Lease is hereby incorporated herein by reference as
though restated herein in its entirety. To the extent the provisions of this
Lease Supplement are inconsistent with corresponding provisions of the Lease,
such provisions of the Lease shall govern.
SECTION 5. ORIGINAL LEASE SUPPLEMENT. The single executed original
of this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
Counterpart"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS.
SECTION 7. MORTGAGE; POWER OF SALE. Without limiting any other
remedies set forth in the Lease, in the event that a court of competent
jurisdiction rules that the Lease constitutes a mortgage, deed of trust or
other secured financing as is the intent of the parties, then Lessor and Lessee
agree that Lessee hereby grants a Lien against the Leased Property WITH A
STATUTORY POWER OF SALE, and that, upon the occurrence of any Lease Event of
Default, Lessor shall have the power and authority, to the extent provided by
law, after ten (10) Business Days' prior written notice and lapse of such time
as may be required by law, to foreclose its interest (or cause such interest to
be foreclosed) in all or any part of the Leased Property.
SECTION 8. COUNTERPART EXECUTION. This Lease Supplement may be
executed in any number of counterparts and by each of the parties hereto in
separate counterparts, all such counterparts together constituting but one (1)
and the same instrument.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
A-2
<PAGE> 54
IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of
the date and year first above written.
STATE STREET BANK AND TRUST COMPANY,
not individually, but solely
as the Owner Trustee under
the IPC Real Estate Trust
1996-1, as Lessor
By:___________________________
Name:_________________________
Title:________________________
IPC, INC., as Lessee
By:___________________________
Name:_________________________
Title:________________________
Receipt of this original counterpart of the foregoing Lease Supplement is
hereby acknowledged as the date hereof.
NATIONSBANC LEASING CORPORATION OF
NORTH CAROLINA, as the Agent
By:___________________________
A-3
<PAGE> 55
Name:__________________________________
Title:_________________________________
A-4
<PAGE> 56
STATE OF ______________________ Section
Section
COUNTY OF ______________________ Section
On this ___ day of December, 1996, before me personally appeared
______________________________________, to me personally known, who, being duly
sworn, did say that he is the ___________________________of State Street Bank
and Trust Company, a Massachusetts trust company, in its individual capacity and
in its capacity as Owner Trustee of the IPC Real Estate Trust 1996-1, and that
the foregoing instrument was signed and sealed on behalf of said banking
association, and acknowledged said instrument to be free act and deed of said
corporation.
____________________________________
Notary Public, State of ____________
____________________________________
(Print Name of Notary Public)
____________________________________
Date Commission Expires
(Seal)
<PAGE> 57
STATE OF ____________________ Section
Section
COUNTY OF ____________________ Section
On this ___ day of December, 1996, before me personally appeared
______________________________________, to me personally known, who, being duly
sworn, did say that he is the ___________________________ of IPC, Inc., a
Delaware corporation, and that the foregoing instrument was signed and sealed in
behalf of said corporation by authority of its Board of Directors, and
acknowledged said instrument to be the free act and deed of said corporation.
____________________________________
Notary Public, State of ____________
____________________________________
(Print Name of Notary Public)
____________________________________
Date Commission Expires
(Seal)
<PAGE> 58
STATE OF ____________________ Section
Section
COUNTY OF ____________________ Section
On this ___ day of December, 1996, before me personally appeared
______________________________________, to me personally known, who, being duly
sworn, did say that he is the ___________________________ of NationsBanc Leasing
Corporation of North Carolina, a North Carolina corporation, and that the
foregoing instrument was signed and sealed in behalf of said corporation by
authority of its Board of Directors, and acknowledged said instrument to be the
free act and deed of said corporation.
____________________________________
Notary Public, State of ____________
____________________________________
(Print Name of Notary Public)
____________________________________
Date Commission Expires
(Seal)
<PAGE> 59
SCHEDULE 1
TO LEASE SUPPLEMENT NO. ____
(Description of the Leased Property)
B-1
<PAGE> 1
EXHIBIT 10.54
L E A S E
This Lease is made and entered into as of this 11th day of
September, 1996, by and between JOSEPH P. BENNETT, having an address at 23185
South Melrose Drive, Westlake, Ohio 44145 ("Landlord") and TRIO ACQUISITION,
INC., a Delaware corporation, having an address at 100 Tri-State Drive, Suite
200, Lincolnshire, Illinois 60069 ("Tenant"). Landlord and Tenant mutually
covenant and agree as follows:
ARTICLE I
GRANT AND TERM
1.1 Landlord, for and in consideration of the rents herein reserved
and of the covenants and agreements herein contained which are to be performed
by Tenant, hereby leases to Tenant, and Tenant hereby leases from Landlord, the
real estate and improvements thereon commonly known as 250 Warden Avenue,
Elyria, Ohio 44035 (the "Real Estate"), together with the easement created by
that certain Easement granted by Robert Glover, Inc. in favor of Landlord,
dated December 18, 1963, recorded in Lorain County on January 6, 1964, in Deed
Volume 864, Page 513, and known as Recorder's File No. 644175 (the "Easement"),
a legal description of the Real Estate and the Easement are attached hereto as
Exhibit A and made a part hereof by this reference, together with all rights,
privileges and appurtenances thereto (together with the Real Estate and the
Easement, collectively hereinafter called the "Demised Premises").
1.2 Subject to the terms and provisions of Section 1.3 hereof, this
Lease shall commence on September 11, 1996 (the "Commencement Date") and
terminating on September 30, 2001 (the "Termination Date"), unless sooner
terminated or extended as hereinafter provided.
1.3 This Lease is contingent upon Tenant acquiring the assets of
Trio Products, Inc. ("Trio"), and the term hereof shall commence on the date of
the closing (the "Closing") of the transaction between Tenant and Trio pursuant
to that certain Asset Purchase Agreement dated as of September 11, 1996, by and
between Trio, as seller, and Tenant, as buyer (the "Asset Purchase Agreement").
Landlord shall be required to deliver possession of the Demised Premises to
Tenant at the Closing.
<PAGE> 2
1.4 So long as Tenant is not in default under the covenants and
agreements of this Lease, Tenant's quiet and peaceable enjoyment of the Demised
Premises shall not be disturbed or interfered with by Landlord or by any person
claiming by, through or under Landlord.
1.5 So long as Tenant is not in default under the covenants and
agreements of this Lease, Tenant shall have the right to renew this Lease for
an additional term of five (5) years, upon the same terms and conditions
contained herein (except Rent and this renewal option). Rent during such
renewal period shall be calculated by multiplying the Rent (as hereinafter
defined) by an escalation factor, which escalation factor shall be calculated
by subtracting the Revised Consumers Price Index for Urban Wage Earners and
Clerical Workers indicated in the column for the City of Cleveland entitled
"all items" published by the Bureau of Labor Statistics of the United States
Department of Labor for July, 1996 from the same Consumer Price Index for June,
2001. The difference shall be added to or subtracted from, as the case may be,
the number one (1), which sum shall be the escalation factor. The new Rent so
calculated shall be payable in sixty (60) equal monthly installments. Tenant
shall give Landlord notice of its intent to renew at least one hundred and
twenty (120) days prior to the expiration of the original term.
ARTICLE II
RENT
2.1 Tenant shall pay to or upon the order of Landlord as base rent
("Rent") for the term the sum of ONE MILLION TWO HUNDRED EIGHTY-NINE THOUSAND
SIX HUNDRED AND NO/100 DOLLARS ($1,289,600.00) (subject to adjustments as
provided herein), payable in sixty (60) monthly installments as follows:
(a) for the period beginning on the Commencement Date and
ending on September 30, 1998, the Rent shall be payable in monthly installments
of EIGHTEEN THOUSAND SEVEN HUNDRED THIRTY-THREE AND 33/100 DOLLARS
($18,733.33); and
(b) for the period beginning on October 1, 1998 and ending on
September 30, 2001, the Rent shall be payable in monthly installments of
TWENTY-THREE THOUSAND THREE HUNDRED THIRTY-THREE AND 33/100 DOLLARS
($23,333.33).
2
<PAGE> 3
The first monthly installment, or a prorated portion thereof in the event the
Commencement Date is not on the first of the month, shall be paid to Landlord
on the Commencement Date. Thereafter, each monthly installment shall be due
and payable on the first day of each successive month during the term.
2.2 All sums due Landlord hereunder (including Rent and additional
rent as herein provided) shall be paid at Landlord's address as first above
written, or at such other place as Landlord may designate in writing from time
to time. All sums due Landlord shall be paid without deduction, set-off,
discount or abatement, except as otherwise provided herein and as permitted
pursuant to Section 12.5 of the Asset Purchase Agreement, in lawful money of
the United States. Each payment of sums due Landlord which shall not be paid
when due shall bear interest, at the rate of twelve percent (12%) per annum,
from the due date until the same shall be paid.
2.3 It is the purpose and intent of the Landlord and Tenant that the
Rent (as may be adjusted as provided herein) to be paid to the Landlord by the
Tenant be absolutely net to Landlord, so that this Lease shall yield net to
Landlord such rent as hereinabove provided, and that all costs, expenses and
obligations of every kind or nature whatsoever, relating to the Demised
Premises (except as otherwise specifically provided herein), which may arise or
become due during the term of this Lease, shall be paid by the Tenant, and that
the Landlord shall be indemnified and saved harmless by the Tenant from and
against the same. Nothing herein contained shall be deemed to require the
Tenant to pay or discharge any liens or mortgages of any character whatever
which may be placed upon the Demised Premises by the affirmative act of the
Landlord.
2.4 No security deposit shall be required of Tenant.
ARTICLE III
IMPROVEMENTS; EQUIPMENT
3.1 Landlord hereby acknowledges that Tenant has title to all
machinery, equipment and trade fixtures on the Demised Premises and Tenant
shall have the right to remove such items prior to the expiration of the term
of this Lease or any renewal thereof, or within one month after an early
termination of the Lease resulting from Tenant's default or a condemnation of
the Demised Premises. The period of removal shall be extended for delays
caused without fault or neglect on the part of Tenant such as acts of God,
strikes, lockouts or
3
<PAGE> 4
other conditions beyond the control of Tenant. In the event Tenant does not
remove such items as aforesaid, the machinery, equipment and trade fixtures
shall become the property of Landlord without payment of any consideration to
Tenant.
3.2 Tenant shall retain title to all machinery, equipment and trade
fixtures which it places on the Demised Premises and shall have the right to
remove such items on the basis indicated in Section 3.1 hereof.
3.3 Landlord and Tenant acknowledge that Tenant will install
additional manufacturing equipment in the Demised Premises during the term, and
that the present electrical supply to the Demised Premises may be inadequate to
meet Tenant's needs. Landlord shall arrange for the provision of electrical
service to the Demised Premises in the amount of 4,500 amps. Tenant shall be
responsible for the cost of the acquisition and installation of all wiring and
other equipment to carry the electricity from the output transformers to the
plant on the Demised Premises and connecting it with Tenant's equipment. In
the event the installation of the new transformer(s) enables Landlord to remove
and sell old transformers presently on the Demised Premises, Landlord shall
have the right to do so, with no claim to the proceeds by Tenant. Landlord and
Tenant acknowledge that it may take several months to obtain and install the
equipment described in this Section 3.3, and that the equipment will not be
available for Tenant's use at the commencement of the term of this Lease.
Notwithstanding the foregoing, Landlord shall endeavor to provide such
equipment with reasonable diligence, and in any event shall ensure such
equipment is fully installed by no later than January 11, 1997.
ARTICLE IV
PAYMENT OF TAXES
4.1 Tenant shall pay, before any fine, penalty, interest or cost may
be added thereto, or become due or be imposed by operation of law for the
nonpayment thereof, all taxes, assessments, water and sewer rents, rates and
charges, transit taxes, charges for public utilities, excises, levies, licenses
and permit fees and other governmental charges applicable to the Demised
Premises during the term hereof (all of which are sometimes collectively
referred to herein as the "Impositions"), which, for any time during the term
of this Lease may be assessed, levied, confirmed, imposed upon, or become due
and payable out of, or in respect of, or become a lien on, the Demised Premises
or any improvements thereon, or any part thereof or any appurtenance thereto.
4
<PAGE> 5
4.2 If any Impositions paid by Tenant shall cover any period of time
prior to or after the expiration of the term hereof, Tenant's share of such
Impositions shall be equitably prorated to cover only the period of time within
the tax fiscal year during which this Lease shall be in effect, and Landlord
shall reimburse Tenant to the extent required. Landlord and Tenant agree to
divide ratably any special assessments or installments of special assessments
paid by Tenant, which division shall reflect the unexpired term of the Lease
and the period during which any improvement or item for which a special
assessment is imposed may be expected to benefit the Demised Premises. In
addition, nothing herein contained shall require Tenant to pay municipal, state
or federal income taxes assessed against Land- lord, municipal, state or
federal capital levy, estate, succession, inheritance or transfer taxes of
Landlord, or corporation or other franchise taxes imposed upon any owner of the
fee of the Demised Premises; provided, however, that, if at any time during the
term of this Lease, the methods of taxation prevailing at the commencement of
the term hereof shall be altered so as to cause the whole or any part of taxes,
assessments, levies, impositions or charges now levied, assessed or imposed on
real estate and the improvements thereon to be levied, assessed and imposed,
wholly or partially as a capital levy, or otherwise, on the rents received
therefrom, or if any tax, corporation franchise tax, assessment, levy
(including, but not limited to any municipal, state or federal levy),
imposition or charge, or any part there- of, shall be measured by or based in
whole or in part upon the Demised Premises and shall be imposed upon Landlord,
then all such taxes, assessments, levies or charges, or the part thereof so
measured or based, shall be paid and discharged by Tenant.
4.3 The parties understand and agree that the Tenant shall pay the
taxes and other charges as enumerated in this Article IV of the Lease at the
place at which tax payments are required to be made, each such payment of taxes
to be made at least ten days before the said tax itself would become delinquent
in accordance with the law then in force governing the payment of such tax or
taxes, and shall, upon request, promptly deliver official receipts evidencing
payments to Landlord.
4.4 Tenant shall have the right at its own expense to contest the
amount or validity of any tax or tax claim by appropriate proceedings
diligently conducted in good faith, but only after payment of such tax unless
such payment would operate as a bar to such contest or interfere materially
with the prosecution thereof, in which event payment of such tax shall be
postponed if and only so long as:
5
<PAGE> 6
(a) neither the Demised Premises nor any part thereof would
by reason of such postponement be, in Landlord's reasonable judgment, in danger
of being forfeited or lost; and
(b) Landlord shall not in its reasonable judgment be in
danger of being subject to criminal liability or penalty by reason of such
postponement.
Any such contest may be made in the name of Landlord or Tenant or both as
Tenant shall determine, and Landlord agrees to cooperate reasonably with Tenant
in any such contest but without expense to Landlord. If, during the pendency
of such contest, Landlord in the exercise of its reasonable judgment shall
determine and shall notify Tenant of its determination that either condition
(a) or (b) of this Section 4.4 is no longer satisfied, Tenant shall immediately
terminate such contest and pay such tax and any costs, fees (including
attorneys' fees) and other liabilities accruing in such proceedings. If no
default exists upon conclusion of any contested proceedings, Tenant shall be
authorized to collect any refund obtained in such contest.
4.5 In the event Tenant shall fail, refuse or neglect to make any of
the payments in this Article IV required, then Landlord may, at its option,
pay the same, and the amount or amounts of money so paid shall be repaid by
Tenant to Landlord, upon demand of Landlord, and the payment thereof may be
collected or enforced by Landlord in the same manner as though said amount were
an installment of Rent specifically required by the terms of the Lease to be
paid by Tenant to Landlord.
ARTICLE V
PURPOSE AND USE
5.1 Tenant may use and occupy the Demised Premises for the conduct
of its business, including, without limitation, the following:
(a) Manufacturing, assembling, testing and selling its
plastic and related products;
(b) Warehousing and shipping; and
6
<PAGE> 7
(c) Offices.
5.2 Tenant shall not use or occupy the Demised Premises, or permit
the Demised Premises to be used or occupied, contrary in any material respects
to any statute, rule, order, ordinance, requirement or regulation applicable
thereto, or in any manner which would materially violate any certificate of
occupancy affecting the same, or which would cause structural injury to the
buildings, structures and improvements, or cause the value or usefulness of the
Demised Premises, or any part thereof, to diminish, or would constitute a
public or private nuisance or waste.
ARTICLE VI
MAINTENANCE AND REPAIR
6.1 Except as set forth in Section 6.2 hereof, Tenant shall take
good care of the Demised Premises and shall keep them in the same condition and
state of repair, ordinary wear and tear excepted, as existed at the time Tenant
received possession. All repairs made by the Tenant shall be equal in quality
and class to the original work.
6.2 Landlord shall repair and maintain and, where appropriate,
replace, at Landlord's sole cost and expense, all structural elements,
including without limitation the roof, of the Demised Premises in good
condition and repair, except if any such maintenance, repair or replacement is
due to damage caused by Tenant.
6.3 The necessity for and adequacy of repairs to any structures and
improvements pursuant to this Article VI shall be measured by the standard
which is appropriate for buildings, structures and improvements of similar
construction and class.
6.4 Although Landlord shall have no obligation by reason of this
Lease to make repairs of any kind other than as set forth in Section 6.2
hereof, Landlord may elect to make necessary repairs which Tenant fails to make
and the cost of such repairs shall be additional rent which shall be
immediately due and owing under this Lease.
7
<PAGE> 8
6.5 Landlord and Tenant acknowledge that a new roof is required for
the Demised Premises, the approximate cost of which is Two Hundred Nineteen
Thousand Dollars ($219,000), the replacement of which Landlord has committed.
Notwithstanding the provisions contained in Section 6.2 hereof, Tenant shall
participate in the cost of such replacement by paying Landlord the sum of One
Hundred Nine Thousand Five Hundred Dollars ($109,500) at the Closing by wire
transfer of immediately available funds. Landlord shall obtain a 10 year
warranty on such replacement roof, assignable to any subsequent owner of the
Demised Premises, and shall cooperate with Tenant in pursuing any claim under
such warranty or, if required, making a claim under such warranty on Tenant's
behalf.
ARTICLE VII
TITLE; MECHANICS' LIENS
7.1 Tenant shall not permit or suffer to be filed or claimed against
the interest of Landlord in the Demised Premises during the term of this Lease
any lien or claim of any kind for services or materials furnished in connection
with any improvement of the Demised Premises, and if such lien be claimed or
filed it shall be the duty of Tenant, within thirty (30) days after Tenant
receives notice that a claim has been filed, or within thirty (30) days after
Landlord has been given written notice of such claim and has transmitted
written notice of the receipt of such claim to Tenant (whichever thirty-day
period expires earlier) to cause the Demised Premises to be released from such
claim, either by payment or by the posting of bond or by the payment into court
of the amount necessary to relieve and release the Demised Premises from such
claim or in any other manner which, as a matter of law, will result within the
said period of thirty (30) days, in releasing Landlord and the title of
Landlord from such claim.
7.2 In consideration of Tenant's option to purchase and right of
first refusal hereunder, Landlord shall not enter into any agreements,
easements, covenants, conditions or other restrictions that might affect title
to the Demised Premises without Tenant's prior written approval.
Notwithstanding the foregoing, Landlord shall have the right after the
Commencement Date and prior to Tenant's election to purchase the Demised
Premises pursuant to Section 14.2 hereof or to exercise its right of first
refusal pursuant to Article XV hereof, to grant a mortgage on Landlord's fee
interest in the Demised Premises. In the event Tenant purchase the Demised
Premises in accordance with either Article
8
<PAGE> 9
XIV or XV, Landlord shall be required to pay or discharge any liens or
mortgages of any character whatever which may be placed upon the Demised
Premises by the affirmative act of the Landlord.
ARTICLE VIII
INDEMNIFICATION OF LANDLORD
8.1 Tenant will protect, indemnify and save Landlord harmless from
and against all liabilities, obliga- tions, claims, damages, penalties, causes
of action, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) imposed upon or incurred by or asserted against
Landlord by reason of (a) any accident, injury to or death of persons or loss
of or damage to property occurring on or about the Demised Premises or any part
thereof or the adjoining properties, sidewalks, curbs, streets or ways, (b) any
failure on the part of Tenant to perform or comply with any of the terms of
this Lease, or (c) performance of any labor or services or the furnishing of
any materials or other property in respect of the Demised Premises or any part
thereof. In case any action, suit or proceeding is brought against Landlord by
reason of any such occurrence, Tenant shall, at Tenant's expense, resist and
defend such action, suit or proceeding. This indemnity shall not apply to any
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses resulting from the actions or omissions of Landlord, its employees
or agents.
ARTICLE IX
INSURANCE
9.1 During the term of this Lease, as additional rent for the
Demised Premises, Tenant shall procure and maintain insurance, at its own cost
and expense, insuring:
(a) The buildings, structures and improvements at any time
situated upon the Demised Premises against loss or damage by fire, explosion,
sprinkler leakage, windstorm, malicious mischief, vandalism, and all other
normally insurable casualties insured by a full and complete extended coverage
endorsement of not less than 100% of the full replacement value of such build-
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ings, structures and improvements, with all proceeds of insurance to be payable
to Landlord and Tenant; and
(b) Landlord and Tenant from all claims, demands or actions
for injury to or death of any person in an amount of not less than $1,000,000;
for injury to or death of more than one person in any one accident to the limit
of $1,000,000; and for damage to property in an amount of not less than
$1,000,000 made by, or on behalf of, any person or persons, firm or
corporation, arising from, related to or connected with the Demised Premises.
9.2 The aforesaid insurance shall be in companies satisfactory to
Landlord and Tenant. The aforesaid insurance shall not be subject to
cancellation except after at least thirty (30) days' prior written notice to
Landlord, and Landlord shall be named as an additional insured. The original
insurance policies (or certificates thereof satisfactory to Landlord), together
with satisfactory evidence of payment of the premiums thereon, shall upon
written request be deposited with Landlord at the commencement of the Lease.
If Tenant fails to obtain the aforesaid insurance, Landlord may obtain such
insurance and keep the same in effect, and Tenant shall pay to Landlord the
premium cost thereof upon demand as additional rent hereunder.
9.3 Whenever any loss, cost, damage or expense resulting from fire,
explosion or any other casualty or occurrence is incurred by either of the
parties to this Lease in connection with the Demised Premises, and such party
is then covered in whole or in part by insurance with respect to such loss,
cost, damage or expense, then the party so insured hereby releases the other
party from any liability it may have on account of such loss, cost, damage or
expense to the extent of any amount recovered by reason of such insurance and
waives any right of subrogation which might otherwise exist in or accrue to any
person on account thereof; provided that such release of liability and waiver
of the right of subrogation shall not be operative in any case where the effect
thereof is to invalidate such insurance coverage or increase the cost thereof
(however, in the case of increased cost the other party shall have the right,
within thirty (30) days following written notice, to pay the increased cost
thereupon keeping such release and waiver in full force and effect).
9.4 In the event of damage to or destruction of an immaterial part
of the buildings, structures or improvements located on the Demised Premises by
fire, windstorm, or other casualty, Landlord shall cause the Demised Premises
to be repaired, restored or rebuilt will all reasonable dispatch. Any
insurance pro-
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ceeds covering such casualty shall be made available to Landlord for such
repair or restoration.
9.5 In the event of damage to or destruction of a material part, as
determined by Tenant in its reasonable discretion, or all of the buildings,
structures or improvements located on the Demised Premises by fire, windstorm,
or other casualty, Tenant shall have the option to either (i) terminate the
Lease, in which event insurance proceeds covering such casualty (excluding
insurance proceeds covering Tenant's machinery, equipment, trade fixtures and
personal property or as part of the recovery under a general casualty policy
where a specific portion of such proceeds is allocable to such property of
Tenant) shall be paid to Landlord, or (ii) elect to have the sum of insurance
proceeds covering such casualty made available for the reconstruction or repair
of any building, structure or improvement so damaged or destroyed, and for the
repair or replacement of any machinery, equipment, and trade fixtures owned by
Tenant; provided, however, that if the amount of proceeds shall be insufficient
for the reconstruction or repair and refurnishing of any building or structure
damaged or destroyed, as aforesaid, then Tenant shall not be responsible for
the amount of the deficiency.
ARTICLE X
ASSIGNMENT;
LEASEHOLD MORTGAGES
10.1 Except as otherwise permitted in this Article X, this Lease
shall not be assigned by Tenant unless Landlord shall have consented thereto in
writing, which consent shall not be unreasonably withheld.
10.2 At any time and from time to time, Tenant may, without
Landlord's consent, assign this Lease to a direct or indirect wholly-owned
subsidiary of IPC, Inc.
10.3 At any time and from time to time, Tenant may freely mortgage,
pledge or otherwise encumber its interest in the Demised Premises. Any such
mortgage, pledge or other encumbrance shall be referred to as a "Leasehold
Mortgage," which Leasehold Mortgage shall at no time be a lien on the
Landlord's interest in the Demised Premises.
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10.4 The holder of any Leasehold Mortgage may give written notice to
Landlord, specifying the name and address of the mortgagee under such Leasehold
Mortgage (the "Leasehold Mortgagee") and attaching thereto a true and complete
copy of such Leasehold Mortgage, and if such notice shall be given, thereafter
Landlord shall give to such Leasehold Mortgagee notice of any and all defaults
and nonperformance hereunder not later than the first to occur of (i) the time
such notice is given to Tenant and (ii) the time of the declaration of any
default, or the exercise of any remedy hereunder, addressed to such Leasehold
Mortgagee at its address last furnished to Landlord in writing. No such notice
by Landlord to Tenant hereunder shall be deemed to have been duly given unless
and until a copy thereof has been delivered to such Leasehold Mortgagee of
which Landlord has been notified in accordance with the provisions of this
Section 10.4 in accordance with the terms of Section 18.2 hereof. Such
Leasehold Mortgagee, after service of a further notice from Landlord to
Leasehold Mortgagee that Tenant's applicable cure period has expired (the
"Landlord's Notice"), shall thereupon have a period of forty-five (45) days
from Leasehold Mortgagee's receipt of the Landlord's Notice for remedying the
default or causing the same to be remedied. Such Leasehold Mortgagee, in case
Tenant shall be in default hereunder, shall within the period and otherwise as
herein provided, have the right to remedy such default, or cause the same to be
remedied. Landlord will accept performance by any such Leasehold Mortgagee
within the aforesaid period of any covenant, condition, or agreement on
Tenant's part to be performed hereunder with the same force and effect as
though performed by Tenant. Landlord will not exercise any right or remedy
with respect to any default in respect of the performance of work required to
be performed, or acts to be done, or conditions to be remedied so long as such
Leasehold Mortgagee shall, in good faith, have commenced promptly to rectify
the same and shall thereafter prosecute the same to completion with diligence
and continuity; provided, however, that all such defaults are cured within
forty-five (45) days from the date of Landlord's Notice or, if such
non-monetary default is not reasonably curable within such forty-five day
period, the Leasehold Mortgagee commences a cure within forty-five (45) days of
the date of Landlord's Notice and the Leasehold Mortgagee completes such cure
within one hundred eighty (180) days after such date. Notwithstanding the
foregoing, the period of time given to the Leasehold Mortgagee to cure any
default by Tenant which reasonably requires that said Leasehold Mortgagee be in
possession of the Demised Premises to do so, shall be deemed extended to
include the period of time reasonably required by said Leasehold Mortgagee to
obtain such possession (by foreclosure or otherwise) with due diligence. No
Leasehold Mortgagee shall become liable under the provisions of this Lease
unless and until such time as it becomes the owner of the leasehold
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estate covered by its mortgage, and then only for obligations arising during
the time it is the owner of such leasehold estate; provided, however, that, the
preceding portion of this sentence shall not limit or restrict in any way
Landlord's authority to terminate this Lease, as against any Leasehold
Mortgagee (subject to the provisions of this Section 10.4) if any default
hereunder (including, without limitation, any default in the payment of Rent)
has not been completely cured. From and after receiving notice from Tenant or
any Leasehold Mortgagee as to the existence of a Leasehold Mortgage as provided
for in the first sentence of this Section 10.4, and if the Leasehold Mortgage
expressly so requires that Landlord so agree, Landlord will not cancel,
surrender, modify or amend the terms, covenants and conditions of this Lease
without the prior written consent of the Leasehold Mortgagee, such consent not
to be unreasonably withheld.
10.5 In case of termination of this Lease by reason of an event of
default hereunder, Landlord shall give notice thereof simultaneously to each
Leasehold Mortgagee who shall be entitled to receive notices of default as
provided in Section 10.4 hereof, which notice shall be addressed to each
Leasehold Mortgagee at the address last furnished to Landlord in writing as
above provided. Provided that the Lease was terminated as the result of an
event of default which was personal to Tenant and therefore not curable by the
Leasehold Mortgagee, if any of such Leasehold Mortgagees notifies Landlord in
writing, within thirty (30) days after the giving of such notice of termination
by Landlord as aforesaid, that it desires to enter into a new lease, Landlord
shall execute and deliver such new lease to the holder or holders of the First
Leasehold Mortgagee (as hereinafter defined) who timely requested such a new
lease in respect of the Demised Premises or leasehold estate which shall have
been covered by the lien of the mortgage held by such Leasehold Mortgagee, for
the remainder of the term of this Lease, at the Rent and other charges herein
reserved and upon the covenants, conditions, limitations and agreements herein
contained, provided that such Leasehold Mortgagee shall have paid to Landlord
all Rent and other charges due under this Lease and shall have paid to the
appropriate authority any other charges to be paid by Tenant hereunder, up to
and including the date of the commencement of the term of such new lease. The
term "First Leasehold Mortgagee" as used in this Lease shall mean that
Leasehold Mortgagee or Leasehold Mortgagees holding the most senior lien on the
interest of Tenant under this Lease or any portion thereof, as consolidated,
renewed, extended, modified or replaced from time to time. In the event the
First Leasehold Mortgagee fails to notify Landlord of its election to enter
into a lease within such thirty-day period, Landlord shall enter into such
lease with any other Leasehold Mortgagee who so elects by written notice
delivered within such thirty-day period to Landlord to
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enter into a new lease with Landlord, in the order of priority of the Leasehold
Mortgagees, or as the other Leasehold Mortgagees may agree. Nothing herein
contained shall be deemed to impose any obligation on the part of Landlord to
deliver physical possession of the Demised Premises or any part thereof to such
Leasehold Mortgagee, provided, however, that Landlord shall cooperate with such
Leasehold Mortgagee (by joining as a party in any appropriate action or
proceeding, or otherwise) at the sole cost and expense of such Leasehold
Mortgagee, and at no cost, expense or liability to Landlord, for the purpose of
enabling such Leasehold Mortgagee to obtain such possession of the Demised
Premises. The Leasehold Mortgagee shall not be required to cure any event of
default which is exclusively personal to Tenant and which therefore no
Leasehold Mortgagee has the power to cure (such as, for example, the bankruptcy
of the Tenant), as a prerequisite to the exercise of the rights granted to such
Leasehold Mortgagee by the provisions of this Section 10.5. Except as
aforesaid, such Leasehold Mortgagee shall remedy all other events of default
hereunder. Any such new lease and the leasehold estate thereby created shall
continue to maintain the same priority as the within Lease with regard to any
mortgage on the Demised Premises or any part thereof or any other lien, charge
or encumbrance thereon caused or made by Landlord whether or not the same shall
then be in existence. The provisions of the preceding sentence are intended to
be self-executing, and Landlord shall not be obligated to expend any funds or
take any other action (other than to execute any documents reasonably required
by any title company, at no expense to Landlord) to accomplish or obtain such
priority for any such new lease or leasehold estate.
10.6 Landlord agrees to enter into any amendments of this Lease as
may be reasonably required at any time by any Leasehold Mortgagee, except any
amendment which in Landlord's reasonable judgment diminishes in any respect any
rights of, increases any obligations of or adversely affects Landlord
hereunder; any costs incurred in connection with such an amendment shall be
borne by Tenant.
10.7 Notwithstanding the provisions of this Article X, any Leasehold
Mortgagee may foreclose on its mortgage or accept a deed in lieu of foreclosure
without the necessity of complying with the provisions of Sections 10.1 and
10.2, provided, however, that, following any such foreclosure or acceptance of
a deed in lieu of foreclosure, the Demised Premises may be used only for the
use and purposes set forth in Section 5.1 hereof, and for no other purpose
without the written consent of the Landlord.
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10.8 Each party hereby covenants and agrees with the other that it
shall, within fifteen (15) days after written notice shall have been given by
the other requiring a statement of the status of the Lease, give such statement
in writing indicating whether the Lease is in good standing, and if it is not,
the particulars in which it is not, and failure within said period of fifteen
(15) days to give such written reply shall constitute a representation that the
Lease is in good standing, upon which representation any person, after the
expiration of said fifteen (15) days, may rely as being true and correct.
10.9 If Tenant's interest in and to this Lease is assigned with
Landlord's consent, Tenant's liability for the performance of the covenants and
agreements contained herein to be performed by Tenant shall cease and determine
simultaneously with such an assignment, provided that the successor tenant, in
each instance, assumes in writing all of the covenants and agreements to be
kept and performed by Tenant and an executed copy of such assumption is
delivered to Landlord and provided further that, at the time of such an
assignment of Tenant's interest, all of the covenants and agreements to be kept
and performed by Tenant were as of that date kept and performed.
10.10 Upon the written consent of Landlord, which consent shall not
be unreasonably withheld, Tenant shall have the right to sublet all or any
portion of the Demised Premises for any lawful purpose and for purposes not in
contravention of zoning regulations or of any conditions, covenants, easements,
or reservations of record affecting the Demised Premises. Tenant shall at all
times, notwithstanding any such subletting, remain directly and primarily
liable to Landlord for the full and faithful performance of all of the terms
and provisions thereof.
ARTICLE XI
CONDEMNATION
11.1 If the whole of the Demised Premises, or so much thereof,
including however, a portion of the build- ings, structures and improvements,
shall be taken or condemned for a public or quasi-public use or purpose by any
competent authority, and as a result thereof the balance of the Demised
Premises cannot in the judgment of Tenant be used for the same purpose as
expressed in Section 5.1 hereof, then, and in either of such events, the term
of this Lease shall terminate when possession of the Demised Premises shall be
so taken and surrendered,
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and any award, compensation or damages shall be paid to and be the sole
property of Landlord (except for that portion allocable to Tenant's machinery,
equipment, trade fixtures and personalty).
11.2 If a material part of the Demised Premises shall be so taken or
condemned, as determined by Tenant in its reasonable discretion, Tenant shall
have the option to terminate this Lease. If as a result of such partial
condemnation, Tenant determines, in its reasonable discretion, that the balance
of the Demised Premises can be used by Tenant for the same purpose as expressed
in Section 5.1 hereof, then Tenant shall be entitled to have the Rent adjusted
to reflect limitations in space available for Tenant's use and Landlord shall
be entitled to retain the entire award; provided, however, that Landlord shall
repair and restore the Demised Premises and all buildings, structures and
improvements thereon to a complete architectural unit.
ARTICLE XII
DEFAULT AND REMEDIES
12.1 Tenant agrees that any one or more of the following events
shall be considered events of default as said term is used herein:
(a) Tenant shall fail to make any payment of rent required
to be made by Tenant hereunder when due as herein provided, and such failure
shall continue for ten (10) days after notice thereof in writing to Tenant; or
(b) Tenant shall fail to comply with any of the other
covenants and agreements herein contained to be kept, observed and performed by
Tenant, and such failure shall continue for thirty (30) days after notice
thereof in writing to Tenant; or
(c) The filing or execution or occurrence of:
(i) a petition in bankruptcy by or against Tenant;
(ii) a petition or answer by or against Tenant
seeking a reorganization, arrangement, composition, readjustment,
liquidation, dissolution or other relief of the same or different kind
under any provision of any bankruptcy act;
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(iii) adjudication of Tenant as a bankrupt or
insolvent, either in the bankruptcy or equity sense;
(iv) an assignment by Tenant for the benefit of
creditors;
(v) a petition or other proceeding by or against
Tenant for, or the appointment of, a trustee, receiver, guardian,
conservator or liquidator of Tenant with respect to the Demised Premises or
with respect to all or substantially all of Tenant's property; or
(vi) a petition or other proceeding by or against
Tenant for its dissolution or liquidation, or the taking of Tenant's
property by any governmental authority in connection with dissolution or
liquidation;
and in the case of petitions filed against Tenant under (i), (ii), (v) or (vi),
the nondismissal of such petition within forty-five (45) days after the filing
thereof; or
(d) the entry of any order, judgment or decree by any court
of competent jurisdiction granting any prayer or demand contained in any
petition under Sections 12.1(d) (i), (ii), (v) or (vi); or
(e) the taking by any person of Tenant's interest in this
Lease upon execution, attachment or other process of law or equity.
Upon the occurrence of any one or more of such events of default, it shall be
lawful for Landlord, at its election, to declare the said term ended, and
either with or without process of law, to re-enter and to expel, remove and put
out Tenant and all persons occupying the Demised Premises under Tenant, using
such force as may be necessary in so doing. If default shall be made in any
covenant and agreement herein contained to be kept, observed and performed by
Tenant, other than the payment of rent as herein provided, which cannot with
due diligence be cured within a period of thirty (30) days, and if notice
thereof in writing shall have been given to Tenant, and if Tenant, prior to the
expiration of thirty (30) days from and after the giving of such notice,
commences to eliminate the cause of such default, proceeds diligently and with
reasonable dispatch to take all steps and do all work required to cure such
default and does so cure such
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default, then Landlord shall not have the right to declare the said term ended
and enforce all of its rights and remedies hereunder for any default not so
cured.
12.2 The foregoing provisions for the termination of this Lease for
any default in any of its covenants shall not operate to exclude or suspend any
other remedy of Landlord for breach of any of said covenants or for the
recovery of rent or any advance of Landlord made thereon, and, in the event of
the termination of this Lease as aforesaid, Tenant agrees to indemnify and save
harmless Landlord from any loss arising from such termination and reentry.
12.3 No remedy herein or otherwise conferred upon or reserved to
Landlord shall be considered exclusive of any other remedy. No delay or
omission of Landlord to exercise any right or power arising from any default
shall impair any such right or power or shall be construed to be a waiver of
any such default or an acquiescence therein.
12.4 No waiver of any breach of any of the covenants of this Lease
shall be construed, taken or held to be a waiver of any other breach or waiver,
acquiescence in or consent to any further or succeeding breach of the same
covenant.
12.5 Neither the rights herein given to receive, collect, sue for or
distrain for any rent or rents, monies or payments, or to enforce the covenants
and agreements of this Lease, or to prevent the breach or non-observance
thereof, or the exercise of any such right or of any other right or remedy
hereunder or otherwise granted or arising, shall in any way affect or impair or
toll the right or power of Landlord to declare the term of this Lease hereby
granted ended, and to terminate this Lease as provided for herein because of
any default in or breach of the covenants and agreements of this Lease.
12.6 Nothing contained in this Article XII shall limit or restrict
the right of Tenant under Article III to remove its improvements from the
Demised Premises.
ARTICLE XIII
MODIFICATIONS; SIGNS
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13.1 Tenant, at its own expense, may make, without Landlord's
consent, any alteration, modification or rearrangement (collectively referred
to below as "modifications"), of the Demised Premises, not affecting the
structural integrity of the building. Upon termination or expiration of this
Lease, the Demised Premises, as regards nonstructural modifications, shall be
returned to its original condition, less ordinary wear and tear.
13.2 Modifications affecting the structural integrity of the
building may not be made by Tenant without the prior written consent of
Landlord, which consent shall not be unreasonably withheld. If Tenant desires
to make such a modification, notice of this type of proposed action shall be
delivered to the Landlord at least sixty (60) days prior to the contemplated
commencement of such action. Within forty-five (45) days of receipt by
Landlord of the aforesaid notice from Tenant, Landlord shall by written notice
to Tenant state whether Landlord desires that the Demised Premises, in regard
to the contemplated structural modification, be returned to its original
condition, less ordinary wear and tear, upon termination or expiration of the
Lease. If such notice from Landlord is received by Tenant within the time
prescribed, Tenant shall, at the termination or expiration of the Lease, return
the Demised Premises, in regard to that particular modification, to the
original condition, less ordinary wear and tear. In all events, Tenant shall
have the right to remove any structural modification as it sees fit, always
returning the Demised Premises to the condition prior to installation of such
modification.
13.3 Tenant shall keep the Demised Premises free from any liens
arising out of any work performed, materials furnished or obligations incurred
by Tenant.
13.4 In addition to the possible installation of modifications and
removal thereof by Tenant, it is agreed that all personal property, mechanical
tools, trade fixtures and like items may be installed and removed as Tenant
sees fit, always returning the Demised Premises to the condition prior to
installation of such property, tools, trade fixtures or like items.
13.5 Tenant, at its sole cost, may place signs on the Demised
Premises, provided, however, that such signs shall be of a size and in such
design as shall be approved by Landlord whose consent shall not be unreasonably
withheld or delayed. Tenant, at its sole cost, shall obtain such permits and
approvals as may be necessary from any governmental bodies.
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ARTICLE XIV
OPTION TO PURCHASE
14.1 Upon written notice from Tenant to Landlord at any time during
the term of this Lease (including any renewal period) and so long as Tenant is
not in default hereunder, Landlord shall enter into a Purchase Agreement with
Tenant, substantially in the form of Exhibit B attached hereto and made a part
hereof, for the sale of the Demised Premises to Tenant at a price to be
determined in accordance with this Article XIV.
14.2 Upon delivery of notice by Tenant to Landlord of its election
to purchase the Demised Premises in accordance with Section 14.1 hereof,
Landlord and Tenant shall attempt in good faith to agree upon a fair market
value for the Demised Premises. If agreement is not reached within thirty (30)
days, the parties shall proceed with the following appraisal process to
determined the purchase price of the Demised Premises. Landlord and Tenant
shall jointly obtain an appraisal of the Demised Premises (the "Appraisal") in
the manner set forth below and which shall be delivered to both Landlord and
Tenant on a date (the "Appraisal Delivery Date") no later than two months after
Tenant's delivery of its notice to Landlord pursuant to Section 14.1 hereof:
(a) The fair market value of the Demised Premises as of the
Appraisal Delivery Date shall be determined by a board (the "Board") of three
disinterested licensed real estate appraisers, who are members of the American
Institute of Real Estate Appraisers, each with at least ten (10) years'
experience in the valuation of similar properties in the metropolitan area of
Lorain County, Ohio. Landlord and Tenant shall each select an appraiser and
those two appraisers shall jointly select the third appraiser. The Board shall
make an independent investigation and shall hold a hearing at which both
Landlord and Tenant shall have a right to be heard. The Board shall
then submit to the parties its determination of the fair market value of the
Demised Premises which shall be a final, unappealable decision.
(b) The fees of the individual members of the Board shall be
shared equally by Landlord and Tenant, and all costs incurred in connection
with the determination of the fair market value of the Demised Premises shall
be divided equally between Landlord and Tenant.
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14.3 Any transferee of Landlord shall take any interest in the
Demised Premises subject to this purchase option; and Tenant shall not be
required to obtain the appointment of any guardian or other type of personal
representative to protect the interest of any owner in the proceedings before
the Board, it being agreed that the function of the Board is to make an
independent and impartial investigation and determination after hearing any
party in interest that desires to present testimony before it. The Board shall
not be bound by rules of evidence in conducting its hearings and, except for
abuse of discretion or irregularity of proceedings, its decision shall not be
appealable.
ARTICLE XV
RIGHT OF FIRST REFUSAL
15.1 If Landlord receives a bona fide offer to purchase all or any
portion of the fee title of the Demised Premises from an unaffiliated third
party, any contract that may be entered into between Landlord and such bona
fide purchaser shall provide that the sale of the fee shall be subject to
Tenant's right of first refusal as set forth hereafter; such sale shall be
subject to this Lease and shall be so affirmed by the purchaser. In the event
that Landlord receives a written offer or executes a contract as above set
forth, Tenant shall have the option, to be exercised within sixty (60) days
after receipt by Tenant of written notice of the terms of such offer, to enter
into a contract with Landlord, and Landlord agrees to enter into such contract
with Tenant, on the same terms and conditions as said offer to purchase.
Notwithstanding anything in this Lease to the contrary, Landlord shall not
entertain or consider any offers from any other party to purchase the Demised
Premises during the last year of the term hereof.
15.2 Landlord shall submit a duplicate original of the executed
contract embodying all of the terms and conditions of said executed contract to
Tenant for such purpose. If, after the receipt of such notice, Tenant fails to
exercise its option by signing and returning within the sixty-day period a copy
of said contract to Landlord together with the down payment therein provided,
Landlord shall have the right to conclude the proposed sale on the same terms,
and no other, as in the offer or contract originally forwarded to Tenant.
Notwithstanding Tenant's failure to exercise such option, Tenant's option shall
remain in force and be binding on any subsequent owner of owners of the Demised
Premises, in connection with any subsequent sale to the same extent as if said
subsequent owner or owners were Landlord herein, and said subsequent
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owner or owners shall be required to do all of the things required of Landlord
in this Lease prior to any such sale of the Demised Premises.
ARTICLE XVI
SURRENDER
16.1 Upon the termination of this Lease, whether by forfeiture,
lapse of time or otherwise, or upon the termination of Tenant's right to
possession of the Demised Premises, Tenant will at once surrender and deliver
up the Demised Premises, together with all improvements thereon which are the
property of Landlord, to Landlord in good condition and repair, ordinary wear
and tear excepted, subject, however, to the provisions of Article IX hereof.
16.2 Upon the termination of the Lease by lapse of time, Tenant may
remove Tenant's trade fixtures and all of Tenant's personal property and
equipment; provided, however, that Tenant shall repair any injury or damage
which may result from such removals.
16.3 Any holding over by Tenant of the Demised Premises after the
expiration of this Lease shall operate and be construed to be a tenancy from
month to month only at a monthly rental of One Hundred Fifty percent (150%) of
the rate of rent (as adjusted pursuant to Article II hereof) payable hereunder
for the Lease term.
ARTICLE XVII
COMPLIANCE WITH LAW;
ENVIRONMENTAL CONCERNS
17.1 Tenant shall comply in all material respects with all laws,
ordinances, and regulations of duly constituted public authorities now or
hereafter in any manner materially affecting the Demised Premises and the use
and occupation thereof. Tenant shall have the right in its name or (wherever
necessary) Landlord's name, to contest the validity or enforcement of any law,
ordinance, order, regulation, or requirement affecting the Demised Premises or
the operation thereof and may defer compliance therewith provided that: (i)
Tenant shall diligently prosecute such contest to binding settlement, or final
determination by,
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the court department, or governmental authority or body having jurisdiction in
the matter; and (ii) Tenant shall save and hold Landlord harmless against
violation by Tenant of any such law, order, ordinance, rule, or regulation.
17.2 Landlord shall cooperate with Tenant and execute any documents
or pleadings required for such purpose, and Tenant agrees to save and hold
Landlord harmless against any liability, claim, or expense in connection
therewith.
17.3 As used herein, the term "Hazardous Material" means any
hazardous, toxic or dangerous waste, sub- stance or material defined as such in
(or for purposes of) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, any so-called "Superfund" or "Superlien"
law, or any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing liability or
standards on conduct concerning any hazardous, toxic or dangerous waste,
substance or material, as now or at any time hereafter in effect.
17.4 Tenant shall pay, protect, indemnify and save harmless Landlord
from and against any and all liabilities, losses, damages, costs, expenses
(including without limitation reasonable attorneys' fees and expenses), causes
of action, suits, claims, demands, fines or judgments of any and every nature
whatsoever (collectively, "Indemnifiable Damages") arising from or in any way
relating to Tenant's use of the Demised Premises (or use by any person claiming
under Tenant) from and after the commencement of the term hereof through the
expiration or earlier termination of this Lease. Without limiting the
foregoing, Tenant agrees, to the maximum extent permitted by law, to indemnify,
defend and save Landlord harmless from and against any and all Indemnifiable
Damages which (i) are asserted against Landlord by any person or entity or
incurred by Landlord by reason of the application to the Demised Premises of
statutes imposing liability or standards of conduct concerning Hazardous
Materials, provided that the Indemnifiable Damages result during the term
hereof from any act or failure to act of Tenant or of any person claiming under
Tenant or of any customer, employee, agent or invitee of Tenant or any such
person, or (ii) result from the presence upon the Demised Premises of or the
release from the Demised Premises, during the term hereof, of any Hazardous
Materials, or (iii) result from the failure of Tenant to obtain all necessary
permits, registrations or authorizations for the use or operation of the
Demised Premises as required under the provisions of any such statute. The
foregoing indemnification shall apply regardless of whether such Indemnifiable
Damages are founded upon municipal,
23
<PAGE> 24
state or federal common, regulatory, statutory or equitable laws, rules or
principles and the term "statute" as used herein shall be deemed to include all
such laws, rules and principles. Indemnifiable Damages shall exclude any and
all and all liabilities, losses, damages, costs, expenses (including without
limitation attorneys' fees and expenses), causes of action, suits, claims,
demands, fines or judgments of any and every nature whatsoever arising out of
or relating to violations, alleged violations, matters or circumstances
existing prior to the commencement of this Lease, or arising out of or relating
to violations, alleged violations, matters or circumstances arising after the
term hereof.
17.5 The obligations of Tenant under Section 17.4 shall survive any
termination of this Lease for all events described in Section 17.4 which are
proven to occur after the commencement of and prior to the termination of this
Lease.
ARTICLE XVIII
MISCELLANEOUS
18.1 None of the covenants and agreements of this Lease to be kept
and performed by either party shall in any manner be altered, waived, modified,
changed or abandoned except by a written instrument, duly signed, acknowledged
and delivered by the other party; and no act or acts, omission or omissions or
series of acts or omissions, or waiver, acquiescence or forgiveness of Landlord
as to any default in or failure of performance, either in whole or in part, by
Tenant, or any of the covenants and agreements of this Lease, shall be deemed
or construed to be a waiver by Landlord of the right at all times thereafter to
insist upon the prompt, full and complete performance by Tenant of each and all
the covenants and agreements hereof thereafter to be performed in the same
manner and to the same extent as the same are herein covenanted to be performed
by Tenant.
18.2 All notices to or demands upon Landlord or Tenant desired or
required to be given under any of the provisions hereof shall be in writing.
Any notices or demands from Tenant to Landlord shall be deemed to have been
duly and sufficiently given if a copy thereof has been mailed by United States
registered or certified mail in an envelope properly stamped and addressed to
Landlord, at 23185 South Melrose Drive, Westlake, Ohio 44145, Attention:
Joseph P. Bennett, or to such other address as Landlord may theretofore have
24
<PAGE> 25
furnished by written notice to Tenant, and any notices or demands from Landlord
to Tenant shall be deemed to have been duly and sufficiently given if mailed by
United States registered mail or certified mail in an envelope properly stamped
and addressed to Tenant c/o Ivex Packaging Corporation, 100 Tri-State Drive,
Suite 200, Lincolnshire, Illinois 60069, Attention: G. Douglas Patterson, Vice
President & General Counsel, or at such other address as Tenant may theretofore
have furnished by written notice to Landlord.
18.3 Landlord may enter the Demised Premises at any time for the
purpose of inspecting same, or if making repairs which Tenant may neglect or
refuse to make in accordance with the covenants and agreements of this Lease,
and also for the purpose of showing the Demised Premises to persons wishing to
purchase the same or at any time within one (1) year prior to the expiration of
the Lease term, to persons wishing to rent the Demised Premises. Tenant shall,
within one (1) year prior to the expiration of the Lease term, permit the usual
notice of "To Let" or "For Sale" to be placed on the Demised Premises and to
remain thereon without molestation.
18.4 This Lease shall not be recorded, but Landlord and Tenant agree
to execute a Memorandum of Lease in the form of Exhibit C attached hereto upon
the execution of this Lease, and such memorandum may be recorded with the
County Recorder, Lorain County, Ohio, at Tenant's sole cost and expense.
18.5 Time is of the essence of this Lease, and all provisions herein
relating thereto shall be strictly construed.
18.6 The parties warrant and represent that there are no real estate
brokers involved and that there are no commissions due to anyone arising out of
this transaction.
18.7 Landlord acknowledges that Trio has made certain
representations and warranties to and covenants with Tenant under the Asset
Purchase Agreement and other agreements executed in connection therewith,
including the retention of certain liabilities, the violation or breach of
which, or failure to comply with, shall entitle Tenant to set-off payments due
Landlord hereunder.
18.8 Nothing contained herein shall be deemed or construed by the
parties hereto, nor by any third party, as creating the relationship of
principal and agent, of partnership or of joint venture between or among the
parties hereto,
25
<PAGE> 26
it being understood and agreed that no provision contained in this Lease, nor
any acts of the parties hereto, shall be deemed to create any relationship
other than the relationship of Landlord and Tenant.
18.9 The captions of this Lease are for convenience only and are not
to be construed as part of this Lease or as defining or limiting in any way the
scope or intent of the provisions hereof.
18.10 If any term or provision of this Lease shall to any extent be
held invalid or unenforceable, the remaining terms and provisions of this Lease
shall not be affected thereby, but each term and provision of this Lease shall
be valid and be enforced to the fullest extent permitted by law.
18.11 This Lease shall be construed and enforced in accordance with
the laws of the State of Ohio.
18.12 All of the covenants and agreements contained in this Lease
shall extend, inure to and be binding upon the successors and assigns of the
respective parties hereto, the same as if they were in every case specifically
named, and wherever in this Lease reference is made to either of the parties
hereto, it shall be held to include and apply to, wherever applicable, the
successors and assigns of such party. Nothing herein contained shall be
construed to grant or confer upon any person or persons, firm, corporation or
governmental authority other than the parties hereto, their successors and
assigns, any right, claim or privilege by virtue of any covenant and agreement
in this Lease contained.
26
<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this Lease in duplicate
the day and year first above written.
Signed in the LANDLORD:
presence of:
_________________________________
Print Name: Joseph P. Bennett
_________________________
Print Name:
Signed in the TENANT:
presence of:
_________________________ TRIO ACQUISITION, INC.,
Print Name: a Delaware corporation
_________________________ By:______________________________
Print Name: Its:__________ President
27
<PAGE> 28
This instrument prepared by:
Yasmina Rahal, Esq.
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE> 29
STATE OF ___________________
COUNTY OF __________________
Before me, a Notary Public in and for said County and State,
personally appeared the above-named JOSEPH P. BENNETT, who acknowledged that he
did sign the foregoing instrument on his behalf, and that the same is his free
act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal on this ____ day of September, 1996.
_____________________________________
Notary Public
STATE OF ___________________
COUNTY OF __________________
Before me, a Notary Public in and for said County and State,
personally appeared the above-named TRIO ACQUISITION, INC., by
________________________, who acknowledged that he did sign the foregoing
instrument for and on behalf of said corporation, and that the same is the free
act and deed of said corporation and his free act and deed individually and as
such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal on this ____ day of September, 1996.
_____________________________________
Notary Public
<PAGE> 30
EXHIBIT A
Legal Description
PARCEL NO. 1
Situated in the City of Elyria, County of Lorain and State of Ohio and
further described as follows:
Beginning at an iron pin on the Northeasterly corner of Warden Avenue
and Adams Street as recorded in Volume 9, Page 27 of the Lorain County Record
of Plats; thence Easterly along the Northerly line of Warden Avenue a distance
of 23 feet to an iron pin which is the principal place of beginning of lands
described herein; thence Northerly** a distance of 591.00 feet to an iron pin
located on the old City of Elyria Corporation Line, vacated and extended in
1958; thence along the old corporation line in a Westerly direction, a distance
of 365 feet to an iron pin on said line; thence*** in a Southerly direction a
distance of 591.00 feet to an iron pin on the Northerly line of Warden Avenue;
thence along the Northerly line of Warden Avenue a distance of 365 feet to the
principal place of beginning, said parcel containing 5.380 acres of land, more
or less, and is part of Original Lot 34 West of Black River and part of Garden
Acres Allotment as recorded in Volume 9, Page 27 in the Lorain County Record of
Plats.*
* The 5.380 Acres of land described herein includes Sublots 1 through 6
in Block 8 & the Westerly 23 feet of Sublot 1 in Block 9 of the Garden
Acres Allotment as shown in Vol. 9, Page 27, Lorain County Records of
Plats, & 4.22 Acres of Elyria Twp. Orig. Lot 34 West of Black River.
** Parallel to the Easterly line of Adams Street extended Northerly.
*** Parallel to the Easterly line of premises described herein.
<PAGE> 31
PARCEL NO. 2
All of the Grantor's right, title and interest in and to a perpetual
easement across, on and within the premises described below for the purpose of
constructing, using, maintaining and keeping in repair a railroad siding from
B. & O. Railroad line to the above-described Parcel Number 1:
Being a twenty-five (25) foot wide easement across lands now or
formerly owned by Robert Glover, situated in part of Outlot 34 West of Black
River, of the Original Elyria Township, now a part of the Northern area of the
City of Elyria, bounded on the South by Warden Avenue, on the West by the
Baltimore & Ohio Railroad Company's CL & W Branch line railroad, on the North
by the Old Corporation Line of the City of Elyria, and on the East by property
granted to Joseph P. Bennett in Deed recorded in Volume 864, Page 511 of Lorain
County Deed Records.
Beginning at a point on the center line of the side track easement in
the East property line of the said railroad and measured S 14 degrees
32' 30" E three hundred thirty-two and ninety-three hundredths (332.93) feet
from the intersection on the Old Corporation Line (being the North line of
Robert Glover) with the East property line of the said railroad, thence the
easement curves to te right with a center line radius of three hundred
fifty-nine and twenty-six hundredths (359.26) feet (a 16 degree railroad
calculation curve) for a distance of the five hundred thirteen and forty-three
hundredths (513.43) feet to the end of the curve, said curve having a chord
bearing of N 48 degrees 48' 32" for a length of four hundred seventy-two and
one-tenth (472.10) feet, thence by a line tangent to the curve, parallel and
twelve and five-tenths (12.5) feet South of the Old Corporation Line (Glover's
North line) N 89 degrees 53' E for a distance of three hundred four and fifteen
hundredths (304.15) feet to Joseph P. Bennett's and Robert Glover's property
division line, above describing the center line of a twenty-five (25) foot wide
easement for a railroad siding containing an area of twenty thousand four
hundred forty square feet more or less.
<PAGE> 32
EXHIBIT B
Purchase Agreement
<PAGE> 33
EXHIBIT C
Memorandum of Lease
<PAGE> 34
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE is made and entered into as of the 11th day of
September, 1996, by and between JOSEPH P. BENNETT ("Landlord"), and TRIO
ACQUISITION, INC., a Delaware corporation ("Tenant").
BACKGROUND
A. Landlord and Tenant have heretofore entered into that certain
Lease, dated as of September __, 1996 (the "Lease"), whereby Landlord leased to
Tenant certain real property and improvements thereon commonly known as 250
Warden Avenue, Elyria, Ohio 44035, together with a certain easement, and all
rights, privileges and appurtenances thereto as hereinafter described.
B. Landlord and Tenant desire to record a Memorandum of Lease as
herein set forth for purposes of giving notice of the Lease and certain of its
terms and conditions.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, for and in consideration of the sum of Ten Dollars ($10.00) and for
other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, do hereby covenant and agree as follows:
1. Landlord: The Landlord under the Lease is: JOSEPH P.
BENNETT.
2. Tenant: The Tenant under the Lease is: TRIO ACQUISITION,
INC., a Delaware corporation.
3. Landlord's Address: Landlord's address is: 23185 South
Melrose Drive, Westlake, Ohio 44145.
4. Tenant's Address: Tenant's address is: c/o Ivex Packaging
Corporation, 100 Tri-State Drive, Suite 200, Lincolnshire, Illinois 60069,
Attention: G. Douglas Patterson, Vice President & General Counsel.
<PAGE> 35
5. Demised Premises: Landlord has demised and leased to Tenant
certain real property and improvements thereon commonly known as 250 Warden
Avenue, Elyria, Ohio 44035 (the "Real Estate"), together with the easement
created by that certain Easement granted by Robert Glover, Inc. in favor of
Landlord, dated December 18, 1963, recorded in Lorain County on January 6,
1964, in Deed Volume 864 Page 513, and known as Recorders's File No. 644175
(the "Easement"), a legal description of the Real Estate and the Easement are
attached hereto as Exhibit A and made a part hereof, together with all rights,
privileges and appurtenances thereto (together with the Real Estate and the
Easement, collectively hereinafter called the "Demised Premises").
6. Term: The initial term of the Lease commenced on September
11, 1996 and shall continue until September 30, 2001, subject to Tenant's right
to renew the term of the Lease for an additional five (5) years.
7. Purchase Option: Tenant has the right to purchase the Demised
Premises at any time during the term of the Lease, as the same may be renewed.
8. Right of First Refusal: Tenant has the right of first refusal
if Landlord receives a bona fide offer to purchase all or any portion of the
Demised Premises at any time during the term of the Lease, as the same may be
renewed.
9. Notice: This Memorandum of Lease does not set forth all of
the material terms or conditions of the Lease. This Memorandum of Lease is not
intended to, and does not and shall not, amend, modify, diminish or affect in
any way the Lease or the construction or interpretation thereof or any rights
or obligations of any of the parties thereto. The sole purpose of this
Memorandum of Lease is to give notice of the Lease and of certain of its terms,
covenants and conditions.
10. Miscellaneous: This Memorandum of Lease shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
2
<PAGE> 36
IN WITNESS WHEREOF, the parties have executed this Memorandum of Lease
in duplicate the day and year first above written.E
Signed in the LANDLORD:
presence of:
_________________________ ____________________________
Print Name: Joseph P. Bennett
_________________________
Print Name:
Signed in the TENANT:
presence of:
_________________________ TRIO ACQUISITION, INC.,
Print Name: a Delaware corporation
_________________________ By: ____________________
Print Name: Its: _____ President
3
<PAGE> 37
This instrument prepared by:
Yasmina Rahal, Esq.
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
<PAGE> 38
STATE OF ___________________
COUNTY OF __________________
Before me, a Notary Public in and for said County and State, personally
appeared the above-named JOSEPH P. BENNETT, who acknowledged that he did sign
the foregoing instrument on his behalf, and that the same is his free act and
deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal on
this ____ day of September, 1996.
______________________________
Notary Public
STATE OF ___________________
COUNTY OF __________________
Before me, a Notary Public in and for said County and State, personally
appeared the above-named TRIO ACQUISITION, INC., by ________________________,
who acknowledged that he did sign the foregoing instrument for and on behalf of
said corporation, and that the same is the free act and deed of said
corporation and his free act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal on
this ____ day of September, 1996.
______________________________
Notary Public
<PAGE> 39
EXHIBIT A
Legal Description
PARCEL NO. 1
Situated in the City of Elyria, County of Lorain and State of Ohio and
further described as follows:
Beginning at an iron pin on the Northeasterly corner of Warden Avenue
and Adams Street as recorded in Volume 9, Page 27 of the Lorain County Record
of Plats; thence Easterly along the Northerly line of Warden Avenue a distance
of 23 feet to an iron pin which is the principal place of beginning of lands
described herein; thence Northerly** a distance of 591.00 feet to an iron pin
located on the old City of Elyria Corporation Line, vacated and extended in
1958; thence along the old corporation line in a Westerly direction, a distance
of 365 feet to an iron pin on said line; thence*** in a Southerly direction a
distance of 591.00 feet to an iron pin on the Northerly line of Warden Avenue;
thence along the Northerly line of Warden Avenue a distance of 365 feet to the
principal place of beginning, said parcel containing 5.380 acres of land, more
or less, and is part of Original Lot 34 West of Black River and part of Garden
Acres Allotment as recorded in Volume 9, Page 27 in the Lorain County Record of
Plats.*
* The 5.380 Acres of land described herein includes Sublots 1 through 6
in Block 8 & the Westerly 23 feet of Sublot 1 in Block 9 of the Garden
Acres Allotment as shown in Vol. 9, Page 27, Lorain County Records of
Plats, & 4.22 Acres of Elyria Twp. Orig. Lot 34 West of Black River.
** Parallel to the Easterly line of Adams Street extended Northerly.
*** Parallel to the Easterly line of premises described herein.
<PAGE> 40
PARCEL NO. 2
All of the Grantor's right, title and interest in and to a perpetual
easement across, on and within the premises described below for the purpose of
constructing, using, maintaining and keeping in repair a railroad siding from
B. & O. Railroad line to the above-described Parcel Number 1:
Being a twenty-five (25) foot wide easement across lands now or
formerly owned by Robert Glover, situated in part of Outlot 34 West of Black
River, of the Original Elyria Township, now a part of the Northern area of the
City of Elyria, bounded on the South by Warden Avenue, on the West by the
Baltimore & Ohio Railroad Company's CL & W Branch line railroad, on the North
by the Old Corporation Line of the City of Elyria, and on the East by property
granted to Joseph P. Bennett in Deed recorded in Volume 864, Page 511 of Lorain
County Deed Records.
Beginning at a point on the center line of the side track easement in
the East property line of the said railroad and measured S 14 degrees
32' 30" E three hundred thirty-two and ninety-three hundredths (332.93) feet
from the intersection on the Old Corporation Line (being the North line of
Robert Glover) with the East property line of the said railroad, thence the
easement curves to te right with a center line radius of three hundred
fifty-nine and twenty-six hundredths (359.26) feet (a 16 degree railroad
calculation curve) for a distance of the five hundred thirteen and forty-three
hundredths (513.43) feet to the end of the curve, said curve having a chord
bearing of N 48 degrees 48' 32" for a length of four hundred seventy-two and
one-tenth (472.10) feet, thence by a line tangent to the curve, parallel and
twelve and five-tenths (12.5) feet South of the Old Corporation Line (Glover's
North line) N 89 degrees 53' E for a distance of three hundred four and fifteen
hundredths (304.15) feet to Joseph P. Bennett's and Robert Glover's property
division line, above describing the center line of a twenty-five (25) foot wide
easement for a railroad siding containing an area of twenty thousand four
hundred forty square feet more or less.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Ivex Packaging Corporation, a Delaware corporation, owns all of the
outstanding capital stock of IPC, Inc., a Delaware corporation, which owns all
of the outstanding capital stock of the following:
1. Packaging Products, Inc., a Delaware corporation
2. Ivex Corporation, an Ontario corporation, which owns all of
the outstanding capital stock of:
(i) M & R Plastics Inc., a Quebec corporation which owns all
of the outstanding capital stock of:
(a) M&R Plastics Canada, Inc., an Ontario
corporation
(b) 2528-5347 Quebec Inc., a Quebec corporation
3. Kama of Illinois Corporation, a Delaware corporation
4. Valley Express Lines, Inc., a Delaware corporation
5. Ivex Paper Mill Corporation, a Delaware corporation
6. IPMC Holding Corporation, a Delaware corporation, which owns
all of the outstanding capital stock of:
(i) IPMC, Inc., a Delaware corporation
7. Trio Products, Inc., a Delaware corporation
8. Ivex Holdings, Ltd., a corporation organized under the laws
of England and Wales, which owns all of the outstanding capital
stock of:
(i) Kama Europe Limited, a corporation
organized under the laws of England and Wales
9. CFI Industries, Inc., a Delaware corporation, which owns all
of the outstanding capital stock of:
(i) Plastofilm Industries, Inc., a Delaware corporation
(ii) CFI Recycling, Inc., a Delaware corporation
(iii)Plastofilm Limited, a Northern Ireland corporation
<PAGE> 1
EXHIBIT 21.2
SUBSIDIARIES OF THE REGISTRANT
Ivex Packaging Corporation, a Delaware corporation, owns all of the
outstanding capital stock of IPC, Inc., a Delaware corporation, which owns all
of the outstanding capital stock of the following:
1. Packaging Products, Inc., a Delaware corporation
2. Ivex Corporation, an Ontario corporation, which owns all of
the outstanding capital stock of:
(i) M & R Plastics Inc., a Quebec corporation which owns all
of the outstanding capital stock of:
(a) M&R Plastics Canada, Inc., an Ontario
corporation
(b) 2528-5347 Quebec Inc., a Quebec corporation
3. Kama of Illinois Corporation, a Delaware corporation
4. Valley Express Lines, Inc., a Delaware corporation
5. Ivex Paper Mill Corporation, a Delaware corporation
6. IPMC Holding Corporation, a Delaware corporation, which owns
all of the outstanding capital stock of:
(i) IPMC, Inc., a Delaware corporation
7. Trio Products, Inc., a Delaware corporation
8. Ivex Holdings, Ltd., a corporation organized under the laws
of England and Wales, which owns all of the outstanding capital
stock of:
(i) Kama Europe Limited, a corporation
organized under the laws of England and Wales
9. CFI Industries, Inc., a Delaware corporation, which owns all
of the outstanding capital stock of:
(i) Plastofilm Industries, Inc., a Delaware corporation
(ii) CFI Recycling, Inc., a Delaware corporation
(iii)Plastofilm Limited, a Northern Ireland corporation
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as
a director or officer or both, as the case may be, of Ivex Packaging
Corporation (the "Company") does hereby appoint Frank V. Tannura or G. Douglas
Patterson, and each of them, severally, his/her true and lawful attorney or
attorneys-in-fact with or without the other and with full power of substitution
and resubstitution, to execute in his/her name, place and stead, in his/her
capacity as a director or officer or both, as the case may be, of the Company,
the Form 10-K and any and all amendments thereto as said attorneys-in-fact or
either of them shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to file the
same or cause the same to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended. Each of said attorneys-in-fact shall have full power and authority to
do and perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable in connection with the
Form 10-K, as fully and for all intents and purposes as the undersigned might
or could do in person, the undersigned hereby ratifying and approving the acts
of said attorneys-in-fact and each of them.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this the ____ day of March, 1997.
-----------------------------
Glenn R. August
<PAGE> 2
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as
a director or officer or both, as the case may be, of Ivex Packaging
Corporation (the "Company") does hereby appoint Frank V. Tannura or G. Douglas
Patterson, and each of them, severally, his/her true and lawful attorney or
attorneys-in-fact with or without the other and with full power of substitution
and resubstitution, to execute in his/her name, place and stead, in his/her
capacity as a director or officer or both, as the case may be, of the Company,
the Form 10-K and any and all amendments thereto as said attorneys-in-fact or
either of them shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to file the
same or cause the same to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended. Each of said attorneys-in-fact shall have full power and authority to
do and perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable in connection with the
Form 10-K, as fully and for all intents and purposes as the undersigned might
or could do in person, the undersigned hereby ratifying and approving the acts
of said attorneys-in-fact and each of them.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this the ____ day of March, 1997.
-----------------------------
David G. Offensend
<PAGE> 3
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, in his capacity as
a director or officer or both, as the case may be, of Ivex Packaging
Corporation (the "Company") does hereby appoint Frank V. Tannura or G. Douglas
Patterson, and each of them, severally, his/her true and lawful attorney or
attorneys-in-fact with or without the other and with full power of substitution
and resubstitution, to execute in his/her name, place and stead, in his/her
capacity as a director or officer or both, as the case may be, of the Company,
the Form 10-K and any and all amendments thereto as said attorneys-in-fact or
either of them shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to file the
same or cause the same to be filed with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended. Each of said attorneys-in-fact shall have full power and authority to
do and perform in the name and on behalf of the undersigned, in any and all
capacities, every act whatsoever necessary or desirable in connection with the
Form 10-K, as fully and for all intents and purposes as the undersigned might
or could do in person, the undersigned hereby ratifying and approving the acts
of said attorneys-in-fact and each of them.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this the ____ day of March, 1997.
-----------------------------
Anthony P. Scotto
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1996 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,822
<SECURITIES> 0
<RECEIVABLES> 53,718
<ALLOWANCES> 2,080
<INVENTORY> 49,023
<CURRENT-ASSETS> 108,878
<PP&E> 296,937
<DEPRECIATION> 123,957
<TOTAL-ASSETS> 315,901
<CURRENT-LIABILITIES> 76,339
<BONDS> 352,893
0
0
<COMMON> 11
<OTHER-SE> (127,355)
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<SALES> 451,807
<TOTAL-REVENUES> 451,807
<CGS> 351,424
<TOTAL-COSTS> 351,424
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 42,732
<INCOME-PRETAX> 9,568
<INCOME-TAX> 900
<INCOME-CONTINUING> 8,668
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,668
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
