<PAGE> 1
As Filed with the Securities and Exchange Commission on September 4, 1997.
Registration No. 33-95436
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 7
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
IVEX PACKAGING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<C> <C> <C>
DELAWARE 2679 76-0171625
(State or other jurisdiction of (Primary Standard Industrial (IRS employer identification number)
incorporation or organization) Classification Code)
</TABLE>
100 TRI-STATE DRIVE, SUITE 200, LINCOLNSHIRE, ILLINOIS 60069
(847) 945-9100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
G. DOUGLAS PATTERSON, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
IVEX PACKAGING CORPORATION
100 TRI-STATE DRIVE, SUITE 200
LINCOLNSHIRE, ILLINOIS 60069
TELEPHONE NO.: (847) 945-9100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
WILLIAM R. KUNKEL PAUL W. THEISS
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) MAYER, BROWN & PLATT
333 W. WACKER DRIVE 190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60606 CHICAGO, ILLINOIS 60603
TELEPHONE NO.: (312) 407-0700 TELEPHONE NO.: (312) 782-0600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement has become effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
PROPOSED MAXIMUM PROPOSED
TITLE OF SECURITIES TO NUMBER OF SHARES OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
BE REGISTERED TO BE REGISTERED PER SHARE OFFERING PRICE(1)(2) REGISTRATION FEE(3)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share....... 9,660,000 $16.00 $154,560,000 $46,837
=========================================================================================================================
</TABLE>
(1) Includes options granted to the Underwriters by Ivex Packaging Corporation
to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(a) under the Securities Act of 1933, as amended.
(3) All of which was previously paid in connection with this Registration
Statement. $20,690 was paid in 1995 and $43,561 was paid on August 1, 1997.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in a concurrent international offering outside
the United States and Canada (the "International Prospectus"). The complete U.S.
Prospectus follows immediately. Following the U.S. Prospectus are certain pages
of the International Prospectus, which include an alternate front cover page, an
alternate underwriting section and an alternate back cover page. All other pages
of the U.S. Prospectus and the International Prospectus are identical.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE OR JURISDICTION IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE OR JURISDICTION.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 4, 1997
PROSPECTUS
8,400,000 SHARES
[IVEX LOGO]
IVEX PACKAGING CORPORATION
COMMON STOCK
------------------------
Of the 8,400,000 shares of Common Stock, $.01 par value (the "Common
Stock"), of Ivex Packaging Corporation, a Delaware corporation (the "Company" or
"Ivex"), being offered hereby, 6,700,000 shares are being offered by the Company
and 1,700,000 shares are being offered by Acadia Partners, L.P. and certain
related investors (the "Selling Stockholder" or "Acadia"). The Company will not
receive any of the proceeds from the sale of shares of Common Stock by the
Selling Stockholder. See "Principal and Selling Stockholders."
Of the 8,400,000 shares of Common Stock offered hereby, 6,720,000 shares are
being offered initially in the United States and Canada by the U.S. Underwriters
(the "U.S. Offering") and 1,680,000 shares are being offered initially in a
concurrent international offering outside the United States and Canada by the
International Managers (the "International Offering," and together with the U.S.
Offering, the "Offerings"). The initial public offering price and the
underwriting discount per share are identical for each of the Offerings. See
"Underwriting."
Prior to the Offerings, there has been no public market for the Common
Stock. For a discussion relating to factors considered in determining the
initial public offering price, see "Underwriting." It is anticipated that the
initial public offering price will be between $14.00 and $16.00 per share.
The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "IXX," subject to official notice of issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=============================================================================================================================
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share............ $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------------
Total(3)............. $ $ $ $
=============================================================================================================================
</TABLE>
(1) The Company and the Selling Stockholder have agreed to indemnify the several
Underwriters against certain liabilities, including certain liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offerings payable by the Company estimated
at $ .
(3) The Company has granted to the U.S. Underwriters and the International
Managers options to purchase up to an additional 1,008,000 shares and
252,000 shares of Common Stock, respectively, in each case exercisable
within 30 days of the date hereof, solely to cover over-allotments, if any.
If such options are exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to the approval of certain legal matters by counsel for the Underwriters and to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the shares of Common Stock will be made in New York, New York,
on or about , 1997.
------------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
SALOMON BROTHERS INC
------------------------
The date of this Prospectus is , 1997.
<PAGE> 4
The following photographs depict applications of the Company's plastic and paper
packaging products. The Company is not the exclusive provider of packaging
products to the companies whose name-branded products appear below.
[photo of man]
Medical Packaging
[photo of woman]
Supermarket Deli Containers
[photo of food]
Home Meal Replacement Packaging
[photo of car]
Surface Protection
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 5
PROSPECTUS SUMMARY
This summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Except where the context
otherwise requires, all references in this Prospectus to the "Company" or "Ivex"
are to Ivex Packaging Corporation and its direct and indirect wholly owned
subsidiaries, and all references to "IPC" are to IPC, Inc. and its direct and
indirect wholly owned subsidiaries. IPC is the only direct subsidiary of Ivex
and is wholly owned. All share and per share data in this Prospectus reflect the
9.65-for-1 split of the outstanding Common Stock of the Company effective
immediately prior to the Offerings and assume no exercise of the Underwriters'
over-allotment options. See "Underwriting."
THE COMPANY
Ivex is a vertically integrated specialty packaging company that designs
and manufactures value-added plastic and paper-based flexible packaging
products. The Company believes that it is the leading provider of customized
packaging in specialty markets, ranking first or second in markets representing
approximately 65% of the Company's revenues. Ivex has increased sales and
profitability by focusing on niche markets that provide attractive margins and
growth and where the Company's integrated manufacturing capabilities enhance its
competitive position. Ivex serves a variety of markets, providing packaging for
food, medical devices and electronic goods and protective packaging for
industrial products.
Over the past several years, the Company has executed a comprehensive
growth strategy based upon (i) achieving internal growth through product
extensions and further penetration into higher growth markets and (ii) growth
through strategic acquisitions. The Company has completed six acquisitions since
1995. Since 1993, net sales, Adjusted EBITDA and Adjusted EBIT (as defined
herein) have increased at compound annualized growth rates of 9.6%, 12.8% and
20.8%, respectively, and, excluding such acquisitions, of 4.7%, 8.7% and 16.8%,
respectively.
MARKETS
Consumer Packaging. The Consumer Packaging product group designs and
manufactures plastic and paper-based products for food packaging applications
and, more recently, for applications in the medical and electronics industries.
The Company produces a broad array of items, including plastic containers for
prepared foods, produce and baked goods; specialty paper products such as fluted
baking cups and liners for cookies and other baked goods; microwaveable
packaging materials; and protective packaging for medical devices and
electronics products. The Consumer Packaging product group markets its products
to a variety of end users, including national wholesale bakeries, supermarket
chains, foodservice distributors, fast-food chains, major agricultural growers,
medical equipment suppliers and electronics manufacturers. The Company also
manufactures a variety of plastic sheet and film products from several different
resins for internal use and sales to third party converters. Ivex is the leading
producer of oriented polystyrene ("OPS") sheet in North America. The Consumer
Packaging product group represented approximately 56% of the Company's net sales
and 58% of the Company's Adjusted EBITDA during the 12 months ended June 30,
1997.
Industrial Packaging. The Industrial Packaging product group manufactures
and coats film, paper and foil products for protective packaging and specialty
papers. The Company produces products for some of the fastest growing
applications in the protective packaging industry, including film and paper
maskings and self-sealing coated packaging applications. These products are
marketed primarily to consumer durable goods manufacturers, automotive
companies, other industrial manufacturers and integrated paper producers. The
Company also manufactures a variety of recycled kraft paper made from
post-consumer and post-industrial fibers and specialty lightweight paper made
primarily from virgin pulp for internal use and sales to third party converters.
The Industrial Packaging product group represented approximately 44% of the
Company's net sales and 42% of the Company's Adjusted EBITDA during the 12
months ended June 30, 1997.
BUSINESS STRATEGY
Ivex seeks to differentiate itself from other packaging providers by
offering customized packaging that addresses the specialized needs of its
customers. The Company's goal is to be the number one or number two
3
<PAGE> 6
provider of customized packaging in its markets. Ivex believes it has a number
of key strengths that support its ability to implement this strategy:
Focus on Niche Markets. Ivex focuses primarily on markets with attractive
margin and growth characteristics. The Company's markets include the in-store
bakery, delicatessen and prepared food sections of supermarkets; foodservice
outlets; medical equipment and electronics goods manufacturers; and users of
industrial protective masking. The Company believes that these markets have been
among the fastest growing for packaging products over the past several years.
Each of these is characterized by few competitors, technological barriers to
entry, significant customer service requirements and attractive growth
potential.
Broad Product Range. Ivex manufactures a broad range of plastic and
paper-based stock and customized packaging products to provide a full service
approach to fulfilling its customers' packaging needs. Through its multi-resin
extrusion and thermoforming capabilities, Ivex is able to offer its customers a
variety of plastic packaging solutions. The Company believes its breadth of
product range and customization capabilities are competitive advantages that
allow it to be more responsive to, and provide a single supply source for, many
of its customers' packaging needs. Further, these capabilities enhance the
Company's ability to adapt to changing market preferences.
Flexible Design and Engineering. Ivex seeks to maximize opportunities
within niche markets by providing its customers with lower-cost product
development and shorter lead times than its competitors. The Company delivers
these benefits through research and development and technical expertise such as
computer-aided design and manufacturing and extensive in-house mold-making
capabilities.
Vertical Integration. Ivex pursues a vertically integrated operating
strategy in order to maximize product quality, minimize the influence of
external commodity price fluctuations and maintain its low-cost position. Within
Consumer Packaging, the Company operates two polymerization, seven extrusion and
eleven thermoforming facilities. In 1996, the Company produced 42% of its
polystyrene needs and 100% of its OPS sheet needs internally, resulting in a
significant advantage over competitors that purchase these materials in the open
market. Within Industrial Packaging, the Company's polyethylene film and paper
facilities provide important source products and product development
capabilities for many of the Company's protective packaging products.
Proprietary Technology. Ivex's proprietary technology strengthens its
product quality, market position and growth prospects in existing markets as
well as new product and geographic markets. Examples of the Company's
proprietary technology used by Consumer Packaging include extensive extrusion
process technology, low residual monomer polymerization technology and the
capability to manufacture OPS film to a gauge of less than one-thousandth of an
inch. Because of its proprietary production technology, the Company's OPS is
recognized as having a high level of quality within the industry. Within
Industrial Packaging, the Company utilizes many customized adhesive and cohesive
formulations in its surface protection and self-sealing products which
strengthen its market position and product development capabilities.
Broad Distribution Network. The geographic breadth of Ivex's manufacturing
and distribution network, including 26 plants in North America and Europe and an
extensive network of sales representatives, is another significant advantage
over the Company's competitors, which are often smaller and regionally based.
Ivex's distribution network allows it to meet the broad geographic needs of its
larger customers from a single source, which is an advantage as customers seek
to reduce their number of suppliers. Extensive geographic coverage also reduces
transportation costs and contributes to the Company's cost competitiveness.
GROWTH STRATEGY
Over the past several years, Ivex has executed a comprehensive growth
strategy based upon (i) internal growth through product extensions and further
penetration into higher growth markets and (ii) growth through strategic
acquisitions. Since 1993, net sales, Adjusted EBITDA and Adjusted EBIT have
increased at compound annualized growth rates of 9.6%, 12.8% and 20.8%,
respectively, and, excluding such acquisitions, of 4.7%, 8.7% and 16.8%,
respectively. The Company believes it can continue growing sales and earnings
through its growth strategy as well as through utilizing excess cash flow to
reduce debt and interest expense.
4
<PAGE> 7
Internal Growth. Ivex intends to utilize its business strategy and strong
market position to capitalize on a number of emerging industry trends. As
supermarkets, bakeries and foodservice distributors consolidate packaging
vendors to create efficiencies, the Company plans to use its broad product
offerings and distribution capabilities to capture market share through
increased sales to these customers. Consumer trends toward convenient,
ready-to-eat food products and the increased utilization of clear plastic
packaging for more appealing presentation within the delicatessen, bakery and
produce sections of supermarkets are resulting in increasing use of OPS sheet.
As the leading producer of OPS sheet in North America, Ivex believes that it
will experience increased production and sales of OPS sheet. In addition,
manufacturers are increasingly realizing the quality and cost/benefit advantage
of using protective packaging and masking to protect products from damage or
breakage during manufacturing, handling, storage and shipping. This trend
creates additional demand for the Company's protective masking products and
corrugated cushioning materials.
Acquisitions. Ivex has pursued a disciplined acquisition program of
"bolt-on" acquisitions that are easily integrated into the Company's operations
and that meet certain defined strategic and financial return criteria. Since
1995, Ivex has completed six acquisitions that achieve a number of strategic
objectives:
- apply existing technology to new products and markets (the acquisition of
Plastofilm Industries, Inc. added medical and electronics end markets);
- fill out or extend existing product lines and markets (the acquisition of
Trio Products, Inc. added multi-resin capabilities and the acquisition of
Packaging Products, Inc. expanded surface protection product offerings);
- expand geographical presence (the acquisitions of M&R Plastics, Inc. and
AVPEX International in Canada and the European OPS business of Viskase
Limited extended operations outside the United States); and
- create rationalization opportunities (the integration of Plastofilm's
extrusion operation into Trio created a lower-cost operation).
As a market leader with a broad range of products and proven capabilities, the
Company believes that it is well positioned to continue to successfully apply
its acquisition and operating expertise to take advantage of consolidation
opportunities within the highly fragmented specialty packaging market.
------------------------
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.
RISK FACTORS
Purchasers of Common Stock in the Offerings should carefully consider the
factors set forth under the caption "Risk Factors" and other information
included in this Prospectus prior to making an investment decision. In
particular, such factors include the Company's highly leveraged condition,
historical losses, the Company's dependence on subsidiary distributions,
volatility of raw material pricing, cyclical demand for certain of the Company's
products, highly competitive markets, risks associated with the Company's growth
strategy, environmental matters, the limitation on the ability of the Company to
use its net operating losses, control by principal stockholders, anti-takeover
provisions, absence of a prior public market for the Common Stock, restrictions
on the ability of the Company to pay dividends, shares eligible for future sale,
dilution and tangible net worth deficiency and nonrecurring charges in
connection with the Offerings. See "Risk Factors."
THE REFINANCING
The Offerings are a component of a comprehensive refinancing strategy of
the Company to significantly lower its interest expense, strengthen its balance
sheet and provide financial flexibility to enable Ivex to continue to pursue
investment opportunities. As part of this refinancing, IPC is in the process of
negotiating a new credit facility (the "New Credit Facility") that will
refinance its existing credit facility (the "Existing
5
<PAGE> 8
Credit Facility"). The Company intends to use the proceeds of the Offerings
together with borrowings under the New Credit Facility to refinance
substantially all of its existing indebtedness.
Specifically, IPC presently intends to use approximately $176.3 million of
the funds to be provided under the New Credit Facility to retire the entire $158
million aggregate principal amount of its 12 1/2% Senior Subordinated Notes due
2002 (the "12 1/2% Subordinated Notes") and pay approximately $13.1 million of
premiums and fees and $5.8 million of accrued interest (assuming the 12 1/2%
Subordinated Notes are purchased September 30, 1997) pursuant to a tender offer
and consent solicitation (the "Subordinated Note Offer"). The Company presently
intends to use the proceeds of the Offerings and borrowings under the New Credit
Facility to retire all or a portion of the $160 million aggregate principal
amount ($116.8 million accreted value assuming the 13 1/4% Discount Debentures
are purchased September 30, 1997) of its 13 1/4% Senior Discount Debentures due
2005 (the "13 1/4% Discount Debentures") plus approximately $17.4 million of
premiums and fees pursuant to a tender offer and consent solicitation (the
"Senior Debenture Offer" and, together with the Subordinated Note Offer, the
"Offers"). See "The Refinancing," "Capitalization" and "Pro Forma Consolidated
Financial Data -- Pro Forma Consolidated Statements of Operations."
The New Credit Facility is expected to provide for IPC to borrow up to $475
million principal amount at variable interest rates. On a pro forma basis at
June 30, 1997, the Company expects IPC to borrow approximately $328.4 million
under the New Credit Facility to (i) refinance $49.2 million outstanding under
the revolving credit portion of the Existing Credit Facility, (ii) refinance
$52.5 million outstanding under the term loan portion of the Existing Credit
Facility, (iii) apply approximately $178.2 million to the acquisition of the
12 1/2% Subordinated Notes and a portion of the 13 1/4% Discount Debentures,
(iv) lend approximately $14.0 million to certain key executives to enable them
to pay their individual income taxes payable in connection with the conversion
of the IPC Options (as hereinafter defined) and (v) pay approximately $34.6
million of fees associated with these transactions, and to utilize approximately
$45 million of availability under the New Credit Facility to refinance
outstanding letters of credit. See "Description of Certain Indebtedness -- The
New Credit Facility," "Capitalization" and "Pro Forma Consolidated Financial
Data."
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Company.................. 6,700,000 shares(1)
Common Stock offered by the Selling Stockholder...... 1,700,000 shares
Common Stock to be outstanding after the Offerings... 19,166,666 shares(1)(2)
Use of Proceeds...................................... To repay certain indebtedness. See "The
Refinancing" and "Use of Proceeds."
NYSE Symbol.......................................... The Common Stock has been approved for listing
on the New York Stock Exchange (the "NYSE")
under the symbol "IXX," subject to official
notice of issuance.
</TABLE>
- -------------------------
(1) Assumes no exercise of the over-allotment options granted by the Company to
the Underwriters.
(2) Includes 2,114,133 shares of Common Stock to be issued to certain officers
of the Company concurrently with the closing of the Offerings, assuming an
initial offering price of $15.00 per share (the midpoint of the range of the
estimated public offering price set forth on the cover page hereof), but
excludes approximately 766,667 shares (817,067 shares assuming exercise of
the over-allotment option) of Common Stock (assuming such offering price) to
be issued under outstanding stock options granted to certain officers of the
Company. See "Management -- Executive Compensation."
6
<PAGE> 9
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
The following summary selected consolidated 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 and should be read in conjunction with the
consolidated audited financial statements of the Company. The data as of and for
the six months ended June 30, 1996 and 1997 are derived from the consolidated
unaudited interim financial statements and include, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the data for such periods. The financial data of
Ivex reflect the following acquisitions as of the respective acquisition dates:
Packaging Products, Inc. ("PPI") as of September 11, 1995; Plastofilm
Industries, Inc. ("Plastofilm") as of August 16, 1996; Trio Products, Inc.
("Trio") as of September 11, 1996; the OPS business based in the United Kingdom
(the "European OPS Business") as of January 17, 1997; and M&R Plastics Inc.
("M&R") as of February 21, 1997. The following summary selected financial data
do not reflect the impact of any pro forma adjustments for the transactions
contemplated hereby, except that the earnings (loss) per share amounts give
effect to the Company's 9.65-for-1 stock split effective immediately prior to
the Offerings.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
-------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $367,649 $ 366,851 $ 390,975 $ 451,569 $ 451,807 $ 210,443 $ 264,034
Gross profit.................... 74,076 72,213 74,271 85,160 100,383 45,775 56,361
Selling and administrative...... 38,502 39,274 41,662 42,567 47,462 22,132 29,467
Amortization of
intangibles(1)................ 12,266 4,372 1,140 1,904 621 258 512
Write-off of goodwill(1)........ 113,859 13,471
Acquisition related
expense(2).................... 1,100
Restructuring and special
charges(3).................... 4,350 4,960
-------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations... 23,308 (90,742) 31,469 22,258 52,300 23,385 26,382
Interest expense................ 46,426 37,179 39,820 43,270 42,732 21,221 22,805
-------- --------- --------- --------- --------- --------- ---------
Income (loss) before income
taxes and extraordinary
item.......................... (23,118) (127,921) (8,351) (21,012) 9,568 2,164 3,577
Income tax provision............ (1,722) (1,177) (942) (1,113) (900) (440) (890)
-------- --------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary item............ (24,840) (129,098) (9,293) (22,125) 8,668 1,724 2,687
Extraordinary item(4)........... (5,532) (2,359)
-------- --------- --------- --------- --------- --------- ---------
Net income (loss)............... $(30,372) $(129,098) $ (9,293) $ (24,484) $ 8,668 $ 1,724 $ 2,687
======== ========= ========= ========= ========= ========= =========
Earnings (loss) per share(5):
Income (loss) before
extraordinary item.......... $ (12.63) $ (.90) $ (2.14) $ .84 $ .17 $ .26
========= ========= ========= ========= ========= =========
Net income (loss)............. $ (12.63) $ (.90) $ (2.37) $ .84 $ .17 $ .26
========= ========= ========= ========= ========= =========
OTHER OPERATING DATA:
Cash flow from operating
activities.................... $ 31,195 $ 22,157 $ 15,647 $ 22,746 $ 49,202 $ 17,451 $ 1,269
Cash flow used by investing
activities.................... (11,306) (8,261) (13,057) (29,871) (38,136) (7,650) (41,689)
Cash flow from (used by)
financing activities.......... (24,838) (5,823) (6,102) 5,666 (13,074) (10,191) 45,943
Adjusted EBIT(6)................ 28,597 28,567 31,469 41,828 52,300 23,385 26,382
Depreciation and
amortization(1)............... 30,931 137,837 22,189 35,871 22,724 11,303 13,290
Adjusted EBITDA(7).............. 54,239 52,545 53,658 63,089 75,024 34,688 39,672
Capital expenditures............ 12,820 9,528 16,769 19,385 17,633 7,996 10,984
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
-------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(8).............. $ 28,451 $ 34,729 $ 32,853 $ 38,090 $ 32,539 $ 39,885 $ 60,200
Total assets.................... 423,051 297,674 304,246 294,911 315,901 289,476 370,642
Long-term debt.................. 278,369 330,201 330,768 353,717 352,893 349,850 404,612
Redeemable preferred stock...... 50,313
Stockholders' equity
(deficit)..................... 23,899 (101,579) (111,266) (136,332) (127,344) (134,608) (124,392)
</TABLE>
7
<PAGE> 10
(1) Depreciation and amortization for the year ended December 31, 1995 includes
the accelerated non-cash write-off of goodwill of $13,471 and the
accelerated non-cash write-off of a non-compete agreement of $1,139.
Depreciation and amortization for the year ended December 31, 1993 includes
the accelerated non-cash write-off of goodwill totaling $113,859.
Depreciation and amortization for the year ended December 31, 1992 includes
the accelerated non-cash write-off of non-compete agreements and a patent
totaling $5,289.
(2) Acquisition related expense totaling $1,100 was incurred during 1993 in
connection with an acquisition attempt.
(3) 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. Operating results for the year ended December 31, 1993 include
restructuring and special charges of $4,350, reflecting a $1,500 non-cash
write-down of certain property held for sale and costs of $2,850 related to
the reorganization of the Consumer Packaging product group, which include,
among other things, severance, transition and relocation expenses.
(4) In connection with the 1995 refinancing of IPC's credit facility, the
Company wrote off deferred financing costs of $2,359. In connection with the
1992 12 1/2% Subordinated Note offering, the Company wrote off deferred
financing costs of $5,977, net of a tax benefit of $445.
(5) The earnings (loss) per share amounts give effect to the Company's
9.65-for-1 stock split effective immediately prior to the Offerings. A loss
per share amount has not been presented for 1992 since the Company's
combined financial statement presentation and capital structure precluded
meaningful equivalent per share calculations.
(6) Adjusted EBIT includes income from operations adjusted to exclude goodwill
write-offs of $13,471 and $113,859 for the years ended December 31, 1995 and
1993, respectively, and acquisition related expenses of $1,100,
restructuring charges of $2,850 and special charges of $1,500 for the year
ended December 31, 1993. In addition, Adjusted EBIT for the year ended
December 31, 1995 excludes the accelerated write-off of a non-compete
agreement of $1,139 and special charges of $4,960, and for the year ended
December 31, 1992 excludes the accelerated write-off of non-compete
agreements and a patent totaling $5,289. Ivex believes that Adjusted EBIT
provides additional information for determining its ability to meet future
debt service requirements. However, Adjusted EBIT is not a defined term
under generally accepted accounting principles ("GAAP").
(7) Adjusted EBITDA includes income from operations adjusted to exclude
depreciation and amortization expenses, goodwill write-offs of $13,471 and
$113,859 for the years ended December 31, 1995 and 1993, respectively, and
acquisition related expenses of $1,100, restructuring charges of $2,850 and
special charges of $1,500 for the year ended December 31, 1993. In addition,
Adjusted EBITDA for the year ended December 31, 1995 includes special
charges of $4,960. Ivex believes that Adjusted EBITDA provides additional
information for determining its ability to meet future debt service
requirements. However, Adjusted EBITDA is not a defined term under GAAP and
is not indicative of operating income or cash flow from operations as
determined under GAAP.
(8) Working capital is determined to be the excess of current assets over
current liabilities (including the current portion of long-term debt).
8
<PAGE> 11
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
The following summary unaudited pro forma consolidated financial data were
derived from and should be read in conjunction with the "Pro Forma Consolidated
Financial Data" included elsewhere in this Prospectus. The following summary pro
forma consolidated financial data give effect to the transactions contemplated
hereby as if such transactions had occurred at the beginning of the periods
presented below for purposes of the statement of operations and other operating
data, and as of the dates presented below for purposes of the balance sheet
data. The following summary pro forma consolidated financial data do not reflect
the Company's actual results of operations or financial position had the
transactions contemplated hereby been consummated on the dates assumed. The pro
forma results of operations for the period ended June 30, 1997 are not
necessarily indicative of the results to be expected for the entire year. This
unaudited data should be read in conjunction with the audited consolidated
financial statements and notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------------------- -----------------------------
HISTORICAL PRO FORMA(1)(4) HISTORICAL PRO FORMA(1)(4)
---------- --------------- ---------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................... $451,807 $ 451,807 $264,034 $264,034
Gross profit............................ 100,383 100,383 56,361 56,361
Selling and administrative.............. 47,462 47,462 29,467 29,467
Amortization of intangibles............. 621 621 512 512
---------- ---------- ---------- ----------
Income from operations.................. 52,300 52,300 26,382 26,382
Interest expense........................ 42,732 25,147(2) 22,805 13,841(2)
---------- ---------- ---------- ----------
Income before income taxes.............. 9,568 27,153 3,577 12,541
Income tax provision.................... (900) (10,861)(3) (890) (5,016)(3)
---------- ---------- ---------- ----------
Income before extraordinary item........ $ 8,668 $ 16,292 $ 2,687 $ 7,525
========== ========== ========== ==========
Income before extraordinary item per
share(5).............................. $ .84 $ .85 $ .26 $ .39
========== ========== ========== ==========
Average shares outstanding(5)........... 10,352,533 19,166,666 10,352,533 19,166,666
========== ========== ========== ==========
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1997
----------------------------- -----------------------------
HISTORICAL PRO FORMA(1)(4) HISTORICAL PRO FORMA(1)(4)
---------- --------------- ---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......................... $ 32,539 $ 21,419 $ 60,200 $ 50,330
Total assets............................ 315,901 351,893 370,642 405,154
Long-term debt.......................... 352,893 299,714 404,612 352,683
Stockholders' deficit................... (127,344) (56,228) (124,392) (53,044)
</TABLE>
- -------------------------
(1) Adjusted for (i) the issuance and sale of shares of Common Stock by the
Company (assuming net proceeds of $92,316), (ii) the issuance of 2,114,133
shares to management in connection with the conversion of the IPC Options
and (iii) borrowings under the New Credit Facility, and the anticipated use
of net proceeds from such transactions to purchase the 12 1/2% Subordinated
Notes and 13 1/4% Discount Debentures as if such issuances and borrowings
had occurred at the beginning of the periods presented. Accordingly, the pro
forma adjustments reflect the refinancing of the Existing Credit Facility,
the repurchase of all of the outstanding 12 1/2% Subordinated Notes and all
of the outstanding 13 1/4% Discount Debentures.
9
<PAGE> 12
(2) Represents the adjustment of interest expense, as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- ----------------
<S> <C> <C>
Estimated interest on the New Credit Facility at a
weighted average interest rate of 7.9%................. $ 21,623 $12,173
Elimination of interest on the 12 1/2% Subordinated
Notes.................................................. (19,891) (9,866)
Elimination of interest on the 13 1/4% Discount
Debentures............................................. (12,811) (6,968)
Elimination of interest on the Existing Credit
Facility............................................... (4,843) (3,439)
Non-cash amortization of new deferred financing costs.... 677 339
Elimination of amortization of existing deferred
financing costs........................................ (1,363) (714)
Interest income on management note receivable (at
7.0%).................................................. (977) (489)
-------- -------
Net change in interest expense...................... $(17,585) $(8,964)
======== =======
</TABLE>
(3) The Company's income tax provision for the year ended December 31, 1996 and
the six months ended June 30, 1997 has been adjusted to reflect a 40%
effective tax rate on pro forma taxable income.
(4) The pro forma statements of operations do not reflect non-cash extraordinary
expense of $8,528 and $8,141 for previously capitalized debt issuance costs
during the year ended December 31, 1996 and the six months ended June 30,
1997, respectively, and a cash extraordinary expense of $30,496 during both
periods for prepayment costs assumed to have been paid in connection with
the repurchase of all of the outstanding 12 1/2% Subordinated Notes and
13 1/4% Discount Debentures. Also the pro forma statements of operations for
the year ended December 31, 1996 and the six months ended June 30, 1997 do
not include a nonrecurring compensation charge of approximately $49,200 in
connection with the conversion of the IPC Options. The nonrecurring
compensation charge consists of (i) a non-cash compensation charge of
approximately $31,700 associated with the conversion of the IPC Options into
shares of the Company's common stock and (ii) a non-cash compensation charge
of approximately $17,500 associated with the accrual of future Company
payments to senior management of an amount which (after taxes) will enable
such management to pay the interest on the loans made to them by the
Company. Such loans were made to senior management to enable them to pay
their individual income taxes payable in connection with the conversion of
the IPC Options. The extraordinary expense and nonrecurring charge is
expected to be recorded net of a tax benefit of approximately $35,300 and
$35,100 during the year ended December 31, 1996 and the six months ended
June 30, 1997.
(5) The average shares outstanding and the income before extraordinary item per
share give effect to the Company's 9.65-for-1 stock split immediately prior
to the Offerings.
10
<PAGE> 13
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including, without
limitation, statements containing the words "believes," "anticipates," "expects"
and words of similar import, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "PSLRA").
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Company, or industry results, 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:
international, national and local general economic and market conditions;
demographic changes; the size and growth of the paper and plastic packaging
markets for both consumer and industrial uses; the ability of the Company to
sustain, manage or forecast its growth; the ability of the Company to
successfully make and integrate acquisitions; the size, timing and mix of
purchases of the Company's products; raw material costs and availability; new
product development and introduction; existing government regulations and
changes in, or the failure to comply with, government regulations; adverse
publicity; contingent liabilities and other claims asserted against the Company;
competition; the loss of significant customers or suppliers; fluctuations and
difficulty in forecasting operating results; changes in business strategy or
development plans; business disruptions; the ability to attract and retain
qualified personnel; the ability to protect technology; the use of proceeds from
the Offering; and other factors referenced in this Prospectus. Certain of these
factors are discussed in more detail elsewhere in this Prospectus, including,
without limitation, under the captions "Risk Factors," "Use of Proceeds,"
"Capitalization," "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business." Given these uncertainties, prospective purchasers are cautioned not
to place undue reliance on such forward-looking statements. The Company
disclaims any obligation to update any such factors or to publicly announce the
result of any revisions to any of the forward-looking statements contained
herein to reflect future events or developments. The safe-harbor provided by the
PSLRA shall not apply to a forward-looking statement made in connection with an
initial public offering.
RISK FACTORS
Prospective purchasers should consider carefully the specific risk factors
set forth below before determining whether to purchase the shares of Common
Stock offered hereby.
LEVERAGE
Ivex is, and immediately following the Offerings will remain, significantly
leveraged. As set forth under "Capitalization," on a pro forma basis (assuming
completion of the Offerings and use of the proceeds thereof as set forth herein)
the Company would have had $352.7 million of long-term indebtedness outstanding
(excluding current maturities) and stockholders' deficit of $53.0 million as of
June 30, 1997. Pursuant to the terms of the indenture relating to the 12 1/2%
Subordinated Notes (the "Subordinated Note Indenture"), IPC will be able to
redeem any 12 1/2% Subordinated Notes that are not repurchased pursuant to the
Subordinated Note Offer on December 15, 1997. Any 13 1/4% Discount Debentures
remaining outstanding after completion of the Senior Debenture Offer will
continue to accrete in value until March 15, 2000, at which time the interest on
such debentures will become payable currently in cash. The Company's future
operating performance and ability to service or refinance its indebtedness will
be subject to future economic conditions and to financial, business and other
factors, many of which are beyond its control, and consequently the Company may
be unable to service all of its debt in the future. There can be no assurance
that the Company's future operating performance and the availability under the
Company's New Credit Facility will be sufficient to service such indebtedness or
that the Company will be able to refinance its indebtedness in whole or in part.
The Subordinated Note Indenture and the indenture relating to the 13 1/4%
Discount Debentures (the "13 1/4% Discount Indenture") contain, and are expected
to continue to contain if the consent solicitations with respect thereto are not
successful, and the New Credit Facility is expected to contain, covenants
imposing certain operating and financial restrictions. The covenants under the
New Credit Facility are expected to limit,
11
<PAGE> 14
among other things, the incurrence of additional indebtedness by IPC and its
subsidiaries, the payment by IPC of dividends or other distributions to the
Company, the redemption of capital stock of IPC or the making of other
restricted payments, transactions with affiliates, the use of proceeds from the
disposal of assets, the incurrence of liens, and the merger, consolidation or
sale of all or substantially all the assets of IPC. In addition, the New Credit
Facility is expected to require IPC to maintain specified financial ratios and
levels, including those relating to cash flow, net worth and maximum leverage.
See "Description of Certain Indebtedness -- The New Credit Facility." The
13 1/4% Discount Indenture contains certain similar operating and financial
restrictions and will continue to contain such restrictions if the consent
solicitation with respect to the 13 1/4% Discount Debentures is not successful.
The ability of IPC to comply with the covenants contained in the New Credit
Facility and the ability of the Company to comply with the 13 1/4% Discount
Indenture will depend on, among other things, IPC's future performance, which
will, in part, be subject to prevailing economic, financial and business factors
beyond IPC's control. The Company's or IPC's failure to comply with such
financial provisions could result in a default under these agreements, which if
not cured or waived, could have a material adverse effect on the Company. See
"Description of Certain Indebtedness -- The New Credit Facility" and "-- The
13 1/4% Discount Debentures."
The degree to which the Company is leveraged could have important
consequences to holders of the Common Stock, including the following: (i) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or other
purposes may be limited; (ii) a substantial portion of the Company's cash flow
from operations will be dedicated to the payment of the principal of and
interest on its existing indebtedness, thereby reducing funds available for
operations; (iii) the agreements governing the Company's long-term indebtedness
and bank loans contain, and the New Credit Facility is expected to contain,
certain restrictive covenants, including certain covenants that limit the
payment of dividends and other distributions by IPC to the Company, and the
13 1/4% Discount Indenture contains, and will continue to contain if the consent
solicitation with respect to the 13 1/4% Discount Debentures is not successful,
certain restrictive covenants, including covenants that limit the ability of the
Company to pay dividends and to make other distributions to its stockholders;
(iv) borrowings under the New Credit Facility will be at floating rates of
interest, causing the Company to be vulnerable to increases in interest rates;
and (v) the Company's substantial degree of leverage could make it more
vulnerable to a downturn in general economic conditions. The Company's ability
to make scheduled payments of the principal of or interest on, or to refinance,
its indebtedness will depend on its future operating performance and cash flow,
which are subject to prevailing economic conditions, primarily interest rate
levels and financial, competitive, business and other factors, many of which are
beyond its control. See "Description of Certain Indebtedness."
HISTORICAL LOSSES
Although the Company had net income of $8.7 million in 1996, the Company
has experienced substantial net losses in the past, principally as a result of
the significant interest charges, certain non-cash goodwill write-offs and other
nonrecurring charges. These net losses were $9.3 million and $24.5 million for
the years ended December 31, 1994 and 1995, respectively.
DEPENDENCE ON SUBSIDIARY DISTRIBUTIONS
The Company conducts business through IPC and IPC's subsidiaries and has no
operations of its own. The primary asset of the Company is the capital stock of
IPC. The Company has no cash flow other than from dividends and other
distributions from IPC. The right of the Company to participate in any
distribution of earnings or assets of IPC and IPC's subsidiaries is subject to
the prior claims of the creditors of IPC and such subsidiaries. In addition, the
agreements governing the Company's long-term indebtedness and bank loans
contain, and the New Credit Facility is expected to contain, certain restrictive
covenants, including certain covenants that limit IPC's ability to pay dividends
or make other distributions to the Company. As part of the proposed amendments
contained in the Subordinated Note Offer, the restrictions contained in the
12 1/2% Subordinated Notes on IPC's ability to pay dividends will be deleted if
such offer is consummated. The 13 1/4% Discount Indenture also restricts the
ability of the Company to pay dividends, unless such provisions are
12
<PAGE> 15
amended or waived. As part of the proposed amendments contained in the Senior
Debenture Offer, the restrictions contained in the 13 1/4% Discount Indenture on
the Company's ability to pay dividends will be deleted if such offer is
consummated. In addition, under Delaware law, IPC is permitted to pay cash
dividends to the Company only (i) out of IPC's capital surplus (the excess of
net assets over stated capital) or (ii) out of the net income of IPC for the
fiscal year in which the dividend is declared and/or the preceding fiscal year.
VOLATILITY OF RAW MATERIAL PRICING
Styrene monomer, polystyrene, polyethylene, polypropylene, polyvinyl
chloride and polyethylene terephthelate are the basic raw materials used in the
manufacture of most of Consumer Packaging's plastic products. The prices of
these raw materials are a function of, among other things, the manufacturing
capacity for such raw materials and the price for the petrochemical feed stocks
of such materials. Similarly, the prices for virgin pulp and recycled fiber
which are the basic raw materials used directly in the manufacture of many of
the Company's specialty kraft (non-bleached) papers and indirectly in the
manufacture of many of Consumer Packaging's and Industrial Packaging's paper
packaging products, are a function of, among other things, pulp manufacturing
capacity, the price for pulp wood and wood chips and the price for old
corrugated containers ("OCC"), double-lined kraft ("DLK") and other recycled
paper materials. In the event of cost increases for raw materials, failure to
achieve corresponding sales price increases in a timely manner, sales price
erosion without a corresponding reduction in raw material costs or failure to
renegotiate favorable raw material supply contracts could have a material
adverse effect on the Company.
CYCLICAL DEMAND FOR THE COMPANY'S PRODUCTS
Demand and pricing for certain of Industrial Packaging's protective
packaging products and specialty papers are cyclical in nature and are subject
to general economic conditions that affect market demand. Demand for paper has
historically corresponded to changes in the rate of growth in the U.S. economy
and demand for protective packaging is driven by trends in the building,
construction, automotive and durable goods markets. Growth in the U.S. economy
generally stimulates demand for these products. Conversely, a weakening in the
U.S. economy tends to decrease demand for these products, thereby adversely
affecting the Company's profitability and its ability to satisfy its debt
service obligations. Consequently, adverse economic conditions could have a
material adverse effect on the condition of the Company.
COMPETITION
The markets in which the Company operates are highly competitive. The
Company's competitors range from the largest packaging companies in the U.S. to
small, emerging companies. Many of the companies that compete with the Company
have greater financial and other resources than the Company, while others are
significantly smaller with lower fixed costs and greater operating flexibility.
See "Business -- Competition."
RISKS ASSOCIATED WITH GROWTH STRATEGY
The Company's future growth will depend in part on additional acquisitions
of plastic and paper packaging businesses. There can be no assurance that the
Company will be able to locate or acquire other suitable acquisition candidates
on acceptable terms or that the Company will be able to fund future acquisitions
because of limitations contained in its instruments and agreements governing its
indebtedness or otherwise. See "Description of Certain Indebtedness." In
pursuing its strategy of growth through acquisitions, the Company will face
risks including difficulty in assimilating the operations and personnel of the
acquired businesses, disruption of the Company's ongoing business, dissipation
of the Company's limited management resources, and impairment of relationships
with employees and customers of the acquired business as a result of changes in
ownership and management. Moreover, additional indebtedness incurred to make
acquisitions could adversely affect the Company's liquidity and financial
stability, and the issuance of Common Stock to effect acquisitions could result
in dilution to the Company's stockholders.
13
<PAGE> 16
ENVIRONMENTAL MATTERS PERTAINING TO THE COMPANY
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 protection of the environment. The Company is currently
involved with environmental remediation and on-going maintenance at certain of
its facilities and from time to time is involved in regulatory proceedings and
inquiries relating to compliance with environmental laws and permits and other
environmental matters. In the future, the Company may be identified as a
potentially responsible party ("PRP") and be subject to liability under
applicable law. No assurance can be given that additional environmental issues
relating to the presently known matters or identified sites or to other sites or
matters related to the Company or to regulatory proceedings or inquiries will
not require future expenditures. Various federal, state, local and foreign
regulatory authorities from time to time have considered enacting and, on a
number of occasions, have enacted, legislation regarding solid waste disposal,
packaging recovery, recycling requirements and the use and content of plastic
packaging. There can be no assurance that such legislation will not have a
material adverse effect on the Company. See "Business -- Environmental Matters
and Business Regulation."
LIMITATION ON USE OF NET OPERATING LOSSES
As of December 31, 1996, the Company had approximately $76 million of net
operating loss ("NOL") carryforwards available to be used to offset income.
Section 382 ("Section 382") of the Internal Revenue Code of 1986, as amended
(the "Code"), imposes limitations on a corporation's ability to use NOL
carryforwards if the corporation experiences a more-than-50-percent ownership
change over a three-year testing period. In general, if such an ownership change
occurs, Section 382 limits the amount of NOL carried over from pre-ownership
change years that can be used in any one post-change year to an amount equal to
the product of the value of the corporation's stock (with certain adjustments)
at the time of the change multiplied by an interest rate determined by the
Internal Revenue Service (the "IRS") for the month of the change.
The Company expects that the Offerings, together with the conversion of the
IPC Options, will result in a more-than-50% ownership change for purposes of
Section 382, resulting in the imposition of Section 382 limitations on the use
of the Company's NOL carryforwards existing as of the date of the ownership
change. In addition, Ivex expects to have a significant NOL attributable to the
period after such ownership change resulting from certain one-time charges
expected to be incurred as a result of the refinancing transactions described
herein. Consequently, if another more-than-50% ownership change takes place
after the consummation of the Offerings, such ownership change could result in
the imposition of Section 382 limitations on such NOL.
CONTROL BY PRINCIPAL STOCKHOLDERS
Immediately following the Offerings and the conversion of the IPC Options,
assuming an initial public offering price of $15.00 per share (the mid-point of
the range for the estimated public offering price set forth on the cover page
hereof), the Selling Stockholder and certain related investors will beneficially
own 8,536,673 shares of Common Stock (44.5%) (41.8% assuming the Underwriters'
over-allotment options are exercised in full), and certain officers of the
Company will beneficially own 2,229,993 shares of Common Stock (11.6%) (10.9% if
the Underwriters' over-allotment options are exercised in full) and options
exercisable into 766,667 shares of Common Stock. If these stockholders were to
vote all of their shares in the same manner, they may have sufficient voting
power to determine the outcome of any corporate transaction or other matter
submitted to the stockholders for a vote, including the election of directors,
mergers, consolidations and sales of all or substantially all of the Company's
assets and preventing or causing a change of control of Ivex. See "Principal and
Selling Stockholders."
In addition, in connection with the Offerings, the Selling Stockholder and
certain related investors and the officers of the Company intend to enter into a
Voting Agreement (the "Voting Agreement") pursuant to which the parties thereto
would agree to vote all of their outstanding shares of Common Stock, for so long
as
14
<PAGE> 17
they own such shares, for the nominees to the Board of Directors proposed
according to the terms thereof. See "Principal and Selling
Stockholders -- Voting Agreement."
ANTI-TAKEOVER PROVISIONS
The Company's Amended and Restated Certificate of Incorporation (the
"Amended Certificate") and Amended and Restated By-Laws (the "Amended By-Laws")
are expected to contain certain provisions that may have the effect of
discouraging, delaying or making more difficult a change in control of the
Company or preventing the removal of incumbent directors even if a majority of
the Company's stockholders were to deem such an attempt to be in the best
interest of the Company. Among other things, the Amended Certificate is expected
to provide for a classified Board of Directors and to allow the Board of
Directors to issue up to 5,000,000 shares of preferred stock and fix the rights,
privileges and preferences of those shares without any further vote or action by
the stockholders. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. Any such issuance of shares of preferred
stock could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. In addition,
the Amended By-Laws, among other things, are expected to limit the manner in
which directors may be nominated by stockholders and limit the manner in which
proposals may be made at stockholder meetings. The Company is also subject to
Section 203 of the Delaware General Corporation Law ("Delaware GCL"), which
could have the effect of delaying or preventing a change of control of the
Company. To the extent that these provisions discourage takeover attempts, they
could deprive stockholders of opportunities to realize takeover premiums for
their shares or could depress the market price of the Common Stock. See
"Description of Capital Stock -- Certain Charter and By-Law Provisions" and
"-- Certain Statutory Provisions."
ABSENCE OF PRIOR PUBLIC MARKET FOR THE COMMON STOCK
Prior to the Offerings, there has not been any public market for the Common
Stock. The Common Stock has been approved for listing on the NYSE under the
symbol "IXX," subject to official notice of issuance. There can be no assurance,
however, that an active public market will develop or be sustained for the
Common Stock or that investors in the Common Stock will be able to resell their
shares of Common Stock at or above the initial public offering price. If a
public market develops for the Common Stock, future trading prices of such
securities will depend on many factors, including, among other things, the
Company's results of operations and the market for similar securities. The
trading price of the Common Stock could be subject to wide fluctuations in
response to the Company's quarterly operating results, changes in earnings
estimates by analysts or general market or economic conditions. The initial
public offering price will be determined through negotiations between Ivex and
the Underwriters and may not be indicative of the market price for the Common
Stock after the Offerings. See "Underwriting." Also, the NYSE imposes certain
minimum financial conditions to determine whether a company's shares may
continue to be listed on the NYSE and the Company's failure to comply with such
requirements could result in the removal of the Company's shares from listing on
the NYSE.
RESTRICTIONS ON THE PAYMENT OF DIVIDENDS
The Company currently intends to retain future earnings to fund the
development and growth of its business and to repay indebtedness and, therefore,
does not anticipate paying any cash dividends in the foreseeable future. In
addition, the New Credit Facility is expected to contain restrictions on the
ability of IPC to make distributions to the Company to allow the Company to pay
dividends, and the 13 1/4% Discount Indenture restricts, unless amended, the
ability of the Company to pay cash dividends. See "The Refinancing."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings (assuming the Underwriters' over-allotment
options are exercised in full) 20,426,666 shares of the Common Stock will be
outstanding. Of such shares, the 9,660,000 shares sold in the Offerings will be
freely tradeable by persons other than "affiliates" of the Company without
restriction or
15
<PAGE> 18
registration under the Securities Act of 1933, as amended (the "Securities
Act"). Sales of substantial amounts of the Common Stock or the availability of
such shares in the public markets could adversely affect prevailing market
prices for the Common Stock. See "Shares Eligible for Future Sale."
DILUTION AND TANGIBLE NET WORTH DEFICIENCY
The deficit in net tangible book value of the Company at June 30, 1997 was
$164.7 million or $15.91 per share. Based upon an assumed offering price of
$15.00 per share (the mid-point of the range for the estimated public offering
price set forth on the cover page hereof), purchasers of the Common Stock
offered hereby will experience an immediate dilution in net tangible book value
of $19.66 per share of the Common Stock purchased as a result of the purchase of
their shares at such price and the issuance of 2,114,133 shares of Common Stock
to management in connection with the conversion of the IPC Options concurrently
with the closing of the Offerings. See "Dilution." After giving pro forma effect
to the Offerings as if they had occurred on June 30, 1997, the Company would
have had a tangible net worth deficiency of $89.3 million.
NONRECURRING CHARGES IN CONNECTION WITH THE OFFERINGS
The Company expects to realize significant one-time charges in connection
with the consummation of the Offerings, including $8.1 million in connection
with the non-cash write-off of previously capitalized debt issuance costs and
$30.5 million of cash expense for prepayment costs paid in connection with the
repurchase of the 12 1/2% Subordinated Notes and the 13 1/4% Discount
Debentures. Also, the Company expects to realize $49.2 million of executive
compensation charges in connection with the Company's conversion, pursuant to
the Amended and Restated Stock Option and Purchase Agreement, dated as of
January 1, 1996, of certain key executives' stock options which are exercisable
for 16,321 shares of IPC's common stock (the "IPC Options") into 2,114,133 newly
issued shares of the Company's Common Stock and newly issued stock options
exercisable for 766,667 shares of the Company's Common Stock. In addition, the
executive compensation charge will include the accrual of future Company
payments to senior management of an amount which (after taxes) will enable such
management to pay the interest on the loans made to them by the Company. Such
loans were made to senior management to enable them to pay their individual
income taxes payable in connection with the conversion of the IPC Options. These
one-time charges are not reflected in the Pro Forma Consolidated Statements of
Operations Data for fiscal year 1996 or for the six months ended June 30, 1997.
These one-time charges are reflected as an increase to stockholders' deficit in
the Pro Forma Consolidated Balance Sheet as of June 30, 1997 included elsewhere
herein. See "Pro Forma Consolidated Financial Data" and "Management -- Executive
Compensation."
USE OF PROCEEDS
The net proceeds to the Company (after deducting the underwriting discount
and estimated expenses) from the sale of the Common Stock in the Offerings are
estimated to be approximately $92.3 million ($109.9 million assuming the
Underwriters' over-allotment options are exercised in full) assuming an initial
public offering price of $15.00 per share (the mid-point of the range for the
estimated public offering price set forth on the cover page hereof). The Company
intends to use the proceeds of the Offerings to retire all or a portion of the
$160 million aggregate principal amount ($116.8 million accreted value as of
September 30, 1997) of 13 1/4% Discount Debentures. See "The Refinancing." The
13 1/4% Discount Debentures mature on March 15, 2005 and accrete in value at the
rate of 13 1/4% per year until March 15, 2000, at which time the interest on
such debentures will become payable in cash at the rate of 13 1/4% per annum.
See "Description of Certain Indebtedness -- 13 1/4% Discount Debentures." In the
event the net proceeds of the Offerings exceed the aggregate amount required to
repurchase the 13 1/4% Discount Debentures pursuant to the Senior Debenture
Offer, any such excess proceeds will be used for working capital and general
corporate purposes.
16
<PAGE> 19
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on its Common
Stock. The Company currently intends to retain future earnings to fund the
development and growth of its businesses and to repay indebtedness, and,
therefore, does not anticipate paying any cash dividends in the foreseeable
future. The Company's principal source of cash from which to make dividend
payments will be dividends distributed by IPC. The New Credit Facility is
expected to contain provisions that limit the ability of IPC to pay dividends
and make distributions to the Company, and the 13 1/4% Discount Indenture,
unless amended, restricts the ability of the Company to pay cash dividends and
make other distributions to its stockholders. See "Description of Certain
Indebtedness." Any future determination to declare and pay dividends will be
made by the Board of Directors of the Company in light of the Company's
earnings, financial position, capital requirements, credit agreements and such
other factors as the Board of Directors deems relevant. Under Delaware law, the
Company is permitted to pay cash dividends to its stockholders only (i) out of
its capital surplus (the excess of net assets over its stated capital) or (ii)
out of its net profits for the fiscal year in which the dividend is declared
and/or the preceding fiscal year.
17
<PAGE> 20
DILUTION
The deficit in net tangible book value of the Company as of June 30, 1997
was $164.7 million or $15.91 per share. Deficit in net tangible book value per
share of Common Stock is determined by dividing the net tangible book value of
the Company (tangible assets less total liabilities) by the number of shares of
Common Stock outstanding. After giving effect to the sale of 6,700,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $15.00 per share (the mid-point of the range for the estimated public
offering price set forth on the cover page hereof), the application of the
estimated net proceeds thereof, as described in "Use of Proceeds," and the
issuance of 2,114,133 shares of Common Stock to management in connection with
the conversion of the IPC Options, the pro forma deficit in net tangible book
value of the Company at June 30, 1997 would have been $89.3 million, or $4.66
per share. This represents an immediate increase in net tangible book value of
$11.25 per share to existing stockholders and an immediate dilution in net
tangible book value of $19.66 per share to purchasers in the Offerings. Dilution
to purchasers in the Offerings is determined by subtracting net tangible book
value per share, after giving effect to the Offerings and the issuance of shares
of Common Stock to management in connection with the conversion of the IPC
Options, from an assumed initial public offering price of $15.00 per share (the
mid-point of the range for the estimated public offering price set forth on the
cover page hereof). The following table illustrates this dilution on a per share
basis as of June 30, 1997.
<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $15.00
Deficit in net tangible book value per share before the
Offerings................................................. $(15.91)
Increase in net tangible book value per share attributable
to purchasing stockholders and shares issued to
management................................................ $ 11.25
-------
Pro forma deficit in net tangible book value per share after
the Offerings............................................. (4.66)
------
Dilution per share to purchasing stockholders............... $19.66
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price paid per share by the existing
stockholders and the purchasers in the Offerings:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- ----------------------- PRICE
NUMBER % AMOUNT % PER SHARE
------ - ------ - ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)(2)............. 12,466,666 65.0% $124,998,000 55.4% $10.03
Purchasing stockholders................. 6,700,000 35.0 100,500,000 44.6 15.00
---------- ----- ------------ -----
19,166,666 100.0% $225,498,000 100.0%
========== ===== ============ =====
</TABLE>
- -------------------------
(1) Total shares outstanding for existing stockholders includes 2,114,133 shares
of Common Stock issued to management in connection with the conversion of
the IPC Options and total consideration for existing stockholders includes
$31.7 million related to management compensation associated with such
conversion.
(2) Sales by the Selling Stockholder in the Offerings will reduce the number of
shares held by existing stockholders to 10,766,666 or approximately 56.2% of
the total number of shares of Common Stock outstanding after the Offering
(or approximately 52.7% if the Underwriters' over-allotment option is
exercised in full), and will increase the number of shares held by new
investors to 8,400,000, or approximately 43.8% of the total number of shares
of Common Stock outstanding after the Offering (or 9,660,000 shares and
approximately 47.3% if the Underwriters' over-allotment option is exercised
in full).
18
<PAGE> 21
THE REFINANCING
The Offerings are a component of a comprehensive refinancing strategy of
the Company to significantly lower its interest expense, strengthen its balance
sheet and provide financial flexibility to enable Ivex to continue to pursue
investment opportunities. As part of this refinancing, IPC is in the process of
negotiating the New Credit Facility that will refinance its Existing Credit
Facility. The Company intends to use the proceeds of the Offerings together with
borrowings under the New Credit Facility to refinance substantially all of its
existing indebtedness.
Specifically, IPC presently intends to use approximately $176.3 million of
the funds to be provided under the New Credit Facility to retire the entire $158
million aggregate principal amount of its 12 1/2% Subordinated Notes and to pay
approximately $13.1 million of premiums and fees and $5.8 million of accrued
interest (assuming the 12 1/2% Subordinated Notes are purchased September 30,
1997) pursuant to the Subordinated Note Offer. The Company presently intends to
use the proceeds of the Offerings and borrowings under the New Credit Facility
to retire all or a portion of the $160 million aggregate principal amount
($116.8 million accreted value assuming the 13 1/4% Discount Debentures are
purchased September 30, 1997) of its 13 1/4% Discount Debentures and to pay
approximately $17.4 million of premiums and fees pursuant to the Senior
Debenture Offer. The Subordinated Note Offer and the Senior Debenture Offer were
commenced on August 27, 1997 and will expire (unless otherwise amended, extended
or terminated) on September 24, 1997 and the Company's and IPC's obligations to
accept and pay for any tendered 12 1/2% Subordinated Notes and 13 1/4% Discount
Debentures are conditioned upon, among other things, the completion of the
Offerings yielding net proceeds of at least $92.3 million, the consummation of
the New Credit Facility and the Company's and IPC's receipt of tendered notes
and consents of at least a majority in aggregate principal amount of both the
12 1/2% Subordinated Notes and the 13 1/4% Discount Debentures. The Company
expects to consummate the Offers promptly following the sale of the Shares
offered hereby, assuming all conditions to such Offers have been met. See
"Capitalization" and "Pro Forma Consolidated Financial Data -- Pro Forma
Consolidated Statements of Operations."
The New Credit Facility is expected to provide for IPC to borrow up to $475
million principal amount at variable interest rates. On a pro forma basis at
June 30, 1997, the Company expects IPC to borrow approximately $328.4 million
under the New Credit Facility to (i) refinance $49.2 million outstanding under
the revolving credit portion of the Existing Credit Facility, (ii) refinance
$52.5 million outstanding under the term loan portion of the Existing Credit
Facility, (iii) apply approximately $178.2 million to the acquisition of the
12 1/2% Subordinated Notes and the 13 1/4% Discount Debentures, (iv) lend
approximately $14.0 million to certain key executives to enable them to pay
their individual income taxes payable in connection with the conversion of the
IPC Options and (v) pay approximately $34.6 million of fees associated with
these transactions, and to utilize approximately $45 million of availability
under the New Credit Facility to refinance outstanding letters of credit. See
"Description of Certain Indebtedness -- The New Credit Facility,"
"Capitalization" and "Pro Forma Consolidated Financial Data."
19
<PAGE> 22
CAPITALIZATION
The following table sets forth (i) the actual consolidated capitalization
of the Company as of June 30, 1997, and (ii) the consolidated capitalization of
the Company as adjusted to reflect the transactions contemplated hereby. This
presentation should be read in conjunction with the consolidated financial
statements and other financial information appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------
HISTORICAL PRO FORMA(1)
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt........................ $ 8,012 $ 16,137(2)
========= =========
Long-term debt:
Existing Credit Facility.................................. $ 94,825 (2)
New Credit Facility....................................... $ 313,386(2)
Industrial revenue bonds.................................. 37,623 37,623
12 1/2% Subordinated Notes, net of discount............... 157,395 (3)
13 1/4% Discount Debentures, net of discount.............. 113,095 (3)
Other debt................................................ 1,674 1,674
--------- ---------
Total long-term debt................................. 404,612 352,683
--------- ---------
Stockholders' deficit:
Ivex Packaging Corporation common stock, $.01 par value --
45,000,000 shares authorized; and 1,072,246 (19,166,666
pro forma) shares issued and outstanding............... 11 192
Paid in capital in excess of par value.................... 177,375 301,222
Accumulated deficit....................................... (300,879) (353,559)(4)
Foreign currency translation adjustment................... (899) (899)
--------- ---------
Total stockholders' deficit.......................... (124,392) (53,044)
--------- ---------
Total capitalization........................................ $ 280,220 $ 299,639
========= =========
</TABLE>
- -------------------------
(1) Adjusted for (i) the issuance and sale of shares of Common Stock by the
Company (assuming net proceeds of $92,316), (ii) the issuance of 2,114,133
shares to management in connection with the conversion of the IPC Options
and (iii) borrowings under the New Credit Facility, and the anticipated use
of net proceeds from such transactions to purchase the 12 1/2% Subordinated
Notes and the 13 1/4% Discount Debentures as if such issuances and
borrowings had occurred on June 30, 1997. Accordingly, the pro forma
adjustments reflect the refinancing of the Existing Credit Facility, the
repurchase of all of the outstanding 12 1/2% Subordinated Notes and all of
the outstanding 13 1/4% Discount Debentures.
(2) Reflects borrowings of $300,000 under the term loan portion and $28,386
under the revolving credit portion of the New Credit Facility and the
refinancing of $52,500 term loans and $49,200 revolving credit loans under
the Existing Credit Facility.
(3) Reflects the repurchase of all of outstanding 12 1/2% Subordinated Notes and
13 1/4% Discount Debentures.
(4) The pro forma accumulated deficit balance is adjusted for a non-cash
extraordinary expense of $8,141 for previously capitalized debt issuance
costs and a cash extraordinary expense of $30,496 for prepayment costs
assumed to have been paid in connection with the repurchase of all of the
outstanding 12 1/2% Subordinated Notes and 13 1/4% Discount Debentures. The
pro forma accumulated deficit balance is also adjusted for a nonrecurring
compensation charge of approximately $49,200 in connection with the
conversion of the IPC Options. The nonrecurring compensation charge consists
of (i) a non-cash compensation charge of approximately $31,700 associated
with the conversion of the IPC Options into shares of the Company's common
stock and (ii) a non-cash compensation charge of approximately $17,500
associated with the accrual of future Company payments to senior management
of an amount which (after taxes) will enable such management to pay the
interest on the loans made to them by the Company. Such loans were made to
senior management to enable them to pay their individual income taxes
payable in connection with the conversion of the IPC Options. The
extraordinary expense and nonrecurring charge are reflected as an increase
to pro forma accumulated deficit, net of a tax benefit of approximately
$35,100.
20
<PAGE> 23
PRO FORMA CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
The unaudited pro forma consolidated financial data on the following pages
give effect to the transactions contemplated hereby as if such transaction had
occurred at the beginning of the periods presented below for purposes of the
statements of operations, and as of June 30, 1997, for purposes of the balance
sheet data. The unaudited pro forma consolidated financial data do not reflect
the Company's actual results of operations or financial position had the
transactions contemplated hereby been consummated on the dates assumed. The pro
forma results of operations for the period ended June 30, 1997 are not
necessarily indicative of the results to be expected for the entire year. This
unaudited data should be read in conjunction with the audited financial
statements and the notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------
HISTORICAL ADJUSTMENTS(1)(4) PRO FORMA
---------- ----------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales...................................... $ 451,807 $ 451,807
Gross profit................................... 100,383 100,383
Selling and administrative..................... 47,462 47,462
Amortization of intangibles.................... 621 621
---------- -------- ----------
Income from operations......................... 52,300 52,300
Interest expense............................... 42,732 $(17,585)(2) 25,147
---------- -------- ----------
Income before income taxes..................... 9,568 17,585 27,153
Income tax provision........................... (900) (9,961)(3) (10,861)
---------- -------- ----------
Income before extraordinary item............... $ 8,668 $ 7,624 $ 16,292
========== ======== ==========
Income before extraordinary item per
share(5)..................................... $ .84 $ .85
========== ==========
Average shares outstanding(5).................. 10,352,533 19,166,666
========== ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
-----------------------------------------------------
HISTORICAL ADJUSTMENTS(1)(4) PRO FORMA
---------- ----------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales...................................... $ 264,034 $ 264,034
Gross profit................................... 56,361 56,361
Selling and administrative..................... 29,467 29,467
Amortization of intangibles.................... 512 512
---------- -------- ----------
Income from operations......................... 26,382 26,382
Interest expense............................... 22,805 $ (8,964)(2) 13,841
---------- -------- ----------
Income before income taxes..................... 3,577 8,964 12,541
Income tax provision........................... (890) (4,126)(3) (5,016)
---------- -------- ----------
Income before extraordinary item............... $ 2,687 $ 4,838 $ 7,525
========== ======== ==========
Income before extraordinary item per
share(5)..................................... $ .26 $ .39
========== ==========
Average shares outstanding(5).................. 10,352,533 19,166,666
========== ==========
</TABLE>
- -------------------------
(1) Adjusted for (i) the issuance and sale of shares of Common Stock by the
Company (assuming net proceeds of $92,316), (ii) the issuance of 2,114,133
shares to management in connection with the
21
<PAGE> 24
conversion of the IPC Options and (iii) borrowings under the New Credit
Facility, and the anticipated use of net proceeds from such transactions to
purchase the 12 1/2% Subordinated Notes and the 13 1/4% Discount Debentures as
if such issuances and borrowings had occurred at the beginning of the
periods presented. Accordingly, the pro forma adjustments reflect the
refinancing of the Existing Credit Facility, the repurchase of all of the
outstanding 12 1/2% Subordinated Notes and all of the outstanding 13 1/4%
Discount Debentures.
(2) Represents the adjustment of interest expense, as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
----------------- ----------------
<S> <C> <C>
Estimated interest on the New Credit Facility at a
weighted average interest rate of 7.9%................. $ 21,623 $ 12,173
Elimination of interest on the 12 1/2% Subordinated
Notes.................................................. (19,891) (9,866)
Elimination of interest on the 13 1/4% Discount
Debentures............................................. (12,811) (6,968)
Elimination of interest on the Existing Credit
Facility............................................... (4,843) (3,439)
Non-cash amortization of new deferred financing costs.... 677 339
Elimination of amortization of existing deferred
financing costs........................................ (1,363) (714)
Interest income on management note receivable (at
7.0%).................................................. (977) (489)
-------- --------
Net change in interest expense...................... $(17,585) $ (8,964)
======== ========
</TABLE>
(3) The Company's income tax provision for the year ended December 31, 1996 and
the six months ended June 30, 1997 has been adjusted to reflect a 40%
effective tax rate on pro forma taxable income.
(4) The pro forma statements of operations do not reflect non-cash extraordinary
expense of $8,528 and $8,141 for previously capitalized debt issuance costs
during the year ended December 31, 1996 and the six months ended June 30,
1997, respectively, and a cash extraordinary expense of $30,496 during both
periods for prepayment costs assumed to have been paid in connection with
the repurchase of all of the outstanding 12 1/2% Subordinated Notes and
13 1/4% Discount Debentures. Also the pro forma statements of operations for
the year ended December 31, 1996 and the six months ended June 30, 1997 do
not include a nonrecurring compensation charge of approximately $49,200 in
connection with the conversion of the IPC Options. The nonrecurring
compensation charge consists of (i) a non-cash compensation charge of
approximately $31,700 associated with the conversion of the IPC Options into
shares of the Company's common stock and (ii) a non-cash compensation charge
of approximately $17,500 associated with the accrual of future Company
payments to senior management of an amount which (after taxes) will enable
such management to pay the interest on the loans made to them by the
Company. Such loans were made to senior management to enable them to pay
their individual income taxes payable in connection with the conversion of
the IPC Options. The extraordinary expense and nonrecurring charge is
expected to be recorded net of a tax benefit of approximately $35,300 and
$35,100 during the year ended December 31, 1996 and the six months ended
June 30, 1997.
(5) The average shares outstanding and the income before extraordinary item per
share give effect to the Company's 9.65-for-1 stock split effective
immediately prior to the Offerings.
22
<PAGE> 25
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------------------
HISTORICAL ADJUSTMENTS(1) PRO FORMA
---------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 8,345 $ 8,345
Accounts receivable trade, net of allowance.......... 67,068 67,068
Inventories.......................................... 53,506 53,506
Prepaid expenses and other........................... 6,327 6,327
--------- -------- --------
Total current assets.............................. 135,246 135,246
--------- --------
Property, plant and equipment, net..................... 190,767 190,767
--------- -------- --------
Other assets:
Goodwill............................................. 30,115 30,115
Deferred income taxes................................ $ 35,119(2) 24,637
(10,482)(3)
Management note receivable........................... 13,953(4) 13,953
Miscellaneous........................................ 14,514 (4,078)(5) 10,436
--------- -------- --------
Total other assets................................ 44,629 34,512 79,141
--------- -------- --------
Total assets...................................... $ 370,642 $ 34,512 $405,154
========= ======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current installments of long-term debt............... $ 8,012 $ 8,125(7) $ 16,137
Accounts payable..................................... 35,795 35,795
Accrued salary and wages............................. 6,730 1,745(6) 8,475
Self insurance reserves.............................. 6,650 6,650
Accrued rebates and discounts........................ 3,559 3,559
Accrued interest..................................... 1,567 1,567
Other accrued expenses............................... 12,733 12,733
--------- -------- --------
Total current liabilities......................... 75,046 9,870 84,916
--------- -------- --------
Long-term debt......................................... 404,612 (51,929)(7) 352,683
--------- -------- --------
Other long-term liabilities............................ 4,894 15,705(6) 20,599
--------- -------- --------
Deferred income taxes.................................. 10,482 (10,482)(3)
--------- -------- --------
Commitments............................................
--------- -------- --------
Stockholders' deficit:
Ivex Packaging Corporation common stock, $.01 par
value -- 45,000,000 shares authorized; and
1,072,246 (19,166,666 pro forma) shares issued and
outstanding....................................... 11 181 192
Paid in capital in excess of par value................. 177,375 123,847 301,222
Accumulated deficit.................................... (300,879) (52,680)(8) (353,559)
Foreign currency translation adjustment................ (899) (899)
--------- -------- --------
Total stockholders' deficit....................... (124,392) 71,348 (53,044)
--------- -------- --------
Total liabilities and stockholders' deficit....... $ 370,642 $ 34,512 $405,154
========= ======== ========
</TABLE>
- -------------------------
(1) Adjusted for (i) the issuance and sale of shares of Common Stock by the
Company (assuming net proceeds of $92,316), (ii) the issuance of 2,114,133
shares to management in connection with the conversion of the IPC Options
and (iii) borrowings under the New Credit Facility, and the anticipated use
of net proceeds from such transactions to purchase the 12 1/2% Subordinated
Notes and the 13 1/4% Discount Debentures as if such issuances and
borrowings had occurred on June 30, 1997. Accordingly,
23
<PAGE> 26
the pro forma adjustments reflect the refinancing of the Existing Credit
Facility, the repurchase of all of the outstanding 12 1/2% Subordinated Notes
and all of the outstanding 13 1/4% Discount Debentures.
(2) Reflects the increase in deferred tax assets associated with the
extraordinary expense and nonrecurring charge associated with the Offerings.
(3) Reflects the reclassification of deferred tax liabilities subsequent to the
Offerings.
(4) Reflects the issuance of a note receivable due from senior management to pay
income taxes associated with the conversion of the IPC Options.
(5) Reflects the write-off of $8,141 of previously capitalized debt issuance
costs and the capitalization of $4,063 of deferred financing costs
associated with the consummation of the New Credit Facility.
(6) Reflects the accrual of future Company payments to senior management of an
amount which (after taxes) will enable such management to pay, on an after
tax basis, the interest on the loans made to them by the Company. Such loans
were made to senior management to enable them to pay income taxes payable in
connection with the conversion of the IPC Options.
(7) Reflects borrowings of $300,000 under the term loan portion and $28,386
under the revolving credit portion of the New Credit Facility and the
refinancing of $52,500 term loans and $49,200 revolving credit loans under
the Existing Credit Facility. Reflects the repurchase of all of outstanding
12 1/2% Subordinated Notes and 13 1/4% Discount Debentures.
(8) The pro forma accumulated deficit balance is adjusted for a non-cash
extraordinary expense of $8,141 for previously capitalized debt issuance
costs and a cash extraordinary expense of $30,496 for prepayment costs
assumed to have been paid in connection with the repurchase of all of the
outstanding 12 1/2% Subordinated Notes and 13 1/4% Discount Debentures. The
pro forma accumulated deficit balance is also adjusted for a nonrecurring
compensation charge of approximately $49,200 in connection with the
conversion of the IPC Options. The nonrecurring compensation charge consists
of (i) a non-cash compensation charge of approximately $31,700 associated
with the conversion of the IPC Options into shares of the Company's common
stock and (ii) a non-cash compensation charge of approximately $17,500
associated with the accrual of future Company payments to senior management
of an amount which (after taxes) will enable such management to pay the
interest on the loans made to them by the Company. Such loans were made to
senior management to enable them to pay their individual income taxes
payable in connection with the conversion of the IPC Options. The
extraordinary expense and nonrecurring charge are reflected as an increase
to pro forma accumulated deficit, net of a tax benefit of approximately
$35,100.
24
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated 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 and should be read in conjunction with the consolidated
audited financial statements of the Company. The data as of and for the six
months ended June 30, 1996 and 1997 are derived from the consolidated unaudited
interim financial statements and include, in the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the data for such periods. The financial data of Ivex reflect the
following acquisitions as of the respective acquisition dates: PPI as of
September 11, 1995; Plastofilm as of August 16, 1996; Trio as of September 11,
1996; the European OPS Business as of January 17, 1997; and M&R as of February
21, 1997. The following summary selected consolidated financial data do not
reflect the impact of any pro forma adjustments for the transactions
contemplated hereby, except that the earnings (loss) per share amounts give
effect to the Company's 9.65-for-1 stock split effective immediately prior to
the Offerings.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $367,649 $ 366,851 $ 390,975 $ 451,569 $ 451,807 $ 210,443 $ 264,034
Gross profit..................... 74,076 72,213 74,271 85,160 100,383 45,775 56,361
Selling and administrative....... 38,502 39,274 41,662 42,567 47,462 22,132 29,467
Amortization of intangibles(1)... 12,266 4,372 1,140 1,904 621 258 512
Write-off of goodwill(1)......... 113,859 13,471
Acquisition related expense(2)... 1,100
Restructuring and special
charges(3)..................... 4,350 4,960
-------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations.... 23,308 (90,742) 31,469 22,258 52,300 23,385 26,382
Interest expense................. 46,426 37,179 39,820 43,270 42,732 21,221 22,805
-------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary item......... (23,118) (127,921) (8,351) (21,012) 9,568 2,164 3,577
Income tax provision............. (1,722) (1,177) (942) (1,113) (900) (440) (890)
-------- --------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary item............. (24,840) (129,098) (9,293) (22,125) 8,668 1,724 2,687
Extraordinary item(4)............ (5,532) (2,359)
-------- --------- --------- --------- --------- --------- ---------
Net income (loss)................ $(30,372) $(129,098) $ (9,293) $ (24,484) $ 8,668 $ 1,724 $ 2,687
======== ========= ========= ========= ========= ========= =========
Earnings (loss) per share(5):
Income (loss) before
extraordinary item........... $ (12.63) $ (.90) $ (2.14) $ .84 $ .17 $ .26
========= ========= ========= ========= ========= =========
Net income (loss).............. $ (12.63) $ (.90) $ (2.37) $ .84 $ .17 $ .26
========= ========= ========= ========= ========= =========
OTHER OPERATING DATA:
Cash flow from operating
activities..................... $ 31,195 $ 22,157 $ 15,647 $ 22,746 $ 49,202 $ 17,451 $ 1,269
Cash flow used by
investing activities........... (11,306) (8,261) (13,057) (29,871) (38,136) (7,650) (41,689)
Cash flow from (used by)
financing activities........... (24,838) (5,823) (6,102) 5,666 (13,074) (10,191) 45,943
Adjusted EBIT(6)................. 28,597 28,567 31,469 41,828 52,300 23,385 26,382
Depreciation and
amortization(1)................ 30,931 137,837 22,189 35,871 22,724 11,303 13,290
Adjusted EBITDA(7)............... 54,239 52,545 53,658 63,089 75,024 34,688 39,672
Capital expenditures............. 12,820 9,528 16,769 19,385 17,633 7,996 10,984
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
-------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(8)............... $ 28,451 $ 34,729 $ 32,853 $ 38,090 $ 32,539 $ 39,885 $ 60,200
Total assets..................... 423,051 297,674 304,246 294,911 315,901 289,476 370,642
Long-term debt................... 278,369 330,201 330,768 353,717 352,893 349,850 404,612
Redeemable preferred stock....... 50,313
Stockholders' equity (deficit)... 23,899 (101,579) (111,266) (136,332) (127,344) (134,608) (124,392)
</TABLE>
- -------------------------
(1) Depreciation and amortization for the year ended December 31, 1995 includes
the accelerated non-cash write-off of goodwill of $13,471 and the
accelerated non-cash write-off of a non-compete agreement of $1,139.
Depreciation and amortization for the year ended December 31, 1993 includes
the accelerated non-cash write-off of goodwill totaling $113,859.
Depreciation and amortization for the year ended December 31, 1992 includes
the accelerated non-cash write-off of non-compete agreements and a patent
totaling $5,289.
25
<PAGE> 28
(2) Acquisition related expense totaling $1,100 was incurred during 1993 in
connection with an acquisition attempt.
(3) 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. Operating results for the year ended December 31, 1993 include
restructuring and special charges of $4,350, reflecting a $1,500 non-cash
write-down of certain property held for sale and costs of $2,850 related to
the reorganization of the Consumer Packaging product group, which include,
among other things, severance, transition and relocation expenses.
(4) In connection with the 1995 refinancing of IPC's credit facility, the
Company wrote off deferred financing costs of $2,359. In connection with the
1992 12 1/2% Subordinated Note offering, the Company wrote off deferred
financing costs of $5,977, net of a tax benefit of $445.
(5) The earnings (loss) per share amounts give effect to the Company's
9.65-for-1 stock split effective immediately prior to the Offerings. A loss
per share amount has not been presented for 1992 since the Company's
combined financial statement presentation and capital structure precluded
meaningful equivalent per share calculations.
(6) Adjusted EBIT includes income from operations adjusted to exclude goodwill
write-offs of $13,471 and $113,859 for the years ended December 31, 1995 and
1993, respectively, and acquisition related expenses of $1,100,
restructuring charges of $2,850 and special charges of $1,500 for the year
ended December 31, 1993. In addition, Adjusted EBIT for the year ended
December 31, 1995 excludes the accelerated write-off of a non-compete
agreement of $1,139 and special charges of $4,960 and for the year ended
December 31, 1992 excludes the accelerated write-off of non-compete
agreements and a patent totaling $5,289. Ivex believes that Adjusted EBIT
provides additional information for determining its ability to meet future
debt service requirements. However, Adjusted EBIT is not a defined term
under GAAP.
(7) Adjusted EBITDA includes income from operations adjusted to exclude
depreciation and amortization expenses, goodwill write-offs of $13,471 and
$113,859 for the years ended December 31, 1995 and 1993, respectively, and
acquisition related expenses of $1,100, restructuring charges of $2,850 and
special charges of $1,500 and for the year ended December 31, 1993. In
addition, Adjusted EBITDA for the year ended December 31, 1995 includes
special charges of $4,960. Ivex believes that Adjusted EBITDA provides
additional information for determining its ability to meet future debt
service requirements. However, Adjusted EBITDA is not a defined term under
GAAP and is not indicative of operating income or cash flow from operations
as determined under GAAP.
(8) Working capital is determined to be the excess of current assets over
current liabilities (including the current portion of long-term debt).
26
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion addresses the information and financial data
contained in "Selected Consolidated Financial Data."
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 Ivex or the Company
herein reflect the consolidated results of Ivex Packaging Corporation.
RESULTS OF OPERATIONS -- FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
Net Sales
The Company's net sales increased by 25.5% during the six months ended June
30, 1997 over the Company's net sales during the corresponding period in 1996
primarily as a result of incremental sales volume associated with the recently
completed acquisitions (including approximately $38.7 million in revenues during
the six months ended June 30, 1997 from the Plastofilm, Trio, European OPS
Business and M&R acquisitions) and significantly increased volume of extruded
sheet and film. The following table sets forth information with respect to net
sales of the Company's product groups for the periods presented:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------------------------
JUNE 30, % OF JUNE 30, % OF
1996 NET SALES 1997 NET SALES
-------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Consumer Packaging..................... $103,495 49.2 $152,914 57.9
Industrial Packaging................... 106,948 50.8 111,120 42.1
-------- ----- -------- -----
Total............................. $210,443 100.0 $264,034 100.0
======== ===== ======== =====
</TABLE>
Consumer Packaging's net sales increased by 47.8% during the six months
ended June 30, 1997 from the corresponding period in 1996 primarily due to
incremental sales volume associated with the recently completed acquisitions
aggregating approximately $38.7 million in revenues during the six months ended
June 30, 1997, increased unit sales volume of extruded OPS sheet and film and
increased sales of converted plastic and paper products. The increase in net
sales was partially offset by decreased average selling price of OPS sheet and
film. During the six months ended June 30, 1997, domestic production of extruded
OPS sheet in pounds increased 18.7% while the average selling price per pound
decreased 2.4% from the corresponding period in 1996. Sales of extruded OPS film
in pounds increased 32.5% during the first six months of 1997 and the average
selling price per pound decreased 6.2% from the corresponding period in 1996.
Sales of converted plastic and paper products, excluding the sales relating to
the newly acquired facilities, increased 8.0% during the six months ended June
30, 1997 over the corresponding period in 1996 primarily due to new product
introductions in the supermarket and agricultural market segments.
Industrial Packaging's net sales increased by 3.9% during the six months
ended June 30, 1997 from the corresponding period in 1996, primarily due to
increased unit volume of the Company's protective masking products and increased
average selling price of the Company's recycled and specialty papers. The
increase in net sales was partially offset by a decrease in volume of the
Company's coated paper for stamp applications and decreased unit volume of the
Company's recycled and specialty paper. The average net selling price of the
Company's recycled and specialty paper increased 10.8% during the six months
ended June 30, 1997 compared to the corresponding period in the prior year.
However, the number of tons of recycled and specialty paper sold during the
period decreased 4.9% compared to the corresponding period in 1996.
27
<PAGE> 30
Gross Profit
The Company's gross profit increased 23.1% during the six months ended June
30, 1997 compared to the corresponding period in the prior year primarily as a
result of the incremental effects of newly acquired facilities and increased
sales volume. The increased gross profit was partially offset by decreased
margins in the Company's recycled and specialty paper operations due to market
conditions and decreased profitability of the Company's polymerization
operations. Gross profit margin was 21.3% and 21.8% during the six months ended
June 30, 1997 and 1996, respectively.
Operating Expenses
Selling and administrative expenses increased 33.1% during the six months
ended June 30, 1997 primarily as a result of the recently completed
acquisitions. As a percentage of net sales, selling and administrative expenses
increased to 11.2% during the six months ended June 30, 1997 compared to 10.5%
during the same period in the prior year primarily due to the higher selling and
administrative expenses at Plastofilm and Industrial Packaging.
Amortization of intangibles increased 98.4% during the six months ended
June 30, 1997 compared to the same period in 1996 as a result of increased
goodwill and non-compete agreement amortization associated with the recently
completed acquisitions.
Income from Operations
Income from operations was $26.4 million during the six months ended June
30, 1997 compared to income from operations of $23.4 million during the six
months ended June 30, 1996. The increase in income from operations is primarily
a result of the recently completed acquisitions and increased volume of extruded
OPS sheet and film during the six months ended June 30, 1997. Operating margin
was 10.0% for the six months ended June 30, 1997 compared to operating margin of
11.1% during the six months ended June 30, 1996. The decrease in operating
margin is primarily due to the increased selling and administrative expenses as
a percentage of net sales.
Interest Expense
Interest expense during the six months ended June 30, 1997 was $22.8
million compared to $21.2 million during the same period in 1996. The increase
reflects greater outstanding aggregate indebtedness during 1997 as a result of
accretion on the 13 1/4% Discount Debentures and additional borrowings under the
Existing Credit Facility to finance the recently completed acquisitions. The
increase was partially offset by decreased interest rates on the Existing Credit
Facility.
Net Income
Net income was $2.7 million during the six months ended June 30, 1997
compared to net income of $1.7 million in the prior year. The increase in net
income during the first six months of 1997 is primarily due to increased income
from operations partially offset by higher interest expense.
Adjusted EBITDA
Adjusted EBITDA includes income from operations adjusted to exclude
depreciation and amortization expenses, goodwill write-off, acquisition related
expenses and restructuring charge. The Company believes that Adjusted EBITDA
provides additional information for determining its ability to meet future debt
service requirements. However, Adjusted EBITDA is not a defined term under GAAP
and is not indicative of operating income or cash flow from operations as
determined under GAAP.
28
<PAGE> 31
The following table sets forth information with respect to Adjusted EBITDA
of the Company's product groups for the periods presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------------------------
JUNE 30, % OF JUNE 30, % OF
1996 NET SALES 1997 NET SALES
-------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Consumer Packaging....................... $19,167 18.5 $25,339 16.6
Industrial Packaging..................... 18,452 17.3 17,516 15.8
Corporate Expense........................ (2,931) -- (3,183) --
------- ---- ------- ----
Total............................... $34,688 16.5 $39,672 15.0
======= ==== ======= ====
</TABLE>
The Company's Adjusted EBITDA increased 14.4% from $34.7 million to $39.7
million; however, Adjusted EBITDA margin decreased from 16.5% to 15.0% during
the six months ended June 30, 1997 compared to the same period in 1996. The
32.2%, or $6.2 million, increase in Consumer Packaging's Adjusted EBITDA during
the six months ended June 30, 1997 is primarily attributable to the incremental
Adjusted EBITDA from the recently completed acquisitions and to the increased
sales of extruded sheet and film and converted plastic and paper products.
Consumer Packaging's increased Adjusted EBITDA was partially offset by the
decreased profitability of the Company's polymerization operations. The decrease
in Industrial Packaging's Adjusted EBITDA of 5.1%, or $936,000, is primarily due
to decreased gross profit associated with lower sales unit volume of the
Company's recycled and specialty paper and increased operating expenses in the
Company's protective masking business.
RESULTS OF OPERATIONS -- FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
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
1994 NET SALES 1995 NET SALES 1996 NET SALES
---- --------- ---- --------- ---- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Consumer Packaging................. $189,089 48.4 $219,806 48.7 $234,584 51.9
Industrial Packaging............... 201,886 51.6 231,763 51.3 217,223 48.1
-------- ----- -------- ----- -------- -----
Total......................... $390,975 100.0 $451,569 100.0 $451,807 100.0
======== ===== ======== ===== ======== =====
</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 which generated
revenue approximating $14.2 million in 1996, 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 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
29
<PAGE> 32
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 PPI which added
revenues of approximately $14.3 million during 1996 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 which generated revenues of approximately $6.8
million during 1995 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, OCC and 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.
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.
30
<PAGE> 33
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.
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
31
<PAGE> 34
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 the Existing 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%
Discount Debentures and increased borrowings under the Existing 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 the
Existing Credit Facility.
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.
Adjusted EBITDA
The following table sets forth information with respect to Adjusted EBITDA
of the Company's product groups for the periods presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
% OF % OF % OF
1994 NET SALES 1995 NET SALES 1996 NET SALES
---- --------- ---- --------- ---- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Consumer Packaging.................... $34,506 18.2 $36,954 16.8 $43,776 18.7
Industrial Packaging.................. 25,695 12.7 31,744 13.7 37,694 17.4
Corporate Expense..................... (6,543) -- (5,609) -- (6,446) --
------- ------- -------
Total............................ $53,658 13.7 $63,089 14.0 $75,024 16.6
======= ======= =======
</TABLE>
The Company's Adjusted EBITDA increased by $11.9 million to $75.0 million
in 1996, an Adjusted EBITDA margin of 16.6%, compared to 1995 Adjusted EBITDA of
$63.1 million and an Adjusted EBITDA margin of 14.0%. The increase in Consumer
Packaging's Adjusted EBITDA 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 Adjusted
32
<PAGE> 35
EBITDA from Plastofilm. Such increases were partially offset by decreased
profitability of the Company's polymerization operations. The increase in
Industrial Packaging's Adjusted EBITDA during 1996 is primarily the result of
the incremental Adjusted 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 Adjusted EBITDA increased by $9.4 million to $63.1 million in
1995, representing an Adjusted EBITDA margin of 14.0%, compared to 1994 Adjusted
EBITDA of $53.7 million and an Adjusted EBITDA margin of 13.7%. The increase in
Consumer Packaging's Adjusted EBITDA 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 Adjusted
EBITDA during 1995 is primarily the result of the increased unit sales of
recycled kraft paper and the incremental Adjusted 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
Recent Developments
The discussion in "Historical Liquidity and Capital Resources" below does
not give effect to the Offerings, the Offers and the New Credit Facility
(described herein) pursuant to which Ivex expects IPC to borrow (on a pro forma
basis at June 30, 1997) approximately $328.4 million under the New Credit
Facility to (i) refinance $49.2 million outstanding under the revolving credit
portion of the Existing Credit Facility, (ii) refinance $52.5 million
outstanding under the term loan portion of the Existing Credit Facility, (iii)
apply approximately $178.2 million to the acquisition of 12 1/2% Subordinated
Notes and 13 1/4% Discount Debentures, (iv) lend approximately $14.0 million to
certain key executives to enable them to pay their individual income taxes
payable in connection with the conversion of the IPC Options and (v) pay
approximately $34.6 million of fees associated with these transactions, and to
utilize approximately $45.0 million of availability under the New Credit
Facility to refinance outstanding letters of credit. See "The Refinancing,"
"Capitalization" and "Pro Forma Consolidated Financial Data." See "Description
of Certain Indebtedness -- The New Credit Facility" for a summary of the terms
and conditions of the New Credit Facility.
The Company expects that the Offerings, together with the conversion of the
IPC Options, will result in a more-than-50% ownership change for purposes of
Section 382 of the Code, resulting in the imposition of Section 382 limitations
on the use of the Company's NOL carryforwards existing as of the date of the
ownership change. In addition, Ivex expects to have a significant NOL
attributable to the period after such ownership change resulting from certain
one-time charges expected to be incurred as a result of the refinancing
transactions described herein. Consequently, if another more-than-50% ownership
change takes place after the consummation of the Offerings, such ownership
change could result in the imposition of Section 382 limitations on such NOL.
Historical 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 obligations of IPC and the subsidiaries under the Existing
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% Discount
Debentures; however, IPC has no contractual obligations to distribute any such
cash flow to the Company. In addition, the Existing 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.
The Company's long-term debt, less current installments, increased to
$404.6 million at June 30, 1997 from $352.9 million at December 31, 1996
primarily reflecting $7.0 million of accretion on the 13 1/4% Discount
33
<PAGE> 36
Debentures, borrowings under the Existing Credit Facility of $49.2 million, $2.6
million of scheduled debt reductions and the reclassification of $1.9 million to
current. The Company's long-term debt consists of the 13 1/4% Discount
Debentures, with an accreted value of $113.1 million at June 30, 1997. The
long-term debt of the Company's wholly-owned subsidiary, IPC, consists primarily
of the $157.4 million of IPC's 12 1/2% Subordinated Notes, term loans of $45.6
million and revolving credit facility borrowing of $49.2 million under the
Existing Credit Facility, $37.6 million of industrial revenue bonds and other
debt of $1.7 million.
At June 30, 1997, IPC had cash and cash equivalents of $8.3 million and
$52.2 million was available under the revolving credit portion of the Existing
Credit Facility. IPC's working capital at June 30, 1997 was $60.2 million.
The Company's primary long-term cash requirements are for the debt service
relating to the 13 1/4% Discount Debentures. Commencing on September 15, 2000,
cash interest on the 13 1/4% Discount Debentures will be payable semi-annually
and on March 15, 2005, the 13 1/4% 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% Discount Debentures that commence in September 2000 or
to retire the $160 million principal amount of 13 1/4% Discount Debentures upon
their maturity in 2005. Consequently, all or a portion of the 13 1/4% 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% Discount Debentures and to refinance any
remaining principal amount of the 13 1/4% 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% Discount Debentures or is unable to obtain
any required consents from the holders of the 12 1/2% Subordinated Notes to make
interest payments on the 13 1/4% Discount Debentures, the Company may be
required to, among other things, seek appropriate waivers from such creditors or
recapitalize its capital structure.
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 the Existing Credit Facility (at June
30, 1997, $52.2 million was available under the revolving credit portion of the
Existing 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% Subordinated Notes through 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 12 1/2%
Subordinated Notes prior to or upon their maturity in 2002. Consequently, all or
a portion of the 12 1/2% Subordinated 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% Subordinated Notes and to refinance any remaining principal amount
of the 12 1/2% Subordinated Notes prior to or upon their maturity, 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% Subordinated 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 future indebtedness and dividends,
among other things, are restricted under these facilities.
34
<PAGE> 37
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 12 1/2% Subordinated Note Indenture contains certain covenants
that, among other things, limit the ability of IPC to incur additional
indebtedness, pay dividends or repurchase stock.
The Existing Credit Facility is comprised of $52.5 million in term loans, a
$45.0 million letter of credit facility and a $105.0 million revolving credit
facility of which approximately $52.2 million was available as of June 30, 1997.
The term loans under the Existing Credit Facility require quarterly payments of
$1.3 million 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 the Existing 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 the Existing Credit Facility. The
Company's actual interest rate on the term loans and the revolving credit
facility as of June 30, 1997 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 Existing Credit Facility, IPC is
required to maintain certain financial ratios and levels of net worth and future
indebtedness and dividends are restricted, among other things.
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
the Existing 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 June 30, 1997, the Company's recorded assets are less than its
recorded liabilities by approximately $124.4 million. The Company believes that
its negative net worth will not have any material consequences on its operations
or its ability to obtain trade credit or financing.
On January 17, 1997, IPC purchased substantially all of the assets,
excluding accounts receivable, of the European OPS Business for $11.9 million
and on February 21, 1997, IPC purchased all of the outstanding common stock of
M&R located in Laval, Quebec for $18.7 million, including the repayment of
certain indebtedness of M&R and related acquisition fees and expenses. In
addition, on August 8, 1997, IPC purchased all of the outstanding common stock
of AVPEX International Corporation ("AVP") located in Newcastle, Canada for
approximately $8.0 million, including the repayment of certain indebtedness of
AVP and related fees and expenses. The acquired businesses were financed through
revolving credit borrowings under IPC's senior credit facility. As of the date
hereof, the Company is not presently committed under any
35
<PAGE> 38
material contractual obligations for acquisitions. However, the Company expects
that a portion of its growth in net revenues will result from future
acquisitions.
The Company made capital expenditures of $11.0 million, $17.6 million,
$19.4 million and $16.8 million for the six months ended June 30, 1997 and the
years 1996, 1995 and 1994, respectively. The spending during the six months
ended June 30, 1997 and the year 1996 was directed, in part, to new stock
thermoforming tooling and thermoforming machines at two 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 June 30, 1997.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Earnings Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," which established a new accounting principle for the calculation of
earnings per share. The new pronouncement is effective for accounting periods
ending after December 15, 1997 and earlier application is not permitted. Upon
adoption, all prior period earnings per share data presented shall be restated
to conform to this Statement. As the Company's common stock equivalents were
anti-dilutive during the periods presented, adoption of this standard is not
expected to have a material impact on amounts previously reported as earnings
per share.
Reporting Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which will require the Company to disclose, in financial statement
format, all non-owner changes in equity. Such changes include cumulative foreign
currency translation adjustments and certain minimum pension liabilities. SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997 and
requires presentation of prior period financial statements for comparability
purposes. The Company expects to adopt this standard during the year ended
December 31, 1998. The adoption of this standard is not expected to have a
material impact on disclosure in the Company's financial statements.
Disclosures about Segments of an Enterprise and Related Information
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which establishes standards for
reporting information about operating segments in annual financial statements
and interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 is effective for fiscal years beginning after December 15, 1997 and
requires presentation of prior period financial statements for comparability
purposes. The Company is currently evaluating its required disclosures under
SFAS No. 131 and expects to adopt this standard during the year ended December
31, 1998.
36
<PAGE> 39
BUSINESS
GENERAL
Ivex is a vertically integrated specialty packaging company that designs
and manufactures value-added plastic and paper-based flexible packaging
products. The Company believes that it is the leading provider of customized
packaging in selected specialty markets, ranking first or second in markets
representing approximately 65% of the Company's revenues. Ivex has increased
sales and profitability by focusing on niche markets that provide attractive
margins and growth and where the Company's integrated manufacturing capabilities
enhance its competitive position. Ivex serves a variety of markets, providing
packaging for food, medical devices and electronic goods and protective
packaging for industrial products.
Over the past several years, the Company has executed a comprehensive
growth strategy based upon (i) achieving internal growth through product
extensions and further penetration into higher growth markets and (ii) growth
through strategic acquisitions. The Company has completed six such acquisitions
since 1995. Since 1993, net sales, Adjusted EBITDA and Adjusted EBIT have
increased at compound annualized growth rates of 9.6%, 12.8% and 20.8%,
respectively, and, excluding such acquisitions, of 4.7%, 8.7% and 16.8%,
respectively.
The core businesses of the Company were acquired by Acadia and certain
related investors between 1988 and 1991. The acquisitions of four established
companies, Kama Corporation, Ivex Corporation, L&CP Corporation and IPMC, Inc.
were part of an overall strategic plan to create a vertically integrated
specialty packaging company. In December 1992, in connection with the
incorporation of IPC, the Company changed its name from Ivex Packaging
Corporation to Ivex Holdings Corporation and IPC changed its name from New
Packaging Corporation to Ivex Packaging Corporation. In August 1995, the Company
changed its name from Ivex Holdings Corporation to Ivex Packaging Corporation
and IPC changed its name from Ivex Packaging Corporation to IPC, Inc. Since
August 1995, the Company has augmented its core businesses through the recent
acquisitions of PPI, Plastofilm, Trio, the European OPS Business, M&R and AVP.
MARKETS
Consumer Packaging. The Consumer Packaging product group designs and
manufactures plastic and paper-based products for food packaging applications
and, more recently, for applications in the medical and electronics industries.
The Company produces a broad array of items, including plastic containers for
prepared foods, produce and baked goods; specialty paper products such as fluted
baking cups and liners for cookies and other baked goods; microwaveable
packaging materials; and protective packaging for medical devices and
electronics products. The Consumer Packaging product group markets its products
to a variety of end users, including national wholesale bakeries, supermarket
chains, foodservice distributors, fast-food chains, major agricultural growers,
medical equipment suppliers and electronics manufacturers. The Company also
manufactures a variety of plastic sheet and film products from several different
resins for internal use and sales to third party converters. Ivex is the leading
producer of OPS sheet in North America. The Consumer Packaging product group
represented approximately 56% of the Company's net sales and 58% of the
Company's Adjusted EBITDA during the 12 months ended June 30, 1997. The
Company's Consumer Packaging product group is hereinafter sometimes referred to
as "Consumer Packaging".
Industrial Packaging. The Industrial Packaging product group manufactures
and coats film, paper and foil products for protective packaging and specialty
papers. The Company produces products for some of the fastest growing
applications in the protective packaging industry, including film and paper
maskings and self-sealing coated packaging applications. These products are
marketed primarily to consumer durable goods manufacturers, automotive
companies, other industrial manufacturers and integrated paper producers. The
Company also manufactures a variety of recycled kraft paper made from
post-consumer and post-industrial fibers and specialty lightweight paper made
primarily from virgin pulp for internal use and sales to third party converters.
The Industrial Packaging product group represented approximately 44% of the
Company's net sales and 42% of the Company's Adjusted EBITDA during the 12
months ended June 30, 1997. The Company's Industrial Packaging product group is
hereinafter sometimes referred to as "Industrial Packaging".
37
<PAGE> 40
The following table illustrates the wide variety of products that Ivex
manufactures:
<TABLE>
<CAPTION>
12 MONTHS ENDED
JUNE 30, 1997
----------------------
ADJUSTED
PRODUCT GROUP NET SALES EBITDA PRODUCTS CUSTOMERS END PRODUCT USES
------------- --------- -------- -------- --------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Consumer Packaging..... $284,003 $49,948 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,
sheet and film, HIPS and confectionery berries and cakes,
sheet, PET sheet, PP companies, food film for envelope and
sheet, PVC sheet and processors, plastic box windows,
HDPE sheet converters, envelope protective plastic
and folding carton packaging for medical
manufacturers, medical and electronics
device and supply applications, paper
companies and liners for cookies,
electronics microwaveable
manufacturers packaging materials,
fluted bakery cups and
specialty paper
products
Industrial Packaging... 221,395 36,758 Protective packaging, Automotive companies, Paper and film
including coated paper consumer durables protective masking
and plastic, single manufacturers, other materials, cohesive
face corrugated paper, industrial self-sealing packaging
shippers and mailers manufacturers, paper papers, coated papers
and manufactured distributors and for stamps, labels and
paper, including kraft manufacturers of business forms, single
papers and specialty postage stamps, face corrugated paper
lightweight virgin business forms and for packaging,
papers paper converters shippers and mailers,
grocery and food bags,
specialty lightweight
papers for fast food
and candy wrappers
Corporate Expenses..... (6,698)
-------- -------
Total.................. $505,398 $80,008
======== =======
</TABLE>
BUSINESS STRATEGY
Ivex seeks to differentiate itself from other packaging providers by
offering customized packaging that addresses the specialized needs of its
customers. The Company's goal is to be the number one or number two provider of
customized packaging in its markets. Ivex believes it has a number of key
strengths that support its ability to implement this strategy:
Focus on Niche Markets. Ivex focuses primarily on markets with attractive
margin and growth characteristics. The Company's markets include the in-store
bakery, delicatessen and prepared food sections of supermarkets; foodservice
outlets; medical equipment and electronics goods manufacturers; and users of
industrial protective masking. The Company believes that these markets have been
among the fastest growing for packaging products over the past several years.
Each of these is characterized by few competitors, technological barriers to
entry, significant customer service requirements and attractive growth
potential.
Broad Product Range. Ivex manufactures a broad range of plastic and
paper-based stock and customized packaging products to provide a full service
approach to fulfilling its customers' packaging needs. Through its multi-resin
extrusion and thermoforming capabilities, Ivex is able to offer its customers a
variety of plastic
38
<PAGE> 41
packaging solutions. The Company believes its breadth of product range and
customization capabilities are competitive advantages that allow it to be more
responsive to, and provide a single supply source for, many of its customers'
packaging needs. Further, these capabilities enhance the Company's ability to
adapt to changing market preferences.
Flexible Design and Engineering. Ivex seeks to maximize opportunities
within niche markets by providing its customers with lower-cost product
development and shorter lead times than its competitors. The Company delivers
these benefits through research and development and technical expertise such as
computer-aided design and manufacturing and extensive in-house mold-making
capabilities.
Vertical Integration. Ivex pursues a vertically integrated operating
strategy in order to maximize product quality, minimize the influence of
external commodity price fluctuations and maintain its low-cost position. Within
Consumer Packaging, the Company operates two polymerization, seven extrusion and
eleven thermoforming facilities. In 1996, the Company produced 42% of its
polystyrene needs and 100% of its OPS sheet needs internally, resulting in a
significant advantage over competitors that purchase these materials in the open
market. Within Industrial Packaging, the Company's polyethylene film and paper
facilities provide important source products and product development
capabilities for many of the Company's protective packaging products.
Proprietary Technology. Ivex's proprietary technology strengthens its
product quality, market position and growth prospects in existing markets as
well as new product and geographic markets. Examples of the Company's
proprietary technology used by Consumer Packaging include extensive extrusion
process technology, low residual monomer polymerization technology and the
capability to manufacture OPS film to a gauge of less than one-thousandth of an
inch. Because of its proprietary production technology, the Company's OPS is
recognized as having a high level of quality within the industry. Within
Industrial Packaging, the Company utilizes many customized adhesive and cohesive
formulations in its surface protection and self-sealing products which
strengthen its market position and product development capabilities.
Broad Distribution Network. The geographic breadth of Ivex's manufacturing
and distribution network, including 26 plants in North America and Europe and an
extensive network of sales representatives, is another significant advantage
over the Company's competitors, which are often smaller and regionally based.
Ivex's distribution network allows it to meet the broad geographic needs of its
larger customers from a single source, which is an advantage as customers seek
to reduce their number of suppliers. Extensive geographic coverage also reduces
transportation costs and contributes to the Company's cost competitiveness.
GROWTH STRATEGY
Over the past several years, Ivex has executed a comprehensive growth
strategy based upon (i) internal growth through product extensions and further
penetration into higher growth markets and (ii) growth through strategic
acquisitions. Since 1993, net sales, Adjusted EBITDA and Adjusted EBIT have
increased at compound annualized growth rates of 9.6%, 12.8% and 20.8%,
respectively, and, excluding such acquisitions, of 4.7%, 8.7% and 16.8%,
respectively. The Company believes it can continue growing sales and earnings
through its growth strategy as well as through utilizing excess cash flow to
reduce debt and interest expense.
Internal Growth. Ivex intends to utilize its business strategy and strong
market position to capitalize on a number of emerging industry trends. As
supermarkets, bakeries and foodservice distributors consolidate packaging
vendors to create efficiencies, the Company plans to use its broad product
offerings and distribution capabilities to capture market share through
increased sales to these customers. Consumer trends toward convenient,
ready-to-eat food products and the increased utilization of clear plastic
packaging for more appealing presentation within the delicatessen, bakery and
produce sections of supermarkets are resulting in increasing use of OPS sheet.
As the leading producer of OPS sheet in North America, Ivex believes that it
will experience increased production and sales of OPS sheet. In addition,
manufacturers are increasingly realizing the quality and cost/benefit advantage
of using protective packaging and masking to protect products from damage or
breakage during manufacturing, handling, storage and shipping. This trend
creates additional demand for the Company's protective masking products and
corrugated cushioning materials.
39
<PAGE> 42
Acquisitions. Ivex has pursued a disciplined acquisition program of
"bolt-on" acquisitions that are easily integrated into the Company's operations
and that meet certain defined strategic and financial return criteria. Since
1995, Ivex has completed six acquisitions that achieve a number of strategic
objectives:
- apply existing technology to new products and markets (the acquisition of
Plastofilm added medical and electronics end markets);
- fill out or extend existing product lines and markets (the acquisition of
Trio added multi-resin capabilities and the acquisition of PPI expanded
surface protection product offerings);
- expand geographical presence (the acquisitions of M&R and AVP in Canada
and the European OPS Business in the United Kingdom extended operations
outside the United States); and
- create rationalization opportunities (the integration of Plastofilm's
extrusion operation into Trio created a lower-cost operation).
As a market leader with a broad range of products and proven capabilities, the
Company believes that it is well positioned to continue to successfully apply
its acquisition and operating expertise to take advantage of consolidation
opportunities within the highly fragmented specialty packaging market.
CONSUMER PACKAGING
General. The Consumer Packaging product group 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 for items sold in
supermarkets, wholesale and retail bakeries, fast-food restaurants and
institutional foodservice outlets. The Company's medical packaging products
typically are used by the major medical supply companies for sterility packaging
and its electronics packaging products generally are used as cushioning
materials.
Products. Consumer Packaging's products consist primarily of thermoformed
plastic containers used in food, medical and electronics markets and paper
products used in food packaging applications. Thermoformed plastic packaging
includes hinged and two-piece containers, trays for delicatessen foods, salads,
cookies, cakes and other items, sterility packaging for medical applications and
cushioning products for the electronics industry. Paper products consist of
single face corrugated paper liners for cookies and other baked goods,
microwaveable materials, fluted cups for baking and other specialty paper
products.
As part of its integrated operations, Ivex is the largest manufacturer of
OPS sheet in North America, and also produces OPS film, high impact polystyrene
("HIPS") sheet, polyethylene terephthelate ("PET") sheet, polypropylene ("PP")
sheet, high density polyethylene ("HDPE") sheet and polyvinyl chloride ("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. OPS film
is a thinner gauge version of OPS sheet with applications primarily in windows
for envelopes and folding cartons as well as labels. The Company is one of the
largest producers of OPS film in North America and believes that it is the only
company in North America able to manufacture OPS film to a thickness of
one-thousandth of an inch. 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 Ivex'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. The Company's position in these markets 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 Company believes the supermarket and foodservice segments have
been two of the fastest growing markets for food packaging products over the
past several years. This growth has been fueled
40
<PAGE> 43
by the expansions of bakery, delicatessen 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 foodservice 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 the Company's medical and electronics
packaging include medical device and supply manufacturers and electronics
manufacturers.
Ivex 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 further penetrate
specific geographic markets and access prospective customers.
Manufacturing. The Company's plastic packaging products are manufactured
internally at the Company's two polystyrene polymerization, six extrusion and
eleven thermoforming facilities. 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 resin and purchased approximately
107 million pounds of polystyrene resin 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 lowest cost producers of OPS
in North America.
Ivex's plastic thermoforming and paper converting operations are
principally conducted in thirteen facilities located throughout North America
and Europe. 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 with its
customers to design custom packages. The Company believes that its strategically
located manufacturing facilities, flexible manufacturing capabilities, in-house
product engineering services and quality production expertise are all important
competitive strengths.
INDUSTRIAL PACKAGING
General. The Industrial Packaging product group 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. 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.
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<PAGE> 44
Ivex 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 manufacturing, handling, storage and shipping. The Company's
products must meet specifications for a broad array of surfaces requiring
protection, including glass, plastic, wood, polished and painted metals,
automotive trim, plastic laminates, furniture and marble.
Ivex 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.
All of Ivex's low density polyethylene film is used internally in the
production of its film masking and self-sealing packaging products and
approximately 33% of the Company's recycled kraft 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. Ivex'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.
Ivex's coating and paper converting operations are conducted at eleven
facilities throughout the U.S. and Canada. 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 four paper mills is
made entirely from post-consumer and post-industrial fibers, including OCC and
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. Ivex 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 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 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
with respect to many of the Company's products is based on quality, supplier
response time, service and timely and complete order fulfillment.
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
42
<PAGE> 45
Company competes with many regional thermoformers, including Prent Corporation,
Placon Corp. and Crystal Thermoplastics, Inc. The Company competes primarily
with the Dow Chemical Company in the OPS film market. Ivex's major competitors
in protective masking include a joint venture between Minnesota Mining and
Manufacturing Company and Sealed Air Corporation, American Biltrite, Inc. and
Main Tape Company, Inc. The Company competes primarily with Sealed Air
Corporation and AVI Products, Inc. in the mailing envelope market.
EMPLOYEES
As of June 30, 1997, the Company had 22 employees at its Lincolnshire,
Illinois corporate headquarters and had 2,995 employees at plant locations, of
which 651 were salaried and 2,344 were hourly. Of the hourly workers,
approximately 914 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 in the last five years, and
the Company believes that relations with its employees are good. 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.
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 1996 and the first half of 1997 and is expected to remain adequate
throughout the remainder of 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. The Company's
material proprietary technologies are considered by the Company to be trade
secrets and know-how and are not protected by patents or licenses.
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 good
relationship. No one customer accounted for more than 10% of the Company's
aggregate net sales for the fiscal year ended December 31, 1996. In general, the
backlog of orders is not significant or material to 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
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<PAGE> 46
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 and
on-going maintenance 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 June 30, 1997 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 and 1998 spending on environmental capital projects to
be material.
During 1991, the Company responded to an information request regarding the
Global Landfill, New Jersey site and since such time has not received any
further notifications regarding such site. During 1993, the Company was named a
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. During 1995, the
Company paid $500 in connection with a de minimis consent order relating to the
American Chemical Service site. In addition, over the past few years, the
Company has received notices of potential liability relating to three Superfund
sites for which the Company believes a former owner of the facilities subject to
such notices will be responsible, and the Company has 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 during 1997 this claim was voluntarily dismissed by the
plaintiffs in the action. 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 United States 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.
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
August 30, 1997, the Company had twenty-six non-warehouse facilities, nineteen
of which are located in the U.S., five in Canada and two 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
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<PAGE> 47
real estate is subject to mortgages securing IPC's indebtedness under the
Existing Credit Facility and is expected to be subject to mortgages securing
indebtedness under the New Credit Facility.
<TABLE>
<CAPTION>
LOCATION FUNCTION SQUARE FOOTAGE
-------- -------- --------------
<S> <C> <C>
DOMESTIC
Avenel, NJ(1)......................... Extrusion 55,000
Bellwood, IL(2)....................... Paper Converting and Film Coating 71,000
Bellwood, IL(3)....................... Paper Converting 71,000
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
Grant Park, IL........................ Thermoforming/Engineering 184,000
Grove City, PA(5)..................... Thermoforming/Paper Converting 236,000
Hazleton, PA(6)....................... Polymerization/Extrusion 166,000
Joliet, IL............................ Paper Mill/Paper Converting 410,000
Madison, GA........................... Thermoforming/Paper Converting 141,000
Manteno, IL........................... Extrusion 105,000
Newton, MA(7)......................... Paper and Film Converting/Coating 225,000
Peoria, IL............................ Paper Mill 234,000
Sparks, NV(8)......................... Thermoforming 40,000
Troy, OH.............................. Paper Converting/Coating 320,000
Visalia, CA........................... Thermoforming/Paper Converting 144,000
Wheaton, IL........................... Thermoforming/Engineering 120,000
INTERNATIONAL
Enniskillen, Northern Ireland(9)...... Thermoforming/Engineering 16,000
Laval, Quebec......................... Thermoforming/Extrusion/Engineering 60,000
Longueuil, Quebec..................... Thermoforming/Paper Converting 32,000
Newcastle, Ontario.................... Extrusion 45,000
Sedgefield, England................... Thermoforming/Extrusion 48,000
Summerstown, Ontario.................. Thermoforming 55,000
Toronto, Ontario...................... Paper Converting 54,000
</TABLE>
- -------------------------
(1) Leased facility, with its lease expiring on December 31, 2003, subject to
IPC's right to extend the lease for two successive five-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. The Company is currently negotiating to purchase this facility from
the landlord.
(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. The Company is currently negotiating a new five-year
lease for this facility.
(4) Leased facility, with its lease expiring on September 30, 2001, subject to
IPC's right to extend the lease for an additional five-year period and, upon
specified terms and conditions, to purchase the property.
(5) This facility is held subject to an installment sales contract with Grove
City Industrial Development Corporation that holds title to the facility.
(6) Leased facility, with its lease expiring on October 4, 1998, subject to
IPC's right to extend the lease for two successive five-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.
(7) Leased facility, with its lease expiring on December 5, 2001, with three
one-year options to extend.
(8) Leased facility, with its lease expiring on December 31, 1999.
(9) Leased facility, with its lease expiring on May 10, 2016.
LITIGATION
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.
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<PAGE> 48
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the name, age, 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.
<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.
Frank V. Tannura..................... 40 Director of the Company since August 1995. Vice
President and Chief Financial Officer of the Company
since October 1989.
Richard R. Cote...................... 45 Vice President and Treasurer of the Company since August
1994. Mr. Cote was Assistant Vice President and
Treasurer of the Company from March 1992 to August 1994.
Donald C. Devine..................... 37 Vice President and General Manager of the Company. 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 since
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.
Gene J. Gentili...................... 50 Vice President and General Manager of the Company since
1994. Vice President of Sales of the Company from 1993
to 1994. Mr. Gentili was director of national accounts
for the Company from 1991 to 1993.
Roger A. Kurinsky.................... 45 Vice President and General Manager of the Company since
1994. Vice President of Marketing of the Company from
1991 to 1994.
Jeremy S. Lawrence................... 46 Vice President of Human Resources of the Company since
May 1991.
G. Douglas Patterson................. 39 Vice President and General Counsel of the Company since
June 1991.
David E. Wartner..................... 30 Corporate Controller of the Company since 1994. Mr.
Wartner was previously associated with Price Waterhouse
LLP from 1988 to 1994.
Eugene M. Whitacre................... 41 Vice President and General Manager of the Company since
February 1991.
Glenn R. August...................... 36 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.
Anthony P. Scotto.................... 50 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 officers of the Company serve at the pleasure of the
Company's Board of Directors.
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<PAGE> 49
The Board of Directors of the Company will be divided into three classes,
as nearly equal in number as possible, having terms expiring at the annual
meeting of the Company's stockholders in 1998 (comprised of Messrs. Tannura and
August), 1999 (comprised of two independent directors to be designated after the
completion of the Offerings) and 2000 (comprised of Messrs. Bayly and Scotto).
At each annual meeting of stockholders, successors to the class of directors
whose term expires at such meeting will be elected to serve for three-year terms
and until their successors are elected and qualified. The outside directors
(other than directors that are employed by Oak Hill Partners, Inc.) will receive
an annual retainer of approximately $25,000 and an undetermined amount of
Company options and will be reimbursed for out-of-pocket expenses incurred in
connection with attending meetings.
In connection with the Offerings, the Board intends to elect at least two
independent directors and create compensation and audit committees. The identity
of the independent directors has not yet been determined and may not be
determined until after the completion of the Offerings. The Company does not
have a nominating committee.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the compensation
paid by IPC to the Company's chief executive officer and each of the four most
highly compensated officers of the Company whose aggregate cash compensation
exceeds $100,000, in each case for all services rendered during the fiscal years
1996, 1995 and 1994:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------
LONG-TERM
COMPENSATION(4)
-----------------------
ANNUAL COMPENSATION(3) AWARDS PAYOUTS
------------------------------- ---------- -------
NUMBER OF
SECURITIES
UNDERLYING
OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUS SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(2) (#)(5) ($)(6) ($)(7)
------------------ ---- ------ ------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
George V. Bayly............... 1996 420,000 600,000 97,331 765,938 314,721
President and Chief 1995 400,000 400,000 74,501 237,500 14,938
Executive Officer 1994 400,000 50,000 18,790 -- 5,667
Frank V. Tannura.............. 1996 249,100 290,000 45,424 282,188 40,368
Vice President and 1995 211,667 235,000 30,064 87,500 28,885
Chief Financial Officer 1994 191,667 25,000 7,516 -- 10,894
Eugene M. Whitacre............ 1996 236,250 230,000 32,459 201,563 7,500
Vice President and 1995 225,000 168,750 20,434 62,500 13,741
General Manager 1994 175,000 100,000 5,167 -- 8,744
Thomas S. Ellsworth........... 1996 250,000 100,000 32,459 -- 25,813
Vice President and 1995 229,000 168,750 20,434 -- 16,185
General Manager 1994 163,000 20,000 28,654 -- 7,325
Donald C. Devine.............. 1996 195,000 175,000 22,313 -- 2,965
Vice President and
General Manager
</TABLE>
- -------------------------
(1) Includes amounts deferred pursuant to IPC's Retirement Plan and Trust 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
47
<PAGE> 50
with the Board of Directors and awards are based upon IPC's achievement of
certain predetermined financial objectives such as minimum Adjusted 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 Securities and Exchange Commission (the
"Commission") 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.
(4) The column designated by the Commission pursuant to the applicable
regulations for the reporting of "Restricted Stock Awards" has been deleted
because no restricted stock of the Company was awarded to any of the named
executive officers in any of the reported calendar years.
Assuming an initial public offering price of $15.00 per share (the mid-point
of the range of the estimated public offering price set forth on the cover
page hereof), the estimated value of each named executive officer's shares
of restricted common stock of the Company held as of the consummation of the
Offerings and the number of such shares (as adjusted to reflect the
9.65-for-1 split of the outstanding Common Stock) as of such date would be
as follows: Mr. Bayly's 19,310 shares -- $289,650; Mr. Tannura's 32,586
shares -- $488,790; Mr. Whitacre's 13,034 shares -- $195,510; and Mr.
Ellsworth's 10,138 shares -- $152,070. 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
originally 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 "Original 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 "Amended and 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" and together with the Original IPC Options, the "IPC
Options") were granted during 1996 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.
Simultaneously with the consummation of the Offerings and pursuant to the
terms of the Amended and Restated Stock Option and Purchase Agreement, the
remaining 3,454 IPC Performance Options will be earned and all 6,908 IPC
Performance Options will become vested.
In connection with the Offerings, such executive officers will exchange all
of the IPC Options for (i) 2,114,133 shares of the Company's Common Stock
and (ii) options exercisable for 766,667 shares of the Company's Common
Stock at an exercise price equal to the initial offering price of the
Offerings. Consequently, the options specified in this column reflect each
named executive officer's portion of the Company options exercisable for
766,667 shares of Common Stock which they will receive upon the closing of
the Offerings in exchange for the IPC Options allocable to each of 1994,
1995 and 1996. In addition, as a result of this exchange, it is expected
that as of the consummation of the Offerings, Messrs. Bayly, Tannura,
Whitacre, Ellsworth and Devine will beneficially own 761,404, 324,095,
224,872, 224,872 and 61,529 shares of the Company's Common Stock,
respectively. Assuming an initial public offering price of $15.00 per share
(the mid-point of the range of the estimated public offering price set forth
on the cover page hereof), the estimated value of each named executive
officer's shares of Common
48
<PAGE> 51
Stock as of the consummation of the Offerings would be as follows: Mr. Bayly's
761,404 shares -- $11,421,060; Mr. Tannura's 324,095 shares -- $4,861,425; Mr.
Whitacre's 224,872 shares -- $3,373,080; Mr. Ellsworth's 224,872 shares --
$3,373,080; and Mr. Devine's 61,529 shares -- $922,935. See "Principal and
Selling Stockholders."
(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. Pursuant to such 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 such plan. The 1995 and the 1996 payments
under such 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. The IPC Special Incentive Plan has been terminated.
(7) The 1996 All Other Compensation column reported includes (i) IPC's
contributions (excluding employee earnings reduction contributions) under
the IPC Retirement Plan and Trust 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 $300,000 of nonqualified
retirement benefits to Mr. Bayly pursuant to the terms of his Amended and
Restated Employment Agreement, dated as of May 30, 1996.
49
<PAGE> 52
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATE
OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
- ---------------------------------------------------------------------------------------- --------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE
OPTIONS/SARS GRANTED TO OR BASE
GRANTED EMPLOYEES IN PRICE EXPIRATION
NAME (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ------------ ------------ -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
George V. Bayly............... 97,331 30.0 15.00 9/30/07 918,164 2,326,808
President and Chief
Executive Officer
Frank V. Tannura.............. 45,424 14.0 15.00 9/30/07 428,504 1,085,912
Vice President
Eugene M. Whitacre............ 32,459 10.0 15.00 9/30/07 306,199 775,969
Vice President
Thomas S. Ellsworth........... 32,459 10.0 15.00 9/30/07 306,199 775,969
Vice President
Donald C. Devine.............. 22,313 6.9 15.00 9/30/07 210,488 533,418
Vice President
</TABLE>
- -------------------------
(1) The options specified in this column reflect each named executive officer's
portion of the Company options exercisable for 766,667 shares of Common
Stock (allocable to the calendar year ending December 31, 1996) which they
will receive upon the closing of the Offerings in exchange for the IPC
Options assuming that the exchange had occurred on December 31, 1996.
(2) As a result of the exchange of the IPC Options by the executive officers of
the Company described in footnote 1 above, the potential realizable value
was calculated based on stock price appreciation from the assumed initial
public offering price of $15.00 per share (the mid-point of the range of the
estimated public offering price set forth on the cover page hereof). The
dollar amounts under these columns are the result of calculations at the 5%
and 10% rates established by the Commission and therefore are not intended
to forecast possible future appreciation, if any, of the stock price of the
Company.
50
<PAGE> 53
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
---------------------------------------------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END(#) AT FY-END($)
ACQUIRED ON VALUE ---------------- ----------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE(1) UNEXERCISABLE(2)
---- ----------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
George V. Bayly....................... -- -- 194,990/81,125 $ 0
President and Chief
Executive Officer
Frank V. Tannura...................... -- -- 79,668/37,861 0
Vice President
Eugene M. Whitacre.................... -- -- 54,490/27,057 0
Vice President
Thomas S. Ellsworth................... -- -- 54,490/27,057 0
Vice President
Donald C. Devine...................... -- -- 3,711/18,602 0
Vice President
</TABLE>
- -------------------------
(1) The options specified in this column were originally granted under the
Amended and Restated Stock Option and Purchase Agreement pursuant to which
the IPC Options were granted to certain executive officers of the Company,
including the named executive officers. In connection with the Offerings,
the Company, IPC and such executive officers will exchange the IPC Options
for (i) 2,114,133 shares of the Company's Common Stock, and (ii) options
exercisable into 766,667 shares of the Company's Common Stock at an exercise
price equal to the initial offering price of the Offerings. Consequently,
the options specified in this column reflect the number of shares of Common
Stock underlying the Company options which the named executive officers
would have received in exchange for those IPC Options (assuming that the
exchange occurred as of December 31, 1996) that would have been vested and
unvested and thus exercisable/unexercisable at December 31, 1996. All of the
options specified in this column will become fully vested and exercisable
upon consummation of the Offerings.
(2) The values specified is this column reflect the effect of the exchange
described in footnote 1 above and are based on the fact that the exercise
price for the options exercisable for shares of the Company's Common Stock
will equal the initial offering price of the Offerings. Thus, as of December
31, 1996, assuming an exercise price equal to the initial offering price of
the Offerings the Company options which the named executive officers
received in exchange for their IPC Options had no "in-the-money" value,
although there can be no assurances that such valuation is accurate because
there was no closing market price for the stock as of December 31, 1996 as
such stock was privately held. In connection with the consummation of the
Offerings, all of the Company options of the named executive officers
included in the table will become exercisable and the value of all such
options as of the consummation of the Offerings would be zero for each of
the named executive officers since the exercise price thereof will equal the
initial public offering price.
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
Chairman, President and Chief Executive Officer and to cause Mr. Bayly's
election as a director of IPC, (ii) Mr. Bayly receives a base salary of $491,000
during 1997,
51
<PAGE> 54
$515,550 during 1998, $541,327 during 1999 and $568,393 during 2000 (subject to
increase at the discretion of the Board of Directors), (iii) Mr. Bayly is
entitled to an aggregate of $150,000 per year for life insurance, disability
insurance and nonqualified retirement benefits, (iv) Mr. Bayly is eligible for
an annual performance bonus based upon the achievement of predetermined
financial objectives, and (v) Mr. Bayly will receive certain severance benefits
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)). These
severance benefits include the payment of 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 and, in certain circumstances, for an additional
one-year period after the termination of Mr. Bayly's employment. In addition,
IPC has agreed to gross-up payments to Mr. Bayly for certain taxes, interest and
penalties that may be imposed by certain sections of the Code.
Mr. Tannura has an amended employment agreement with IPC, 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 $235,000 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 certain severance benefits 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 plus (iii) a pro
rata portion of his performance bonus for the year in which his employment is
terminated, plus (iv) unpaid benefits accrued up to the date of termination,
plus (v) the continuation of all benefits for the full term.
IPC has entered into severance agreements with the other named executive
officers, pursuant to which such officers receive a severance payment equal to
one year's salary if their employment is terminated other than for death,
disability or cause.
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.
IVEX PACKAGING CORPORATION 1997 LONG-TERM STOCK INCENTIVE PLAN
Ivex intends to adopt the Ivex Packaging Corporation 1997 Long-Term Stock
Incentive Plan (the "1997 Stock Incentive Plan" or the "LTIP"). The following is
a summary of the material features of the plan.
52
<PAGE> 55
Purpose. The purpose of the plan is to promote the interests of the Company
and its stockholders by (i) attracting and retaining exceptional officers,
employee-directors and other key employees and consultants of the Company and
its affiliates; (ii) motivating such individuals by means of performance-related
incentives to achieve longer-range performance goals; and (iii) enabling such
individuals to participate in the long-term growth and financial success of the
Company.
Administration/Eligible Participants. The plan will be administered by a
committee (the "Committee") of two or more members of the Board designated by
the Board to administer the plan, each of whom is intended to be a
"disinterested person" (within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act")) and an "outside director"
(within the meaning of Code Section 162(m)); however, the mere fact that a
Committee member shall fail to qualify as a disinterested person or outside
director will not invalidate any award made by the Committee which award is
otherwise validly made under the plan.
The Committee has the sole and complete authority to determine the
participants to whom awards shall be granted under the plan. In connection with
the consummation of the Offerings, the Company expects to issue options
exercisable into approximately 500,000 shares of Common Stock to certain key
officers and employees of the Company.
Number of Shares Authorized Under the Plan. The plan authorizes the grant
of awards to participants with respect to a maximum of 2,000,000 shares of the
Company's Common Stock ("Shares"), which awards may be made in the form of (i)
nonqualified stock options; (ii) stock options intended to qualify as incentive
stock options under Section 422 of the Code; (iii) stock appreciation rights;
(iv) restricted stock and/or restricted stock units; (v) performance awards and
(vi) other stock-based awards; provided that the maximum number of Shares with
respect to which stock options and stock appreciation rights may be granted to
any participant in the plan in any calendar year may not exceed 200,000. If,
after the effective date of the plan, any Shares covered by an award granted
under the plan, or to which such an award relates, are forfeited, or if an award
has expired, terminated or been canceled for any reason whatsoever (other than
by reason of exercise or vesting) and in either such case a participant has
received no benefits of ownership with respect to the forfeited Shares or the
Shares to which such expired, terminated or canceled award relates (other than
voting rights and dividends that were forfeited in connection with such
forfeiture, expiration, termination or cancellation), then the Shares covered by
such award shall again be, or shall become, Shares with respect to which awards
may be granted under the plan.
Terms and Conditions of Awards Under the Plan. Non-qualified and incentive
stock options granted under the plan shall be subject to such terms, including
exercise price and conditions and timing of exercise, as may be determined by
the Committee and specified in the applicable award agreement or thereafter;
provided that stock options that are intended to qualify as incentive stock
options will be subject to terms and conditions that comply with such rules as
may be prescribed by Section 422 of the Code. Payment in respect of the exercise
of an option granted under the Plan may be made in cash, or its equivalent, or,
if and to the extent permitted by the Committee, by exchanging Shares owned by
the optionee (which are not the subject of any pledge or other security interest
and which have been owned by such optionee for at least six months), or by a
combination of the foregoing, provided that the combined value of all cash and
cash equivalents and the fair market value of such Shares so tendered to the
Company as of the date of such tender is at least equal to the aggregate
exercise price of the option.
Stock appreciation rights granted under the plan shall be subject to such
terms, including grant price and the conditions and limitations applicable to
exercise thereof, as may be determined by the Committee and specified in the
applicable award agreement or thereafter; provided that stock appreciation
rights may not be exercisable earlier than six months after the date of grant.
Stock appreciation rights may be granted in tandem with another award, in
addition to another award, or freestanding and unrelated to another award. A
stock appreciation right shall entitle the participant to receive an amount
equal to the excess of the fair market value of a Share on the date of exercise
of the stock appreciation right over the grant price thereof. The Committee
shall determine whether a stock appreciation right shall be settled in cash,
Shares or a combination of cash and Shares.
53
<PAGE> 56
Restricted stock and restricted stock units granted under the plan shall be
subject to such terms and conditions including, without limitation, the duration
of the period during which, and the conditions under which, the restricted stock
and restricted stock units may be forfeited to the Company, as may be determined
by the Committee in its sole discretion. Each restricted stock unit shall have a
value equal to the fair market value of a Share. Restricted stock units shall be
paid in cash, Shares, other securities or other property, as determined in the
sole discretion of the Committee, upon the lapse of the restrictions applicable
thereto, or otherwise in accordance with the applicable award agreement.
Dividends paid on any Shares of restricted stock may be paid directly to the
participant, or may be reinvested in additional Shares of restricted stock or in
additional restricted stock units, as determined by the Committee in its sole
discretion.
Performance awards granted under the plan shall consist of a right which is
(i) denominated in cash or Shares, (ii) valued, as determined by the Committee,
in accordance with the achievement of such performance goals during such
performance periods as the Committee shall establish, and (iii) payable at such
time and in such form as the Committee shall determine. Subject to the terms of
the plan and any applicable award agreement, the Committee shall determine the
performance goals to be achieved during any performance period, the length of
any performance period, the amount of any performance award and the amount and
kind of any payment or transfer to be made pursuant to any performance award.
Performance awards may be paid in a lump sum or in installments following the
close of the performance period or, in accordance with procedures established by
the Committee, on a deferred basis.
In addition to the foregoing types of awards, the Committee shall have
authority to grant to participants an "other stock-based award," which shall
consist of any right which is (i) not a stock option, stock appreciation right,
restricted stock or restricted unit award or performance award and (ii) an award
of Shares or an award denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Shares (including, without
limitation, securities convertible into Shares), as deemed by the Committee to
be consistent with the purposes of the plan; provided that any such rights must
comply, to the extent deemed desirable by the Committee, with Rule 16b-3 and
applicable law. Subject to the terms of the plan and any applicable award
agreement, the Committee shall determine the terms and conditions of any such
other stock-based award, including the price, if any, at which securities may be
purchased pursuant to any other stock-based award granted under this plan.
In addition, in the sole and complete discretion of the Committee, an
award, whether made as an other stock-based award or as any other type of award
issuable under the plan, may provide the participant with dividends or dividend
equivalents, payable in cash, Shares, other securities or other property on a
current or deferred basis.
Adjustments. In the event that the Committee determines that any dividend
or other distribution (whether in the form of cash, Shares, other securities, or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee in its discretion to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number of Shares or other securities of the Company (or number and kind
of other securities or property) with respect to which awards may be granted,
(ii) the number of Shares or other securities of the Company (or number and kind
of other securities or property) subject to outstanding awards, and (iii) the
grant or exercise price with respect to any award or, if deemed appropriate,
make provision for a cash payment to the holder of an outstanding award in
consideration for the cancellation of such award; provided, in each case, that
with respect to awards of incentive stock options no such adjustment shall be
authorized to the extent that such authority would cause the Plan to violate
Section 422(b)(1) of the Code, as from time to time amended or (iv) provide for
the acceleration or exercisability or lapse of restrictions otherwise applicable
to such awards, or the early cancellation, expiration or termination of such
awards with or without consideration or consent.
54
<PAGE> 57
Transferability. Each award, and each right under any award, shall be
exercisable only by the participant during the participant's lifetime or, if
permissible under applicable law, by the participant's guardian or legal
representative or by a transferee receiving such award pursuant to a qualified
domestic relations order ("QDRO"), as determined by the Committee.
No award that constitutes a "derivative security", for purposes of Section
16 of the Exchange Act, may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a participant otherwise than by will or
by the laws of descent and distribution or pursuant to a QDRO, and any such
purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company or any
affiliate; provided that the designation of a beneficiary shall not constitute
an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
Amendment to Plan. The Board may amend, alter, suspend, discontinue, or
terminate the plan or any portion thereof at any time; provided that no such
amendment, alteration, suspension, discontinuation or termination shall be made
without stockholder approval if such approval is necessary to comply with any
tax or regulatory requirement, including for these purposes any approval
requirement which is a prerequisite for exemptive relief from Section 16(b) of
the Exchange Act. Notwithstanding anything to the contrary herein, the Committee
may amend the plan in such manner as may be necessary so as to have the plan
conform with local rules and regulations in any jurisdiction outside the United
States.
PRINCIPAL AND SELLING STOCKHOLDERS
As of September 4, 1997, the Company owned 100% of the outstanding capital
stock of IPC (other than the IPC Options held by certain executive officers
which concurrently with the Offerings will be exchanged for shares of the
Company's Common Stock and options exercisable for shares of the Company's
Common Stock). As of September 4, 1997, all issued and outstanding shares of
capital stock of the Company were beneficially owned by Acadia, certain related
investors and certain executive officers. Acadia has informed the Company that
it is in the process of distributing its assets, which include Common Stock, as
part of the liquidation of Acadia. Acadia has also informed the Company that it
expects to sell or distribute the Common Stock held by Acadia to its general and
limited partners in the future. However, Acadia has agreed that it will not sell
or transfer the Common Stock held by it for a period of 180 days after the date
of this Prospectus, without the prior written consent of Merrill Lynch (as
defined herein) on behalf of the Underwriters. See "Underwriting." See "Certain
Relationships and Related Transactions" for material relationships between the
Selling Stockholder and the Company.
The following table sets forth certain information regarding the beneficial
ownership before and after the Offerings of the Common Stock as of September 4,
1997, (assuming the executive officers had exchanged their IPC Options for
2,114,133 shares of Common Stock and options exercisable for 766,667 shares of
Common Stock as of such date) by (i) each person known by the Company to be the
beneficial owner of more than 5% of the Common Stock, (ii) each of the directors
of the Company, (iii) each of the named executive officers of the Company, and
(iv) all executive officers and directors of the Company as a group. The
following table is based on an assumed initial public offering price of $15.00
(the mid-point of the range of the estimated public offering price set forth on
the cover page hereof).
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERINGS(1) AFTER OFFERINGS(1)(2)
------------------------------ ------------------------------
NUMBER OF SHARES NUMBER OF SHARES
NAME AND ADDRESS OF THE COMPANY'S PERCENTAGE OF THE COMPANY'S PERCENTAGE
OF BENEFICIAL OWNER COMMON STOCK(3) OF CLASS COMMON STOCK(3) OF CLASS
------------------- ---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
Acadia Partners, L.P.(4)................. 9,603,595 92.8% 7,903,595 39.7%
George V. Bayly.......................... 19,310 * 1,056,829(7) 5.3%
Frank V. Tannura......................... 32,586 * 474,211(7) 2.4%
Eugene M. Whitacre....................... 13,034 * 319,453(7) 1.6%
Thomas S. Ellsworth...................... 10,138 * 316,557(7) 1.6%
Donald C. Devine......................... * 83,842(7) *
Glenn R. August(5)(6).................... * *
Anthony P. Scotto(6)..................... * *
All directors and officers as a group.... 115,860 1.1% 2,996,660(8) 15.0%
</TABLE>
- -------------------------
* Represents less than 1% of such Common Stock.
55
<PAGE> 58
(1) Gives effect to the 9.65-for-1 stock split and the conversion of the IPC
Options into shares of the Company's Common Stock and options exercisable
for shares of the Company's Common Stock.
(2) The Company has granted the Underwriters 30-day options to purchase up to
1,260,000 shares of the Company's Common Stock. The table does not reflect
the possible sale of additional shares if the Underwriters' over-allotment
options are exercised.
(3) To the knowledge of the Company, each of such stockholders has sole voting
and investment power as to the shares shown unless otherwise noted.
(4) 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. 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 633,078 shares (approximately 3.2%) 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"), which entities
have entered into a Voting Agreement with Acadia, Electra and certain
members of management of the Company in connection with the Offerings (see
"Stockholders Agreement" below). Certain investors in FCP-I, FCP-III, 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.
(5) Mr. August is an officer and director of Acadia MGP (see footnote 4 above).
(6) The address of such individuals is c/o Oak Hill Partners, Inc., 65 East 55th
Street, New York, New York 10022-3219.
(7) Represents shares of outstanding Common Stock in the amounts of 780,714,
356,681, 237,906, 235,010 and 61,529 that are owned by Messrs. Bayly,
Tannura, Ellsworth, Whitacre and Devine, respectively, and vested and earned
options that are currently exercisable in the amounts of 276,115, 117,530,
81,547, 81,547 and 22,313 that are owned by Messrs. Bayly, Tannura,
Ellsworth, Whitacre and Devine, respectively.
(8) All directors and officers as a group hold shares of outstanding Common
Stock in the aggregate amount of 2,229,993 and vested and earned options
that are currently exercisable for 766,667 shares of Common Stock.
Under the New Credit Facility, it is expected the Company will pledge to
the banks under the New Credit Facility all of IPC's common stock, par value
$0.01 per share, to collateralize the repayment of IPC's obligations thereunder.
VOTING AGREEMENT
In connection with the Offerings, Acadia and certain related investors and
certain officers of the Company intend to enter into the Voting Agreement
pursuant to which they will agree to vote all of their outstanding shares of
Common Stock, for so long as they own such shares, for the director nominees
proposed according to the terms thereof. The Voting Agreement is expected to
provide that the stockholders thereto will vote their shares to the effect that
the Board of Directors will consist of up to six members, two of whom will be
initially designated by Acadia, two of whom will be initially designated by Mr.
Bayly or a successor management employee and two of whom will be independent
directors mutually acceptable to the parties. Acadia is expected to have the
right (until Acadia's ownership of the outstanding Common Stock falls below
20.0%) to increase the size of the Board to nine members and designate an
additional three directors. During the time that Acadia and such related
investors own more than 12.5% and less than 20.0% of the outstanding Common
Stock, Acadia will be entitled to designate two directors (if the Board of
Directors has six directors) or three directors (if the Board of Directors has
more than nine directors), and during the time that Acadia and its related
investors own more than 5.0% and less than 12.5% of the outstanding Common
Stock, Acadia will be entitled to designate one director. Also, during the time
that Ivex's management owns 7.5% or more of
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the outstanding Common Stock, Mr. Bayly or a successor management employee will
be entitled to designate two directors, and during the time that Ivex's
management owns more than 5.0% and less than 7.5% such management will be
entitled to designate one director. The term of such agreement is ten years,
subject to earlier termination upon the occurrence of certain events, including
the point at which Acadia's holdings of Common Stock fall below 5.0% of the
outstanding Common Stock of the Company.
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" and "Management -- Certain Employment Arrangements."
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" and "Management -- Certain Employment Arrangements."
Pursuant to a consulting agreement, dated October 29, 1996, Nicolaus Paper
Inc. ("Nicolaus") pays IPC a performance-based consulting fee in an annual
amount between $250,000 and $500,000 for certain services rendered to Nicolaus
by IPC. Certain executive officers and directors of the Company together with
certain members of management of Oak Hill Partners, Inc. (Acadia's investment
advisor) own all of the outstanding common stock of Nicolaus. It is also
expected that IPC will purchase certain grades of paper from Nicolaus for use in
IPC's paper converting operations at market prices.
Concurrently with the consummation of the Offerings, pursuant to the
Amended and Restated Stock and Stock Option Agreement among the Company and
certain members of management, including Messrs. Bayly, Tannura, Ellsworth,
Whitacre and Devine, all of the IPC Options are expected to be exchanged for
2,114,133 shares of Common Stock and vested and earned options exercisable at
any time on or prior to January 1, 2003 into an aggregate of 766,667 shares of
the Company's Common Stock at the initial public offering price per share with
respect to the Offerings. See "Executive Compensation -- Summary Compensation
Table" (footnote 4) and "Principal and Selling Stockholders." In addition,
management will have the right to have their shares of Common Stock registered
by the Company in the event that Acadia's shares of Common Stock are registered
under the Registration Rights Agreement. See "Shares Eligible For Future Sale --
Registration Rights." Also, pursuant to the Amended and Restated Stock and Stock
Option Agreement, the Company is expected to agree to lend the management
stockholders an amount equal to the aggregate tax liability, on a grossed-up
basis, incurred by them upon their exchange of the IPC Options. Such loan will
be non-recourse (other than to such shares) and will bear interest at the
minimum permissible rate per annum allowable under the Code without imputation
of income, payable in arrears on each December 31, commencing December 31, 1997,
and is payable in full upon the earlier to occur of (i) the tenth anniversary of
the date of the Offerings and (ii) the termination of the management
stockholder's employment with the Company for any reason, but in no event on or
before the date such shares are registered pursuant to a registration statement
that has been declared effective.
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DESCRIPTION OF CAPITAL STOCK
The following summaries of the Amended Certificate and Amended By-laws are
intended to describe all relevant material provisions thereof; however, such
summaries are qualified by reference to such Amended Certificate and Amended
By-laws, copies of which will be filed with the Commission.
Prior to the completion of the Offerings, the Company's Board of Directors
and stockholders will approve the Amended Certificate and a 9.65-for-1 stock
split of the Common Stock. After giving effect thereto and the consummation of
the Offerings, the authorized capital stock of the Company will consist of
45,000,000 shares of Common Stock, $.01 par value, of which 19,166,666 shares
will be outstanding, and 5,000,000 shares of preferred stock, $.01 par value, of
which no shares will be outstanding.
COMMON STOCK
Following the Offerings, 19,166,666 shares of Common Stock will be
outstanding, assuming an initial public offering price of 15.00 per share (the
mid-point of the range for the estimated public offering price set forth on the
cover page hereof). Certain officers of the Company will beneficially own
2,229,993 shares of such Common Stock and options exercisable into an aggregate
of 766,667 shares of the Company's Common Stock and 2,000,000 shares of such
Common Stock will have been reserved for issuance under the 1997 Stock Incentive
Plan. As of, or promptly after, the closing of the Offerings, the Company
expects that options to acquire approximately 500,000 shares of Common Stock
will have been, or will be, issued under this Plan. See "Management -- 1997
Long-Term Stock Incentive Plan." All of the issued and outstanding shares of
Common Stock are, and upon completion of the Offerings the shares of Common
Stock offered hereby will be, fully paid and non-assessable. Holders of Common
Stock are entitled to one vote for each share on all matters voted upon by
stockholders and have no preemptive or other rights to subscribe for additional
securities of the Company. Each share of Common Stock has an equal and ratable
right to receive dividends when, as and if declared by the Board of Directors
out of assets legally available therefor. The 13 1/4% Discount Indenture
restricts the Company's ability to pay cash dividends to holders of Common
Stock, unless amended. See "Risk Factors -- Substantial Leverage," "Dividend
Policy" and "Description of Certain Indebtedness -- 13 1/4% Discount
Debentures." In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock will be entitled to share equally and
ratably in the distribution of all of the Company's assets remaining available
for distribution after satisfaction of all its liabilities and the payment of
the liquidation preference of any then outstanding preferred stock, if any. The
Common Stock has been approved for listing on the NYSE under the symbol "IXX,"
subject to official notice of issuance.
PREFERRED STOCK
The Amended Certificate will authorize the Board of Directors to issue
preferred stock in classes or series and to establish the designations,
preferences, qualifications, limitations or restrictions of any class or series
with respect to the rate and nature of dividends, the price and terms and
conditions on which shares may be redeemed, the terms and conditions for
conversion or exchange into any other class or series of the stock, voting
rights and other terms. The Company may then issue, without approval of the
holders of Common Stock, preferred stock which has voting, dividend or
liquidation rights superior to the Common Stock and which may adversely affect
the rights of holders of Common Stock. The issuance of preferred stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting power
of the holders of Common Stock and could have the effect of delaying or
preventing a change in control of the Company. The Company has no present plan
to issue any shares of preferred stock.
CERTAIN CHARTER AND BY-LAW PROVISIONS
As permitted by the Delaware GCL, the directors will be indemnified against
certain expenses and liabilities incurred in their capacities as directors of
the Company when acting in good faith and cannot be held personally liable for
certain breaches of their fiduciary duty of care, as described below.
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The Amended Certificate will provide for the Board of Directors to be
divided into three classes, with staggered three-year terms. As a result, only
one class of directors will be elected at each annual meeting of stockholders of
the Company, with the other classes continuing for the remainder of their
respective terms.
The Amended Certificate also will provide that directors may be removed
from office only for cause and only by the affirmative vote of the holders of at
least two-thirds of the total outstanding voting stock of the Company. Vacancies
on the Board of Directors, including those resulting from an increase in the
number of directors, may be filled only by the remaining directors, not by
stockholders.
Any action required or permitted to be taken by the stockholders of the
Company may be effected only at an annual or special meeting of stockholders and
will not be permitted to be taken by written consent in lieu of a meeting
(except that stockholders may take action by written consent in lieu of a
meeting during the time period that the Stockholders Agreement remains in
effect). The Amended Certificate and the Amended By-Laws also will provide that
special meetings of stockholders may only be called by a majority of the Board
of Directors of the Company. Stockholders will not be permitted to call a
special meeting or to require that the Board of Directors call a special meeting
of stockholders.
Certain provisions contained in the Amended Certificate, including those
relating to the size and classification of the Board of Directors, the removal
of directors, the prohibition on action by written consent and the calling of
special meetings, may only be amended by the affirmative vote of the holders of
at least two-thirds of the total outstanding voting stock of the Company. In
addition, the Amended Certificate will provide that the Amended By-Laws may only
be amended by the affirmative vote of the holders of at least two-thirds of the
outstanding voting stock of the Company or by a vote of two-thirds of the
members of the Board of Directors in office.
The Amended Certificate and the Amended By-Laws will establish an advance
notice procedure for nomination, other than by or at the direction of the Board
of Directors, of candidates for election as directors, as well as for other
stockholder proposals to be considered at annual meetings of stockholders. In
general, notice of intent to nominate a director or raise business at such
meeting must be received by the Company not less than 60 nor more than 90 days
prior to the scheduled annual meeting, and must contain certain specified
information concerning the person to be nominated or the matter to be brought
before the meeting.
The foregoing provisions could have the effect of discouraging, delaying or
making more difficult certain attempts to acquire the Company or to remove
incumbent directors even if a majority of the Company's stockholders were to
deem such an attempt to be in the best interests of the Company and its
stockholders.
PERSONAL LIABILITY OF DIRECTORS
The Delaware GCL authorizes a Delaware corporation to eliminate or limit
the personal liability of a director to the corporation and its stockholders for
monetary damages for breach of certain fiduciary duties as a director and,
accordingly, the Company's Amended Certificate will include a provision
eliminating liability for monetary damages for any breach of fiduciary duty as a
director, except: (i) for any breach of the duty of loyalty to the Company or
its stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for any transaction
from which the director derived an improper personal benefit; or (iv) for
willful or negligent payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. Pursuant to the Delaware GCL,
directors of the Company are not insulated from liability for breach of their
duty of loyalty (requiring that, in making a business decision, directors act in
good faith and in the honest belief that the action taken was in the best
interest of the corporation), or for claims arising under the Federal securities
laws. The foregoing provision of the Amended Certificate may reduce the
likelihood of derivative litigation against directors and may discourage or
deter stockholders or management from bringing a lawsuit against directors for
breaches of their fiduciary duties, even though such an action, if successful,
might otherwise have benefitted the Company and its stockholders. In addition,
the Amended Certificate will provide that such provision may only be amended by
the affirmative vote of the holders of at least 80% of the outstanding voting
stock of the Company.
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CERTAIN STATUTORY PROVISIONS
Section 203 of the Delaware GCL contains certain provisions that may make
more difficult the acquisition of control of the Company by means of a tender
offer, open market purchase, proxy fight or otherwise. These provisions are
designed to encourage persons seeking to acquire control of the Company to
negotiate with the Board of Directors. However, these provisions could have the
effect of discouraging a prospective acquiror from making a tender offer or
otherwise attempting to obtain control of the Company. To the extent that these
provisions discourage takeover attempts, they could deprive stockholders of
opportunities to realize takeover premiums for their shares or could depress the
market price of shares. Set forth below is a description of the relevant
provisions of Section 203 of the Delaware GCL. The description is intended as
summary only and is qualified in its entirety by reference to Section 203 of the
Delaware GCL.
Section 203 of the Delaware GCL prohibits certain "business combination"
transactions between a publicly held Delaware corporation, such as the Company
after the Offerings, and any "interested stockholder" for a period of three
years after the date on which such stockholder became an interested stockholder,
unless (i) the board of directors approves, prior to such date, either the
proposed business combination or the proposed acquisition of stock which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction in which the stockholder becoming an interested
stockholder, the interested stockholder acquires at least 85% of those shares of
the voting stock of the corporation which are not held by the directors,
officers or certain employee stock plans or (iii) on or subsequent to the
consummation date, the business combination with the interested stockholder is
approved by the board of directors and also approved at a stockholders' meeting
by the affirmative vote of the holders of at least two-thirds of the outstanding
shares of the corporation's voting stock other than shares held by the
interested stockholder. For purposes of Section 203, a "business combination"
includes a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an "interested stockholder" is a
person who, together with affiliates and associates, owns (or within three
years, did own) 15% or more of the corporation's voting stock. A corporation
may, at its option, exclude itself from the coverage of Section 203 by amending
its charter or by-laws by action of its stockholders to exempt itself from
coverage, provided that such by-law or charter amendment shall not become
effective until 12 months after the date it is adopted. The Company has not
elected to opt out of Section 203 of the Delaware GCL pursuant to its terms.
TRANSFER AGENT AND REGISTRAR
The transfer agent, dividend paying agent and registrar for the Common
Stock is First Chicago Trust Company of New York.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summaries of the agreements governing the outstanding
long-term indebtedness of the Company and its subsidiaries are intended to
describe all relevant material provisions thereof; however, such summaries are
qualified in their entirety by reference to the various agreements described
herein, copies of which (except for the New Credit Facility) have been filed
with the Commission. Capitalized terms used but not defined herein have the
meanings ascribed to them in the applicable agreement.
THE NEW CREDIT FACILITY
The New Credit Facility is expected to provide for aggregate maximum
borrowings by IPC of an aggregate principal amount originally of up to $475
million to be provided by the several banks thereunder, consisting of (i) term
loans in an original aggregate amount of $300 million, consisting of a new Term
A loan in an original principal amount of $150 million (the "Term A Loan") and a
Term B loan in an original principal amount of $150 million (the "Term B Loan"
and, collectively with the Term A Loan, the "New Term Loan Facility"); and (ii)
a revolving credit facility (the "New Revolving Credit Facility") providing for
borrowings by IPC of revolving loans of up to $175 million, up to $65 million of
which may be in the form of letters of credit (the "New Revolving Loans"). The
New Term Loan and the New Revolving Loans are collectively referred to herein as
the "New Loans."
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A commitment fee of 0.25% per annum is payable on the committed but unused
portions of the New Revolving Credit Facility. The interest rate of the New
Loans can be, at the election of IPC, based upon LIBOR or the Alternative Base
Rate (to be defined in the New Credit Facility) and are, subject to certain
performance pricing adjustments, based upon IPC's Total Debt to EBITDA Ratio (to
be defined in the New Credit Facility). The Term A Loan and the New Revolving
Loans that are LIBOR loans will bear interest at 1.375% per annum plus LIBOR.
The Term B Loans that are LIBOR loans will bear interest at 1.75% per annum plus
LIBOR. The New Revolving Loans and the Term A Loans that are Alternative Base
Rate loans will bear interest at 0.375% per annum plus the Alternative Base
Rate. The Term B Loans that are Alternative Base Rate Loans will bear interest
at 0.75% per annum plus the Alternative Base Rate.
The Term A Loan is expected to be required to be repaid in quarterly
payments totalling $3.75 million in 1997, $16.25 million in 1998, $21.25 million
in 1999, $25.0 million in 2000, $26.25 million in 2001, $31.25 million in 2002
and $26.25 million in 2003 and the Term B Loan is expected to be required to be
repaid in quarterly payments totalling $1.5 million per annum and four
installments of $35.25 million on December 31, 2003, March 31, 2004, June 30,
2004 and September 30, 2004. The New Revolving Credit Facility and the Term A
Loan will terminate on or about September 30, 2003 and the Term B Loan will
terminate on or about September 30, 2004, respectively. IPC may prepay the New
Term Loan Facility in accordance with the terms of the New Credit Facility.
Subject to the provisions of the New Credit Facility, IPC will be able to, from
time to time, borrow, repay and reborrow under the New Revolving Credit
Facility.
All net cash proceeds from the sale of assets of IPC and its subsidiaries
in excess of a certain minimum amount and 75% of Excess Cash Flow (to be defined
in the New Credit Facility) must, with certain exceptions, be applied to repay
the New Term Loan Facility. Any such mandatory prepayments of the New Term Loan
Facility is to be applied first to the New Term Loan Facility, if any, and
second to the permanent reduction of the New Revolving Credit Facility.
The New Term Loan Facility and the other obligations under the New Credit
Facility are expected to be guaranteed by the Company and IPC's subsidiaries and
are to be secured by (i) a pledge of the capital stock of IPC and each of IPC's
subsidiaries; (ii) grants of security interests in substantially all of the
assets of IPC and its subsidiaries; and (iii) mortgages on the real property of
IPC and its subsidiaries. Certain interest rate hedging arrangements with
respect to the New Term Loan Facility will be secured pari passu with the New
Term Loan Facility and the other obligations under the New Credit Facility.
The New Credit Facility is expected to contain restrictive covenants
typical in facilities of its type, including, among others, the following: (i)
delivery of financial statements and other reports; (ii) compliance
certificates; (iii) notices of default, material litigation and material
governmental and environmental proceedings; (iv) compliance with laws; (v)
payment of taxes; (vi) maintenance of insurance; (vii) limitation on liens (to
include standard exceptions and to permit the receivables securitization
financing, if any); (viii) limitations on mergers, consolidations and sales of
assets (with the asset sale restriction to include standard exceptions and to
permit the receivables securitization financing, if any); (ix) limitations on
incurrence of debt; (x) limitations on dividends and stock redemptions; (xi)
except as otherwise therein specifically provided for, prohibition on the
repayment and/or defeasance of any subordinated debt; (xii) limitations on
investments; (xiii) certain ERISA covenants; and (xiv) restrictions on
transactions with affiliates.
In addition to the covenants described above, the New Credit Facility is
expected to contain financial covenants with respect to, among others, (i) the
ratio of EBITDA to Consolidated Interest Charges (to be defined in the New
Credit Facility); (ii) the ratio of EBITDA to Fixed Charges (to be defined in
the New Credit Facility); (iii) the ratio of Total Debt (to be defined in the
New Credit Facility) to EBITDA; and (iv) IPC's Net Worth (to be defined in the
New Credit Facility).
The New Credit Facility is expected to provide for events of default
typical in facilities of its type, including, among others, the following: (i)
nonpayment of principal, interest, fees or other amounts; (ii) violation of
covenants; (iii) inaccuracy of representations and warranties; (iv)
cross-default of other indebtedness; (v) bankruptcy and other similar events;
(vi) material unsatisfied judgments; (vii) certain
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ERISA events; (viii) invalidity of any loan documents or security interests; and
(ix) change in control (to be defined in the New Credit Facility).
THE 13 1/4% DISCOUNT DEBENTURES
The Company has commenced a tender offer and consent solicitation to
purchase all or a portion of the 13 1/4% Discount Debentures. See "The
Refinancing."
The 13 1/4% Discount Debentures are general unsecured obligations of the
Company, limited to $160 million aggregate principal amount, and will mature on
March 15, 2005. The 13 1/4% Discount Debentures were issued for aggregate
consideration of $65 million and are subordinated in right of payment to all
existing and future senior indebtedness of the Company, including, without
limitation, all obligations of the Company under the Existing Credit Facility.
The 13 1/4% Discount Debentures also are structurally subordinated to all
indebtedness of IPC and its subsidiaries.
Prior to March 15, 2000, interest is not payable in cash on the 13 1/4%
Discount Debentures but continues to accrete. Interest on the 13 1/4% Discount
Debentures will be payable in cash semi-annually on each March 15 and September
15, commencing September 15, 2000, to holders of record of the 13 1/4% Discount
Debentures at the close of business on the March 1 and September 1 next
preceding the interest payment date. Interest will accrue from the most recent
interest payment date to which interest has been paid or duly provided for or,
if no interest has been paid or duly provided for, from March 15, 2000. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
The 13 1/4% Discount Indenture provides that, upon occurrence of a change
of control of the Company, the Company will make an offer to purchase all of the
13 1/4% Discount Debentures at 101% of the accreted value thereof.
The 13 1/4% Discount Debentures are redeemable, in whole or in part, at the
option of the Company, at any time, at the principal amount thereof plus accrued
and unpaid interest, if any, to the date of redemption. The Offerings will not
constitute a change of control under the 13 1/4% Discount Indenture.
The 13 1/4% Discount Indenture restricts the ability of the Company and its
subsidiaries to incur, issue, assume or guarantee indebtedness unless certain
financial requirements are met. The Company and its subsidiaries are prohibited,
with certain limited exceptions, from declaring or paying any dividends,
purchasing, acquiring or redeeming for value any capital stock of the Company or
any of its subsidiaries, making payments with respect to subordinated
indebtedness, or making any other Restricted Payments unless (i) no Default or
Event of Default shall have occurred and be continuing at the time of or after
giving effect to such Restricted Payment; (ii) immediately after giving effect
to such Restricted Payment, the aggregate of all Restricted Payments declared or
made after the issue date of the 13 1/4% Discount Debentures does not exceed the
sum of (1) 50% of the Consolidated Net Income of the Company (or 100% of any
loss) from January 1, 1993 through the most recent full fiscal quarter, taken as
one accounting period, plus (2) 100% of the aggregate net cash proceeds from the
issue or sale of equity securities of the Company, with certain exceptions, plus
(3) $2.5 million; and (iii) at the time of and immediately after giving effect
to such Restricted Payment, the Company would be entitled to incur additional
indebtedness, subject to a minimum fixed coverage ratio. The Company is
prohibited from creating any additional restrictions on the ability of the
Company or any of its subsidiaries to pay dividends, make loans or transfer
assets to the Company or any of its subsidiaries. The Company and its
subsidiaries are also limited in their ability to engage in transactions with
affiliates, create liens, incur senior indebtedness or engage in certain
material acquisitions, sale and leaseback transactions or asset sales.
The 13 1/4% Discount Indenture provides for customary events of default and
provides that if an event of default (other than an event of default resulting
from bankruptcy, insolvency or reorganization of the Company) occurs and
continues, then either the trustee or the holders of not less than 25% in
principal amount of the 13 1/4% Discount Debentures may declare the accreted
value (if such event of default occurs on or prior to March 15, 2000) or the
principal amount and accrued interest thereon, if any (if such event of default
occurs after March 15, 2000) on all of the 13 1/4% Discount Debentures to be
immediately due and payable.
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OTHER INDEBTEDNESS
Any 12 1/2% Subordinated Notes that are not repurchased pursuant to the
Subordinated Note Offer may be redeemed by IPC on December 15, 1997. In
addition, certain of the Company's subsidiaries have an aggregate of
approximately $40.3 million principal amount of indebtedness (excluding
indebtedness under the New Credit Facility) that will remain outstanding after
the Offerings. Of this amount, $38.3 million in principal amount of such
indebtedness relates to industrial development revenue bonds ("IRBs") secured by
letters of credit under the Existing Credit Facility. Interest on the IRBs is
exempt from federal income taxation, and a determination by the Internal Revenue
Service that such exemption is no longer applicable would cause the mandatory
redemption of the IRBs with resulting draws upon the letters of credit. The
Company expects that the existing letters of credit (including those issued in
connection with the IRBs) that were issued pursuant to the Existing Credit
Facility will remain in place after the Offerings and will be included within
the New Credit Facility. Certain of the IRBs are secured by certain real estate
and other assets of the Company's subsidiaries.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, 19,166,666 shares of Common Stock will be
outstanding. Of such shares, the 8,400,000 shares sold in the Offerings will be
freely tradeable by persons other than "affiliates" of the Company without
restriction or registration under the Securities Act. The remaining outstanding
shares of Common Stock were acquired by existing stockholders without
registration under the Securities Act and are "restricted securities" for
purposes of the Securities Act. Of such amount, Acadia, certain related
investors and certain officers of the Company will beneficially own immediately
following the Offerings 10,766,666 shares of Common Stock. Such shares may be
sold in the future under Rule 144 which contains volume and manner of sales
limitations. See "Principal and Selling Stockholders." In addition, certain
officers of the Company will beneficially own options exercisable into 766,667
shares of the Common Stock.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) (including affiliates of the Company) who has
beneficially owned restricted shares for at least one year, will be entitled to
sell in any three-month period a number of shares that does not exceed the
greater of (i) 1% of the then outstanding shares of Common Stock (approximately
191,666 shares immediately after the Offerings); or (ii) the average weekly
trading volume during the four calendar weeks immediately preceding the date on
which notice of the sale is filed with the Commission. Sales pursuant to Rule
144 are subject to certain requirements relating to the manner of sale, notice
and availability of current public information about the Company. A person (or
persons whose shares are aggregated) who has beneficially owned restricted
shares for at least two years and who is not an affiliate of the Company at any
time during the 90 days immediately preceding the sale is entitled to sell such
shares pursuant to Rule 144(k) without regard to the limitations described
above. As defined in Rule 144, an "affiliate" of an issuer is a person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such issuer.
Of the restricted securities outstanding following the Offerings,
approximately 8,652,533 million shares will have been held for at least one year
and will be eligible for resale subject to the volume and other limitations of
Rule 144.
Upon the consummation of the Offerings, the Company expects to file one or
more Registration Statements on Form S-8 to register the shares covered by such
officers' stock options as well as the shares of Common Stock covered by the
1997 Stock Incentive Plan under the Securities Act.
Sales of substantial amounts of Common Stock in the public market following
the Offerings, or the possibility that such sales may occur, may adversely
affect the prevailing market price of the Common Stock. Also, prior to the
Offerings, there has been no public trading market for the Common Stock and no
predictions can be made as to the effect, if any, that market sales of shares of
Common Stock or the availability of shares of Common Stock for sales will have
on the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public markets could adversely affect
prevailing market prices.
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REGISTRATION RIGHTS
Pursuant to a Registration Rights Agreement to be entered into by and among
the Company, Acadia and the other stockholders listed therein, Acadia and/or
holders owning at least 5.0% of the outstanding shares of Common Stock will have
certain shelf, demand and piggyback registration rights. The Registration Rights
Agreement will provide such stockholders with the right to request one or more
"shelf" registrations (each, a "Shelf Registration") at any time after the
Company is required to file periodic reports under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The Registration Rights Agreement also
will provide that at any time when a Shelf Registration is not in effect or not
available for use by the holders of Common Stock, Acadia and/or the holders of
at least 5.0% of the outstanding shares of Common Stock of the Company have the
right to make up to three requests (in the aggregate) for an underwritten
offering registered under the Securities Act (a "Demand Registration") of all or
part of such stockholders' Common Stock subject to the Registration Rights
Agreement. In the event that a Demand Registration is not declared effective
within 120 days after a request is delivered, stockholders then acquire the
right to request one additional Demand Registration. The Company may delay a
Demand Registration otherwise required to be prepared and filed under the
Registration Rights Agreement for up to 180 days under certain circumstances if
such registration would, in the opinion of the Board of Directors, interfere
with any material acquisition or financing transaction then being pursued by the
Company. This right to delay registration may not be used more than once in any
twelve-month period.
In addition, in connection with any registration by the Company of its
Common Stock, the Company is required to notify the stockholders subject to the
Registration Rights Agreement of such registration and include in such
registration all registrable Common Stock with respect to which the Company has
received written requests for inclusion therein unless the underwriters
determine that the number of shares requested to be included in such
registration will have a material adverse effect on such registration, in which
case only shares which may be sold without any such material adverse effect will
be included, on a pro-rata basis. Under the Registration Rights Agreement, the
Company is required to bear all costs and expenses of each such registration
(other than the underwriters' commissions or discounts which are to be borne by
the sellers), and the stockholders and the Company have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act.
Management also has the right to have their shares of Common Stock
registered by the Company (on the same terms and conditions as Acadia) in the
event Acadia's shares of Common Stock are registered under the Registration
Rights Agreement. See "Certain Relationships and Related Transactions --
Transactions with Management."
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States Federal tax
consequences of the acquisition, ownership, and disposition of Common Stock by a
holder that, for United States Federal income tax purposes, is not a "United
States person" (a "Non-United States Holder"). This discussion is based upon the
United States Federal tax law now in effect, which is subject to change,
possibly retroactively. For purposes of this discussion, a "United States
person" means a citizen or resident of the United States; a corporation,
partnership, or other entity created or organized in the United States or under
the laws of the United States or of any political subdivision thereof; an estate
whose income is includible in gross income for United States Federal income tax
purposes regardless of its source; or a "United States Trust." A United States
Trust is (a) for taxable years beginning after December 31, 1996, or if the
trustee of a trust elects to apply the following definition to an earlier
taxable year, any trust if, and only if, (i) a court within the United States is
able to exercise primary supervision over the administration of the trust and
(ii) one or more United States trustees have the authority to control all
substantial decisions of the trust, and (b) for all other taxable years, any
trust whose income is includible in gross income for United States Federal
income tax purposes regardless of its source. This discussion does not consider
any specific facts or circumstances that may apply to a particular Non-United
States Holder. Prospective investors are urged to consult their tax advisors
regarding
64
<PAGE> 67
the United States Federal tax consequences of acquiring, holding, and disposing
of Common Stock, as well as any tax consequences that may arise under the laws
of any foreign, state, local, or other taxing jurisdiction.
DIVIDENDS
Dividends paid to a Non-United States Holder will generally be subject to
withholding of United States Federal income tax at the rate of 30% unless the
dividend is effectively connected with the conduct of a trade or business within
the United States by the Non-United States Holder (or if certain tax treaties
apply, is attributable to a United States permanent establishment maintained by
such Non-United States Holder), in which case the dividend will be subject to
the United States Federal income tax on net income on the same basis that
applies to United States persons generally. In the case of a Non-United States
Holder which is a corporation, such effectively connected income also may be
subject to the branch profits tax (which is generally imposed on a foreign
corporation on the repatriation from the United States of effectively connected
earnings and profits). Non-United States Holders should consult any applicable
income tax treaties that may provide for a lower rate of withholding or other
rules different from those described above. A Non-United States Holder may be
required to satisfy certain certification requirements in order to claim treaty
benefits or otherwise claim a reduction of or exemption from withholding under
the foregoing rules.
GAIN ON DISPOSITION
A Non-United States Holder will generally not be subject to United States
Federal income tax on gain recognized on a sale or other disposition of Common
Stock unless (i) the gain is effectively connected with the conduct of a trade
or business within the United States by the Non-United States Holder or, if tax
treaties apply, is attributable to a United States permanent establishment
maintained by the Non-United States Holder, (ii) in the case of a Non-United
States Holder who is a nonresident alien individual and holds the Common Stock
as a capital asset, such holder is present in the United States for 183 or more
days in the taxable year of disposition or either such individual has a "tax
home" in the United States or the gain is attributable to an office or other
fixed place of business maintained by such individual in the United States,
(iii) the Company is or has been a "United States real property holding
corporation" for United States Federal income tax purposes (which the Company
does not believe that it is or likely to become) and the Non-United States
Holder holds or has held, directly or indirectly, at any time during the
five-year period ending on the date of disposition, more than 5% of the Common
Stock or (iv) the Non-United States Holder is subject to tax pursuant to the
Internal Revenue Code of 1986, as amended, provisions applicable to certain
United States expatriates. Gain that is effectively connected with the conduct
of a trade or business within the United States by the Non-United States Holder
will be subject to the United States Federal income tax on net income on the
same basis that applies to United States persons generally (and, with respect to
corporate holders, under certain circumstances, the branch profits tax) but will
not be subject to withholding. Non-United States Holders should consult any
applicable treaties that may provide for different rules.
FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is not a
citizen or resident of the United States at the date of death will be included
in such individual's estate for United States Federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Internal Revenue Service and to
each Non-United States Holder the amount of dividends paid to, and the tax
withheld with respect to, such holder, regardless of whether any tax was
actually withheld. This information may also be made available to the tax
authorities of a country in which the Non-United States Holder resides.
Under the temporary United States Treasury regulations, United States
information reporting requirements and backup withholding tax at a rate of 31%
will generally apply to dividends paid on the Common Stock to a Non-United
States Holder and to payments by a United States office of a broker of the
proceeds of
65
<PAGE> 68
a sale of Common Stock to a Non-United States Holder unless the holder certifies
its Non-United States Holder status under penalties of perjury or otherwise
establishes an exemption. Information reporting requirements (but not backup
withholding) will also apply to payments of the proceeds of sales of Common
Stock by foreign offices of United States brokers, or foreign brokers with
certain types of relationships to the United States, unless the broker has
documentary evidence in its records that the holder is a Non-United States
Holder and certain other conditions are met, or the holder otherwise establishes
an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-United
States Holder's United States Federal income tax liability, provided that the
required information is furnished to the Internal Revenue Service.
These information reporting and backup withholding rules are under review
by the United States Treasury, and their application to the Common Stock could
be changed by future regulations. On April 22, 1996, proposed Treasury
Regulations were published in the Federal Register concerning the withholding of
tax and reporting for certain amounts paid to nonresident individuals and
foreign corporations. The proposed Treasury Regulations, if adopted in their
present form, would be effective for payments made after December 31, 1997.
Prospective investors should consult their tax advisors concerning the potential
adoption of such proposed Treasury Regulations and the potential effect on their
ownership of Common Stock.
66
<PAGE> 69
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Lehman Brothers Inc. and Salomon Brothers Inc are acting as representatives (the
"U.S. Representatives") of each of the Underwriters named below (the "U.S.
Underwriters"). Subject to the terms and conditions set forth in a U.S. purchase
agreement (the "U.S. Purchase Agreement") among the Company, the Selling
Stockholder and the U.S. Underwriters, and concurrently with the sale of
1,680,000 shares of Common Stock to the International Managers (as defined
below), the Company has agreed to sell to the U.S. Underwriters, and each of the
U.S. Underwriters severally has agreed to purchase from the Company, the number
of shares of Common Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER SHARES
---------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Lehman Brothers Inc.
Salomon Brothers Inc
---------
Total.......................................... 6,720,000
=========
</TABLE>
The Company and the Selling Stockholder have also entered into an
international purchase agreement (the "International Purchase Agreement") with
certain underwriters outside the United States and Canada (the "International
Managers" and, together with the U.S. Underwriters, the "Underwriters") for whom
Merrill Lynch International, Lehman Brothers International (Europe) and Salomon
Brothers International Limited are acting as lead managers (the "Lead
Managers"). Subject to the terms and conditions set forth in the International
Purchase Agreement, and concurrently with the sale of 6,720,000 shares of Common
Stock to the U.S. Underwriters pursuant to the U.S. Purchase Agreement, the
Company has agreed to sell to the International Managers, and the International
Managers severally have agreed to purchase from the Company, an aggregate of
1,680,000 shares of Common Stock. The initial offering price per share and the
total underwriting discount per share of Common Stock are identical under the
U.S. Purchase Agreement and the International Purchase Agreement.
In the U.S. Purchase Agreement and the International Purchase Agreement,
the several U.S. Underwriters and the several International Managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant to
such agreement are purchased. The closings with respect to the sale of shares of
Common Stock to be purchased by the U.S. Underwriters and the International
Managers are conditioned upon one another.
The U.S. Representatives have advised the Company and the Selling
Stockholder that the U.S. Underwriters proposed initially to offer the shares of
Common Stock to the public at the initial public offering price set forth on the
cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of $ per share of Common Stock. The U.S.
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share of Common Stock on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Company has granted an option to the U.S. Underwriters, exercisable for
30 days after the date of this Prospectus, to purchase up to an aggregate of
1,008,000 additional shares of Common Stock at the initial public offering price
set forth on the cover page of this Prospectus, less the underwriting discount.
The U.S. Underwriters may exercise this option only to cover over-allotments, if
any, made on the sale of the Common Stock offered hereby. To the extent that the
U.S. Underwriters exercise this option, each U.S. Underwriter
67
<PAGE> 70
will be obligated, subject to certain conditions, to purchase a number of
additional shares of Common Stock proportionate to such U.S. Underwriter's
initial amount reflected in the foregoing table. The Company also has granted an
option to the International Managers, exercisable for 30 days after the date of
this Prospectus, to purchase up to an aggregate of 252,000 additional shares of
Common Stock to cover over-allotments, if any, on terms similar to those granted
to the U.S. Underwriters.
The Company, its executive officers and directors and all existing
stockholders have agreed, subject to certain exceptions, not to directly or
indirectly (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of or otherwise dispose of or transfer any shares
of Common Stock or securities convertible into or exchangeable or exercisable
for Common Stock, whether now owned or thereafter acquired by the person
executing the agreement or with respect to which the person executing the
agreement thereafter acquires the power of disposition, or file a registration
statement under the Securities Act with respect to the foregoing except for the
registration under the Securities Act of the Shares issuable under the 1997
Stock Incentive Plan and issuable under the option agreements of certain
officers of the Company that may be registered on Form S-8 or any such successor
form or (ii) enter into any swap or other agreement that transfers, in whole or
in part, the economic consequence of ownership of the Common Stock whether any
such swap or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, without the prior written consent of Merrill
Lynch on behalf of the Underwriters for a period of 180 days after the date of
this Prospectus. See "Shares Eligible for Future Sale."
The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
U.S. Underwriters and the International Managers are permitted to sell shares of
Common Stock to each other for purposes of resale at the initial public offering
price, less an amount not greater than the selling concession. Under the terms
of the Intersyndicate Agreement, the U.S. Underwriters and any dealer to whom
they sell shares of Common Stock will not offer to sell or sell shares of Common
Stock to persons who are non-U.S. or non-Canadian persons or to persons they
believe intend to resell to persons who are non-U.S. or non-Canadian persons,
and the International Managers and any dealer to whom they sell shares of Common
Stock will not offer to sell or sell shares of Common Stock to U.S. persons or
to Canadian persons or to persons they believe intend to resell to U.S. or
Canadian persons, except in the case of transactions pursuant to the
Intersyndicate Agreement.
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. The initial public offering price has been determined
through negotiations among the Company, the Selling Stockholder, the U.S.
Representatives and the Lead Managers. The factors considered in determining the
initial public offering price, in addition to prevailing market conditions, were
price-earnings ratios of publicly traded companies that the U.S. Representatives
believe to be comparable to the Company, certain financial information of the
Company, the history of, and the prospects for, the Company and the industry in
which it competes, an assessment of the Company's management, its past and
present operations, the prospects for, and timing of, future revenues of the
Company, the present state of the Company's development, and the above factors
in relation to market values and various valuation measures of other companies
engaged in activities similar to the Company. There can be no assurance that an
active trading market will develop for the Common Stock or that the Common Stock
will trade in the public market subsequent to the Offerings at or above the
initial public offering price.
The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "IXX," subject to official notice of issuance. In
order to meet the requirements for listing of the Common Stock on that exchange,
the U.S. Underwriters and the International Managers have undertaken to sell
lots of 100 or more shares to a minimum of 2,000 beneficial owners.
Because affiliates of Lehman Brothers Inc. beneficially own in excess of
10% of the capital stock of the Company, the underwriting arrangements for the
Offering must comply with the requirements of Rule 2720 of the National
Association of Securities Dealers, Inc. (the "NASD"). This Offering is being
conducted in accordance with Rule 2720, which provides that, among other things,
when an NASD member participates in
68
<PAGE> 71
the underwriting of an affiliate's equity securities, the initial public
offering price can be no higher than that recommended by a "qualified
independent underwriter." Accordingly, Merrill Lynch is acting as a qualified
independent underwriter for purposes of determining the price of the Common
Stock offered hereby and has conducted due diligence investigations and has
reviewed and participated in the preparation of this Prospectus and the
Registration Statement of which this Prospectus forms a part. The price at which
the Common Stock is being sold to the public is no higher than the price
recommended by Merrill Lynch.
The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.
The Company and the Selling Stockholder have agreed to indemnify the U.S.
Underwriters and the International Managers against certain liabilities,
including certain liabilities under the Securities Act.
Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Common Stock. As an exception to these
rules, the U.S. Representatives are permitted to engage in certain transactions
that stabilize the price of the Common Stock. Such transactions consist of bids
or purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offerings, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the U.S.
Representatives may reduce that short position by purchasing Common Stock in the
open market. The U.S. Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Common Stock in the open market to reduce the
Underwriters' short position or to stabilize the price of the Common Stock, they
may reclaim the amount of the selling concession from the Underwriters and
selling group members who sold those shares as part of the Offerings.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the U.S.
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995 and 1996 and for each of the three years in the period ended December 31,
1996 included in this Prospectus have been so included in reliance on the report
of Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
LEGAL MATTERS
Certain legal matters in connection with the Offerings will be passed upon
for the Company by Skadden, Arps, Slate, Meagher & Flom (Illinois), Chicago,
Illinois and certain legal matters will be passed upon for the Underwriters by
Mayer, Brown & Platt, Chicago, Illinois.
69
<PAGE> 72
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Act with respect to the shares of Common Stock being offered by
this Prospectus. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto, certain portions
of which have been omitted as permitted by the Securities Act and the rules and
regulations of the Commission thereunder. For further information with respect
to the Company and the shares of Common Stock offered hereby, reference is made
to the Registration Statement, including the exhibits thereto, copies of which
may be obtained upon payment of the fees prescribed by the Commission or
examined without charge at (i) the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
(ii) the Commission's regional offices located at Northwest Atrium Center, 500
W. Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
Suite 1300, New York, New York 10048. Such reports and other information may
also be accessed through the Commission's electronic data gathering, analysis
and retrieval system via electronic means, including the Commission's web site
on the Internet (http://www.sec.gov). Statements contained in this Prospectus as
to the contents of any contract or other document are intended to discuss all
relevant material provisions thereof; however, in each instance where such
contract or other document is an exhibit to the Registration Statement,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, and each such statement is qualified in
all respects by such reference.
The Company is not currently subject to the informational requirements of
the Exchange Act because prior to the Offerings the Company was not required to
register under Section 12(g) of the Exchange Act and did not have securities
registered on a national securities exchange under Section 12(b) of the Exchange
Act. However, since March 1993, the Company has agreed to voluntarily comply
with such informational requirements under the terms of the 13 1/4% Discount
Indenture. As a result of the Offerings, the Company will become subject to the
informational requirements of the Exchange Act, and in accordance therewith will
be required to file reports and other information with the Commission.
70
<PAGE> 73
INDEX TO FINANCIAL STATEMENTS
IVEX PACKAGING CORPORATION:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Audited Financial Statements:
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets at December 31, 1995 and
1996................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1994,
1995 and 1996.......................................... F-4
Consolidated Statements of Changes in Stockholders'
Deficit for the years ended December 31, 1994, 1995 and
1996................................................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994,
1995 and 1996.......................................... F-6
Notes to Consolidated Financial Statements................ F-7
Unaudited Interim Financial Statements:
Consolidated Balance Sheets at December 31, 1996 and June
30, 1997............................................... F-17
Consolidated Statements of Operations for the six months
ended June 30, 1996 and 1997........................... F-18
Consolidated Statements of Changes in Stockholders'
Deficit for the year ended December 31, 1996 and the
six months ended June 30, 1997......................... F-19
Consolidated Statements of Cash Flows for the six months
ended June 30, 1996 and 1997........................... F-20
Notes to Consolidated Financial Statements................ F-21
</TABLE>
F-1
<PAGE> 74
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Ivex Packaging Corporation:
In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of operations, of changes in stockholders' deficit, and
of cash flows 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
F-2
<PAGE> 75
IVEX PACKAGING CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 4,830 $ 2,822
Accounts receivable trade, net of allowance............... 46,077 51,638
Inventories............................................... 44,050 49,023
Prepaid expenses and other................................ 5,417 5,395
--------- ---------
Total current assets................................. 100,374 108,878
--------- ---------
Property, Plant and Equipment:
Buildings and improvements................................ 47,108 49,038
Machinery and equipment................................... 208,820 231,526
Construction in progress.................................. 4,159 8,069
--------- ---------
260,087 288,633
Less -- Accumulated depreciation.......................... (102,098) (123,957)
--------- ---------
157,989 164,676
Land...................................................... 7,504 8,304
--------- ---------
Total property, plant and equipment.................. 165,493 172,980
--------- ---------
Other assets:
Goodwill, net of accumulated amortization................. 13,938 20,506
Miscellaneous............................................. 15,106 13,537
--------- ---------
Total other assets................................... 29,044 34,043
--------- ---------
Total Assets................................................ $ 294,911 $ 315,901
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Current installments of long-term debt.................... $ 5,128 $ 5,921
Accounts payable.......................................... 31,934 36,748
Accrued salary and wages.................................. 7,781 8,603
Self insurance reserves................................... 6,339 7,453
Accrued rebates and discounts............................. 2,817 3,824
Accrued interest.......................................... 1,747 1,680
Other accrued expenses.................................... 6,538 12,110
--------- ---------
Total current liabilities............................ 62,284 76,339
--------- ---------
Long-Term Debt.............................................. 353,717 352,893
--------- ---------
Other Long-Term Liabilities................................. 6,472 5,243
--------- ---------
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....................................... (312,234) (303,566)
Foreign currency translation adjustment................... (1,484) (1,164)
--------- ---------
Total stockholders' deficit.......................... (136,332) (127,344)
--------- ---------
Total Liabilities and Stockholders' Deficit................. $ 294,911 $ 315,901
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE> 76
IVEX PACKAGING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Gross sales.............................................. $ 418,502 $ 483,689 $ 485,039
Freight out.............................................. 15,875 16,001 16,229
Discounts and returns.................................... 11,652 16,119 17,003
---------- ---------- ----------
Net sales................................................ 390,975 451,569 451,807
Cost of goods sold....................................... 316,704 366,409 351,424
---------- ---------- ----------
Gross profit............................................. 74,271 85,160 100,383
---------- ---------- ----------
Operating expenses:
Selling................................................ 18,166 18,027 20,306
Administrative......................................... 23,496 24,540 27,156
Amortization of intangibles............................ 1,140 1,904 621
Write-off of goodwill.................................. 13,471
Special charges........................................ 4,960
---------- ---------- ----------
Total operating expenses.......................... 42,802 62,902 48,083
---------- ---------- ----------
Income from operations................................... 31,469 22,258 52,300
Interest expense......................................... 39,820 43,270 42,732
---------- ---------- ----------
Income (loss) before income taxes and extraordinary
item................................................... (8,351) (21,012) 9,568
Income tax provision..................................... (942) (1,113) (900)
---------- ---------- ----------
Income (loss) before extraordinary item.................. (9,293) (22,125) 8,668
Extraordinary loss....................................... (2,359)
---------- ---------- ----------
Net income (loss)........................................ $ (9,293) $ (24,484) $ 8,668
========== ========== ==========
Earnings (loss) per share:
Income (loss) before extraordinary item................ $ (8.67) $ (20.63) $ 8.08
Extraordinary loss..................................... (2.20)
---------- ---------- ----------
Net income (loss)...................................... $ (8.67) $ (22.83) $ 8.08
========== ========== ==========
Average shares outstanding............................... 1,072,246 1,072,246 1,072,246
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE> 77
IVEX PACKAGING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<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.
F-5
<PAGE> 78
IVEX PACKAGING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ (9,293) $(24,484) $ 8,668
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Depreciation of properties............................ 21,049 20,496 22,103
Amortization of intangibles and debt issue costs...... 3,058 19,689 2,028
Deferred income taxes................................. (106)
Write-down of property, plant and equipment, net...... 760
Non-cash interest..................................... 9,916 11,232 12,801
-------- -------- --------
24,624 27,693 45,600
Change in operating assets and liabilities:
Accounts receivable................................... (9,461) (550) 528
Inventories........................................... (10,871) 4,371 (743)
Prepaid expenses and other............................ (719) (930) 621
Accounts payable...................................... 10,322 (8,486) 1,516
Accrued expenses and other liabilities................ 1,752 648 1,680
-------- -------- --------
Net cash from operating activities................. 15,647 22,746 49,202
-------- -------- --------
Cash flows from financing activities:
Proceeds from senior credit facilities.................... 60,000
Payment of senior credit facilities....................... (5,342) (59,870) (5,000)
Proceeds from revolving credit facility................... 8,500
Payment of revolving credit facility...................... (8,500)
Payment of debt issue costs............................... (569) (2,779) (296)
Other, net................................................ (191) (185) 722
-------- -------- --------
Net cash from (used by) financing activities....... (6,102) 5,666 (13,074)
-------- -------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment................. (16,769) (19,385) (17,633)
Proceeds from the sale of real estate..................... 1,305 1,034
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................................................ 2,407 215 283
-------- -------- --------
Net cash used by investing activities.............. (13,057) (29,871) (38,136)
-------- -------- --------
Net decrease in cash and cash equivalents................... (3,512) (1,459) (2,008)
Cash and cash equivalents at beginning of year.............. 9,801 6,289 4,830
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 6,289 $ 4,830 $ 2,822
======== ======== ========
Supplemental cash flow disclosures:
Cash paid during the year for:
Interest................................................ $ 27,740 $ 30,004 $ 28,592
Income taxes............................................ 935 1,052 1,199
Supplemental schedule of non-cash investing and financing
activities:
Issuance of non-current note for accounts receivable.... 2,000 1,000
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.
F-6
<PAGE> 79
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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.
Accounts receivable
Accounts receivable at December 31, 1995 and 1996 consist of the following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Accounts receivable........................................ $48,089 $53,718
Less -- Allowance for doubtful accounts.................... (2,012) (2,080)
------- -------
$46,077 $51,638
======= =======
</TABLE>
Accounts receivable from sales to customers are unsecured.
F-7
<PAGE> 80
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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, 1995 and 1996 consist of the following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Raw materials.............................................. $24,148 $26,483
Finished goods............................................. 19,902 22,540
------- -------
$44,050 $49,023
======= =======
</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.
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 $18,315 and $18,781 as of December 31, 1995
and 1996, 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
F-8
<PAGE> 81
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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 (loss) per share
Earnings (loss) per share is computed by dividing earnings (loss) by the
weighted average number of shares outstanding during each year. Common stock
equivalent shares, issuable upon exercise of outstanding stock options, are
included in these calculations when they would have a dilutive effect on the per
share amounts.
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 1994, 1995 and 1996.
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%
(approximate market price of 79). 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% (approximate market price of 109). 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.
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
F-9
<PAGE> 82
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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.
NOTE 4 -- MISCELLANEOUS OTHER ASSETS:
Miscellaneous other assets at December 31, 1995 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Deferred financing costs................................... $13,121 $13,416
Less -- Accumulated amortization........................... (2,966) (4,370)
------- -------
10,155 9,046
Other...................................................... 4,951 4,491
------- -------
$15,106 $13,537
======= =======
</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, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Senior credit facility (A)............................... $ 68,500 $ 55,000
Industrial revenue bonds (B)............................. 38,293 38,293
12 1/2% Subordinated Notes, net of discount (C).......... 157,229 157,340
13 1/4% Discount Debentures, net of discount (D)......... 93,338 106,139
Other.................................................... 1,485 2,042
-------- --------
Total debt outstanding.............................. 358,845 358,814
Less -- Current installments of long-term debt........... (5,128) (5,921)
-------- --------
Long-term debt...................................... $353,717 $352,893
======== ========
</TABLE>
A. Senior Credit Facility -- IPC's senior credit facility (the "Existing
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
F-10
<PAGE> 83
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
approximately $52,798 was available at December 31, 1996. On March 24, 1997, IPC
amended the Existing 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 Existing
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 Existing 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 Existing Credit Facility, IPC is
required to maintain certain financial ratios and levels of net worth while
future indebtedness and dividends are restricted.
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 1995 and 1996 of 6.2% and
5.8%, 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% Discount Debentures will be payable
semi-annually, and on March 15, 2005, the 13 1/4% Discount Debentures will
mature and the aggregate principal amount then outstanding will become
F-11
<PAGE> 84
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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
write-off 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.
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% 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>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current provision:
Federal........................................... $(106) $ (142) $ (415)
State............................................. (942) (971) (485)
Deferred (provision) benefit:
Federal........................................... 106 (9,029)
Benefit of net operating loss carryovers............ 9,029
----- ------- -------
$(942) $(1,113) $ (900)
===== ======= =======
</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>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income taxes................. $(8,351) $(21,012) $ 9,568
======= ======== =======
Computed expected (provision) benefit at the
statutory rate.................................. $ 2,923 $ 7,354 $(3,349)
Adjustments to the computed expected (provision)
benefit resulting from:
Amortization of goodwill........................ (214) (4,862) (77)
Net operating loss carryover adjustments........ (3,108) (2,701) 3,077
State income taxes, net......................... (608) (610) (417)
Other, net...................................... 65 (294) (134)
------- -------- -------
$ (942) $ (1,113) $ (900)
======= ======== =======
</TABLE>
F-12
<PAGE> 85
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Depreciation............................................. $ 33,581 $ 33,449
Basis differences of acquired assets..................... 4,737 3,969
-------- --------
Deferred tax liabilities................................. 38,318 37,418
-------- --------
Environmental reserves................................... (478) (330)
Non-compete agreements................................... (963) (613)
Self insurance reserves.................................. (1,731) (1,979)
Original issue discount accretion........................ (9,921) (14,394)
Other.................................................... (2,709) (2,727)
Net operating loss carryover............................. (37,646) (26,795)
-------- --------
Deferred tax assets...................................... (53,448) (46,838)
-------- --------
Deferred tax asset valuation allowance................... 23,900 18,190
-------- --------
$ 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.
NOTE 7 -- EMPLOYEE BENEFIT PLANS:
Net periodic pension expense related to the defined benefit plans for the
years ended December 31, 1994, 1995 and 1996 is comprised of the following
components:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Service cost component -- benefits earned by
employees for services during this period......... $ 274 $ 265 $ 290
Interest cost component -- increase in projected
benefit obligation due to the passage of time..... 1,029 1,070 1,208
Return on plan assets, net of administrative
expense........................................... (79) (1,926) (1,317)
Net amortization and deferral....................... (866) 1,084 372
------ ------- -------
Net periodic pension cost........................... $ 358 $ 493 $ 553
====== ======= =======
</TABLE>
F-13
<PAGE> 86
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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>
1995 1996
---- ----
<S> <C> <C>
Actuarial present value of vested benefit obligation....... $14,228 $15,139
======= =======
Actuarial present value of accumulated benefit
obligation............................................... $14,333 $15,252
======= =======
Fair value of the plans' assets............................ $12,873 $14,202
Actuarial present value of projected benefit obligation.... 14,417 15,357
------- -------
Fair value of the plans' assets less than the projected
benefit obligation....................................... (1,544) (1,155)
Unrecognized net transition obligation..................... 463 398
Unrecognized prior service cost............................ 1,070 952
Unrecognized net loss...................................... 243 650
------- -------
Prepaid pension expense.................................... $ 232 $ 845
======= =======
</TABLE>
The following table sets forth significant assumptions utilized in the
actuarial valuation.
<TABLE>
<CAPTION>
1995 1996
---- ----
<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 $1,900, $2,063 and $2,351 for the years
ended December 31, 1994, 1995 and 1996, respectively.
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
Adjusted 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.
F-14
<PAGE> 87
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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
1994 and 1995.
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 $3,576, $4,339 and $4,954 during 1994,
1995 and 1996, 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
F-15
<PAGE> 88
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
plastic packaging products for the medical, electronics 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>
1995 1996
---- ----
<S> <C> <C>
Net Sales................................................ $483,259 $472,414
======== ========
Net income (loss) before extraordinary items............. $(22,089) $ 8,545
======== ========
Net income (loss)........................................ $(24,448) $ 8,545
======== ========
</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 $11,907 and on February 21, 1997, IPC purchased all of
the outstanding common stock of M&R Plastics, Inc. located in Laval, Quebec for
$18,651. 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.
NOTE 15 -- SUBSEQUENT EVENT -- INITIAL PUBLIC OFFERING (UNAUDITED)
The Company intends to file a Registration Statement to register its Common
Stock. In conjunction with the offering, the Company's Board of Directors will
authorize a common stock split.
Upon successful completion of the offering, such transaction would trigger
a change in ownership of the Company, as defined under Section 382 of the
Internal Revenue Code, resulting in a limitation of the Company's ability to
utilize its net operating loss carryovers in the future.
F-16
<PAGE> 89
IVEX PACKAGING CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 2,822 $ 8,345
Accounts receivable trade, net of allowance............... 51,638 67,068
Inventories............................................... 49,023 53,506
Prepaid expenses and other................................ 5,395 6,327
--------- ---------
Total current assets................................... 108,878 135,246
--------- ---------
Property, Plant and Equipment:
Buildings and improvements................................ 49,038 53,491
Machinery and equipment................................... 231,526 249,091
Construction in progress.................................. 8,069 15,959
--------- ---------
288,633 318,541
Less -- Accumulated depreciation.......................... (123,957) (136,699)
--------- ---------
164,676 181,842
Land...................................................... 8,304 8,925
--------- ---------
Total property, plant and equipment.................... 172,980 190,767
--------- ---------
Other Assets:
Goodwill, net of accumulated amortization................. 20,506 30,115
Miscellaneous............................................. 13,537 14,514
--------- ---------
Total other assets..................................... 34,043 44,629
--------- ---------
Total Assets................................................ $ 315,901 $ 370,642
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Current installments of long-term debt.................... $ 5,921 $ 8,012
Accounts payable.......................................... 36,748 35,795
Accrued salary and wages.................................. 8,603 6,730
Self insurance reserves................................... 7,453 6,650
Accrued rebates and discounts............................. 3,824 3,559
Accrued interest.......................................... 1,680 1,567
Other accrued expenses.................................... 12,110 12,733
--------- ---------
Total current liabilities.............................. 76,339 75,046
--------- ---------
Long-Term Debt.............................................. 352,893 404,612
--------- ---------
Other Long-Term Liabilities................................. 5,243 4,894
--------- ---------
Deferred Income Taxes....................................... 8,770 10,482
--------- ---------
Stockholders' Deficit:
Ivex Packaging Corporation common stock, $.01 par value --
2,000,000 shares authorized; and 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) (300,879)
Foreign currency translation adjustment................... (1,164) (899)
--------- ---------
Total stockholders' deficit............................ (127,344) (124,392)
--------- ---------
Total Liabilities and Stockholders' Deficit................. $ 315,901 $ 370,642
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-17
<PAGE> 90
IVEX PACKAGING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1996 1997
---- ----
<S> <C> <C>
Net sales................................................... $ 210,443 $ 264,034
Cost of goods sold.......................................... 164,668 207,673
---------- ----------
Gross profit................................................ 45,775 56,361
---------- ----------
Operating expenses:
Selling................................................... 9,599 13,231
Administrative............................................ 12,533 16,236
Amortization of intangibles............................... 258 512
---------- ----------
Total operating expenses.................................... 22,390 29,979
---------- ----------
Income from operations...................................... 23,385 26,382
Interest expense............................................ 21,221 22,805
---------- ----------
Income before income taxes.................................. 2,164 3,577
Income tax provision........................................ (440) (890)
---------- ----------
Net income.................................................. $ 1,724 $ 2,687
========== ==========
Net income per share........................................ $ 1.61 $ 2.51
========== ==========
Average shares outstanding.................................. 1,072,246 1,072,246
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-18
<PAGE> 91
IVEX PACKAGING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<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, 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)
Foreign currency translation
adjustment................. 265 265
Net income.................... 2,687 2,687
--------- --- -------- --------- ------- ---------
Balance at June 30, 1997........ 1,072,246 $11 $177,375 $(300,879) $ (899) $(124,392)
========= === ======== ========= ======= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-19
<PAGE> 92
IVEX PACKAGING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1996 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 1,724 $ 2,687
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation of properties........................... 11,045 12,778
Amortization of intangibles and debt issue costs..... 951 1,251
Non-cash interest.................................... 6,139 6,956
-------- --------
19,859 23,672
Change in operating assets and liabilities:
Accounts receivable.................................. 828 (12,104)
Inventories.......................................... (798) (532)
Prepaid expenses and other........................... 852 (809)
Accounts payable..................................... (3,517) (5,184)
Accrued expenses and other liabilities............... 227 (3,774)
-------- --------
Net cash from operating activities................ 17,451 1,269
-------- --------
Cash flows from financing activities:
Payment of senior credit facility......................... (2,500) (2,500)
Proceeds from revolving credit facility................... -- 49,200
Payment of revolving credit facility...................... (7,500) --
Payment of debt issue costs............................... (191) (327)
Other, net................................................ -- (430)
-------- --------
Net cash from (used by) financing activities...... (10,191) 45,943
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment................. (7,996) (10,984)
Acquisition of the OPS business of Viskase Limited........ -- (11,907)
Acquisition of M&R Plastics, Inc.......................... -- (18,651)
Other, net................................................ 346 (147)
-------- --------
Net cash used by investing activities............. (7,650) (41,689)
-------- --------
Net increase (decrease) in cash and cash equivalents........ (390) 5,523
Cash and cash equivalents at beginning of period............ 4,830 2,822
-------- --------
Cash and cash equivalents at end of period.................. $ 4,440 $ 8,345
======== ========
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest............................................... $ 14,410 $ 15,222
Income taxes........................................... 742 1,072
</TABLE>
The accompanying notes are an integral part of this statement.
F-20
<PAGE> 93
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 -- ACCOUNTING AND REPORTING POLICIES
In the opinion of management, the information in the accompanying unaudited
financial statements reflects all adjustments necessary for a fair statement of
results for the interim periods. These interim financial statements should be
read in conjunction with the financial statements and the notes thereto included
herein.
The Company is the sole stockholder of its operating subsidiary, IPC, Inc.
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 obligation to
distribute any such cash flow to the Company.
The Company's accounting and reporting policies are summarized in Note 2 of
Ivex's consolidated financial statements included herein.
Accounts Receivable
Accounts receivable at December 31, 1996 and June 30, 1997 consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ --------
<S> <C> <C>
Accounts receivable...................................... $53,718 $69,370
Less -- Allowance for doubtful accounts.................. (2,080) (2,302)
------- -------
$51,638 $67,068
======= =======
</TABLE>
Inventories
Inventories at December 31, 1996 and June 30, 1997 consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ --------
<S> <C> <C>
Raw materials............................................ $26,483 $27,561
Finished goods........................................... 22,540 25,945
------- -------
$49,023 $53,506
======= =======
</TABLE>
NOTE 2 -- INCOME TAXES
Income taxes are provided at the estimated annual effective tax rate which
differs from the federal statutory rate of 35% primarily due to net operating
loss carryovers and state and foreign income taxes.
F-21
<PAGE> 94
IVEX PACKAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 3 -- LONG-TERM DEBT
At December 31, 1996 and June 30, 1997, the long-term debt of the Company
and its wholly owned subsidiary, IPC, was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ --------
<S> <C> <C>
Senior credit facility.................................. $ 55,000 $101,700
Industrial revenue bonds................................ 38,293 38,293
12 1/2% IPC Notes, net of discount...................... 157,340 157,395
13 1/4% Discount Debentures, net of discount............ 106,139 113,095
Other................................................... 2,042 2,141
-------- --------
Total debt outstanding............................. 358,814 412,624
Less -- Current installments of long-term debt.......... (5,921) (8,012)
-------- --------
Long-term debt.......................................... $352,893 $404,612
======== ========
</TABLE>
NOTE 4 -- ACQUISITIONS
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 $11,907. On February 21, 1997, IPC purchased all of the
outstanding common stock of M&R Plastics, Inc. ("M&R") located in Laval, Quebec
for $18,651, including the repayment of certain indebtedness of M&R and related
acquisition fees and expenses. The acquired businesses were financed through
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. Pro forma financial information associated with these
acquisitions has not been included because these acquisitions are not material
to the Company's consolidated financial statements.
NOTE 5 -- SUBSEQUENT EVENT -- INITIAL PUBLIC OFFERING
The Company intends to file a Registration Statement to register its Common
Stock. In conjunction with the offering, the Company's Board of Directors will
authorize a common stock split.
Upon successful completion of the offering, such transaction would trigger
a change in ownership of the Company, as defined under Section 382 of the
Internal Revenue Code, resulting in a limitation of the Company's ability to
utilize its net operating loss carryovers in the future.
F-22
<PAGE> 95
The following photographs depict applications of the Company's plastic and paper
packaging products. The Company is not the exclusive provider of packaging
products to the companies whose name-branded products appear below.
[photo of man]
Protective Packaging
[photo of food]
Food Packaging
[photo of electronic packaging]
Electronic Packaging
[photo of boy]
Supermarket Bakery Packaging
The following trademarks used in this Prospectus are owned by Ivex
Packaging Corporation or one of its affiliates: Ivex(R), Kama(R), Plastofilm(R),
Jet-Pak(R), Jet-Lite(R) and Jet-Cor(TM).
<PAGE> 96
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERINGS COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 11
Use of Proceeds........................ 16
Dividend Policy........................ 17
Dilution............................... 18
The Refinancing........................ 19
Capitalization......................... 20
Pro Forma Consolidated Financial
Data................................. 21
Selected Consolidated Financial Data... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 27
Business............................... 37
Management............................. 46
Principal and Selling Stockholders..... 55
Certain Relationships and Related
Transactions......................... 57
Description of Capital Stock........... 58
Description of Certain Indebtedness.... 60
Shares Eligible for Future Sale........ 63
Certain United States Federal Tax
Consequences to Non-United States
Holders.............................. 64
Underwriting........................... 67
Experts................................ 69
Legal Matters.......................... 69
Additional Information................. 70
Index to Financial Statements.......... F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
================================================================================
8,400,000 SHARES
[IVEX LOGO]
IVEX PACKAGING CORPORATION
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
SALOMON BROTHERS INC
, 1997
================================================================================
<PAGE> 97
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE OR
JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE OR JURISDICTION.
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 4, 1997
PROSPECTUS
8,400,000 SHARES
[IVEX LOGO]
IVEX PACKAGING CORPORATION
COMMON STOCK
------------------------
Of the 8,400,000 shares of Common Stock, $.01 par value (the "Common
Stock"), of Ivex Packaging Corporation, a Delaware corporation (the "Company" or
"Ivex"), being offered hereby, 6,700,000 shares are being offered by the Company
and 1,700,000 shares are being offered by Acadia Partners, L.P. and certain
related investors (the "Selling Stockholder" or "Acadia"). The Company will not
receive any of the proceeds from the sale of shares of Common Stock by the
Selling Stockholder. See "Principal and Selling Stockholders."
Of the 8,400,000 shares of Common Stock offered hereby, 1,680,000 shares are
being offered initially outside the United States and Canada by the
International Managers (the "International Offering") and 6,720,000 shares are
being offered initially in a concurrent offering in the United States and Canada
by the U.S. Underwriters (the "U.S. Offering," and together with the
International Offering, the "Offerings"). The initial public offering price and
the underwriting discount per share are identical for each of the Offerings. See
"Underwriting."
Prior to the Offerings, there has been no public market for the Common
Stock. It is anticipated that the initial public offering price will be between
$14.00 and $16.00 per share. For a discussion relating to factors considered in
determining the initial offering price, see "Underwriting."
The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "IXX," subject to official notice of issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=============================================================================================================================
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDER
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Per Share............ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------
Total(3)............. $ $ $ $
=============================================================================================================================
</TABLE>
(1) The Company and the Selling Stockholder have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offerings payable by the Company estimated
at $ .
(3) The Company has granted the International Managers and the U.S. Underwriters
options to purchase up to an additional 252,000 shares and 1,008,000 shares
of Common Stock, respectively, in each case exercisable within 30 days of
the date hereof, solely to cover over-allotments, if any. If such options
are exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $ , $ and $ , respectively.
See "Underwriting."
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to the approval of certain legal matters by counsel for the Underwriters and to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the shares of Common Stock will be made in New York, New York,
on or about , 1997.
------------------------
MERRILL LYNCH INTERNATIONAL
LEHMAN BROTHERS
SALOMON BROTHERS INTERNATIONAL LIMITED
------------------------
The date of this Prospectus is , 1997.
<PAGE> 98
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
UNDERWRITING
Merrill Lynch International, Lehman Brothers International (Europe) and
Salomon Brothers International Limited are acting as lead managers (the "Lead
Managers") for each of the International Managers named below (the
"International Managers"). Subject to the terms and conditions set forth in an
international purchase agreement (the "International Purchase Agreement") among
the Company, the Selling Stockholder and the International Managers, and
concurrently with the sale of 6,720,000 shares of Common Stock to the U.S.
Underwriters (as defined below), the Company has agreed to sell to the
International Managers, and each of the International Managers severally has
agreed to purchase from the Company, the number of shares of Common Stock set
forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
---------------------- ---------
<S> <C>
Merrill Lynch International.................................
Lehman Brothers International (Europe)......................
Salomon Brothers International Limited......................
---------
Total.......................................... 1,680,000
=========
</TABLE>
The Company and the Selling Stockholder have also entered into a U.S.
purchase agreement (the "U.S. Purchase Agreement") with certain underwriters in
the United States and Canada (the "U.S. Underwriters" and, together with the
International Managers, the "Underwriters") for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), Lehman Brothers Inc. and Salomon
Brothers Inc are acting as representatives ("the U.S. Representatives"). Subject
to the terms and conditions set forth in the U.S. Purchase Agreement, and
concurrently with the sale of 1,680,000 shares of Common Stock to the
International Managers pursuant to the International Purchase Agreement, the
Company has agreed to sell to the U.S. Underwriters, and the U.S. Underwriters
severally have agreed to purchase from the Company, an aggregate of 6,720,000
shares of Common Stock. The initial public offering price per share and the
total underwriting discount per share of Common Stock are identical under the
International Purchase Agreement and the U.S. Purchase Agreement.
In the International Purchase Agreement and the U.S. Purchase Agreement,
the several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant to
such agreement are purchased. The closings with respect to the sale of shares of
Common Stock to be purchased by the International Managers and the U.S.
Underwriters are conditioned upon one another.
The Lead Managers have advised the Company and the Selling Stockholder that
the International Managers propose initially to offer the shares of Common Stock
to the public at the initial public offering price set forth on the cover page
of this Prospectus, and to certain dealers at such price less a concession not
in excess of $. per share of Common Stock. The International Managers may
allow, and such dealers may reallow, a discount not in excess of $. per
share of Common Stock on sales to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
The Company has granted an option to the International Managers,
exercisable for 30 days after the date of this Prospectus, to purchase up to an
aggregate of 252,000 additional shares of Common Stock at the initial public
offering price set forth on the cover page of this Prospectus, less the
underwriting discount. The International Managers may exercise this option only
to cover over-allotments, if any, made on the sale of the Common Stock offered
hereby. To the extent that the International Managers exercise this option, each
International Manager will be obligated, subject to certain conditions, to
purchase a number of additional
67
<PAGE> 99
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
shares of Common Stock proportionate to such International Manager's initial
amount reflected in the foregoing table. The Company has also granted an option
to the U.S. Underwriters, exercisable for 30 days after the date of this
Prospectus, to purchase up to an aggregate of 1,008,000 additional shares of
Common Stock to cover over-allotments, if any, on terms similar to those granted
to the International Managers.
The Company, the Company's executive officers and directors and all
existing stockholders have agreed, subject to certain exceptions, not to
directly or indirectly (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of or otherwise dispose of or transfer
any shares of Common Stock or securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or thereafter acquired by the
person executing the agreement or with respect to which the person executing the
agreement thereafter acquires the power of disposition, or file a registration
statement under the Securities Act with respect to the foregoing except for the
registration under the Securities Act of the Shares issuable under the 1997
Stock Incentive Plan and issuable under the option agreements of certain
officers of the Company that may be registered on Form S-8 or any such successor
form or (ii) enter into any swap or other agreement that transfers, in whole or
in part, the economic consequence of ownership of the Common Stock whether any
such swap or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, without the prior written consent of Merrill
Lynch on behalf of the Underwriters for a period of 180 days after the date of
this Prospectus. See "Shares Eligible for Future Sale."
The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
International Managers and the U.S. Underwriters are permitted to sell shares of
Common Stock to each other for purposes of resale at the initial public offering
price, less an amount not greater than the selling concession. Under the terms
of the Intersyndicate Agreement, the U.S. Underwriters and any dealer to whom
they sell shares of Common Stock will not offer to sell or sell shares of Common
Stock to persons who are non-U.S. or non-Canadian persons or to persons they
believe intend to resell to persons who are non-U.S. or non-Canadian persons,
and the International Managers and any dealer to whom they sell shares of Common
Stock will not offer to sell or sell shares of Common Stock to U.S. persons or
to Canadian persons or to persons they believe intend to resell to U.S. or
Canadian persons, except in the case of transactions pursuant to the
Intersyndicate Agreement.
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. The initial public offering price has been determined
through negotiations among the Company, the Selling Stockholder, the U.S.
Representatives and the Lead Managers. The factors considered in determining the
initial public offering price, in addition to prevailing market conditions, were
price-earnings ratios of publicly traded companies that the U.S. Representatives
believe to be comparable to the Company, certain financial information of the
Company, the history of, and the prospects for, the Company and the industry in
which it competes, an assessment of the Company's management, its past and
present operations, the prospects for, and timing of, future revenues of the
Company, the present state of the Company's development, and the above factors
in relation to market values and various valuation measures of other companies
engaged in activities similar to the Company. There can be no assurance that an
active trading market will develop for the Common Stock or that the Common Stock
will trade in the public market subsequent to the Offerings at or above the
initial public offering price.
The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "IXX," subject to official notice of issuance. In
order to meet the requirements for listing of the Common Stock on that exchange,
the U.S. Underwriters and the International Managers have undertaken to sell
lots of 100 or more shares to a minimum of 2,000 beneficial holders.
Because affiliates of Lehman Brothers Inc. beneficially own in excess of
10% of the capital stock of the Company, the underwriting arrangements for the
Offering must comply with the requirements of Rule 2720 of the National
Association of Securities Dealers, Inc. (the "NASD"). This Offering is being
conducted in
68
<PAGE> 100
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
accordance with Rule 2720, which provides that, among other things, when an NASD
member participates in the underwriting of an affiliate's equity securities, the
initial public offering price can be no higher than that recommended by a
"qualified independent underwriter." Accordingly, Merrill Lynch is acting as a
qualified independent underwriter for purposes of determining the price of the
Common Stock offered hereby and has conducted due diligence investigations and
has reviewed and participated in the preparation of this Prospectus and the
Registration Statement of which this Prospectus forms a part. The price at which
the Common Stock is being sold to the public is no higher than the price
recommended by Merrill Lynch.
The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.
The Company and the Selling Stockholder have agreed to indemnify the
International Managers and the U.S. Underwriters against certain liabilities,
including certain liabilities under the Securities Act.
Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Common Stock. As an exception to these
rules, the U.S. Representatives are permitted to engage in certain transactions
that stabilize the price of the Common Stock. Such transactions consist of bids
or purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offerings, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the U.S.
Representatives may reduce that short position by purchasing Common Stock in the
open market. The U.S. Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Common Stock in the open market to reduce the
Underwriters' short position or to stabilize the price of the Common Stock, they
may reclaim the amount of the selling concession from the Underwriters and
selling group members who sold those shares as part of the Offerings.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the U.S.
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Each International Manager has agreed that (i) it has not offered or sold
and, prior to the expiration of the period of six months from the Closing Date,
will not offer or sell any shares of Common Stock to persons in the United
Kingdom, except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which do not
constitute an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Common Stock in, from or
otherwise involving the United Kingdom; and it has only issued or passed on and
will only issue or pass on in the United Kingdom any document received by it in
connection with the issuance of Common Stock to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom such document may
otherwise lawfully be issued or passed on.
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<PAGE> 101
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of Common
Stock, or the possession, circulation or distribution of this Prospectus or any
other material relating to the Company, the Selling Stockholder or shares of
Common Stock in any jurisdiction where action for that purpose is required.
Accordingly, the shares of Common Stock may not be offered or sold, directly or
indirectly, and neither this Prospectus nor any other offering material or
advertisements in connection with the shares of Common Stock may be distributed
or published, in or from any country or jurisdiction except in compliance with
any applicable rules and regulations of any such country or jurisdiction.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.
70
<PAGE> 102
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERINGS COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
IN THE PROSPECTUS, REFERENCES TO "DOLLARS" AND "$" ARE TO UNITED STATES
DOLLARS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 11
Use of Proceeds........................ 16
Dividend Policy........................ 17
Dilution............................... 18
The Refinancing........................ 19
Capitalization......................... 20
Pro Forma Consolidated Financial
Data................................. 21
Selected Consolidated Financial Data... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 27
Business............................... 37
Management............................. 46
Principal and Selling Stockholders..... 55
Certain Relationships and Related
Transactions......................... 57
Description of Capital Stock........... 58
Description of Certain Indebtedness.... 60
Shares Eligible for Future Sale........ 63
Certain United States Federal Tax
Consequences to Non-United States
Holders.............................. 64
Underwriting........................... 67
Experts................................ 70
Legal Matters.......................... 70
Additional Information................. 70
Index to Financial Statements.......... F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
8,400,000 SHARES
[IVEX LOGO]
IVEX PACKAGING CORPORATION
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH INTERNATIONAL
LEHMAN BROTHERS
SALOMON BROTHERS
INTERNATIONAL LIMITED
, 1997
======================================================
<PAGE> 103
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the registration of the shares of Common
Stock are estimated as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $22,871
NASD filing fee............................................. 14,875
NYSE filing fee*............................................ *
Printing and engraving costs*............................... *
Legal fees and expenses*.................................... *
Accounting fees and expenses*............................... *
Blue sky qualifications and related legal fees and
expenses*................................................. *
Miscellaneous*.............................................. *
-------
Total*................................................. $ *
=======
</TABLE>
None of the expenses will be borne by the Selling Stockholders.
- -------------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "GCL") provides
that a Delaware corporation may, with certain limitations, indemnify any person
who was or is a party or is threatened to be made a party to any action, civil
or criminal, by virtue of the fact he is or was an officer, director, employee
or agent of the corporation.
Section 9.1 of the Company's Amended and Restated Certificate of
Incorporation provides as follows:
"To the extent not prohibited by law, the Corporation shall indemnify
any person who is or was made, or threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including without limitation, an action by or in the right of the
Corporation to procure a judgment in its favor, by reason of the fact that
such person, or a person of whom such person is the legal representative,
is or was a Director or officer of the Corporation, or is or was serving in
any capacity at the request of the Corporation for any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Other Entity"), against judgments, fines, penalties, excise
taxes, amounts paid in settlement and costs, charges and expenses
(including attorneys' fees and disbursements). Persons who are not
Directors or officers of the Corporation may be similarly indemnified in
respect of service to the Corporation or to an Other Entity to the extent
the Board of Directors at any time specifies that such persons are entitled
to the benefits of this Section 9."
Sections 1 through 9 of Article 8 of the Company's Amended By-Laws provide
as follows:
"To the extent not prohibited by law, the Corporation shall indemnify
any person who is or was made, or threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the
Corporation to procure a judgment in its favor, by reason of the fact that
such person, or a person of whom such person is the legal representative,
is or was a Director or officer of the Corporation, or is or was serving in
any capacity at the request of the Corporation for any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Other Entity"), against judgments, fines, penalties, excise
taxes, amounts paid in settlement and costs, charges and expenses
(including attorneys' fees and disbursements). Persons who are not
Directors or officers of the Corporation may be similarly indemnified in
respect of service to the Corporation or to an Other
II-1
<PAGE> 104
Entity at the request of the Corporation to the extent the Board at any
time specifies that such persons are entitled to the benefits of this
Section 8."
"The Corporation shall, from time to time, reimburse or advance to any
Director or officer or other person entitled to indemnification hereunder
the funds necessary for payment of expenses, including attorneys' fees and
disbursements, incurred in connection with any Proceeding, in advance of
the final disposition of such Proceeding; provided, however, that, if
required by the General Corporation Law, such expenses incurred by or on
behalf of any Director or officer or other person may be paid in advance of
the final disposition of a Proceeding only upon receipt by the Corporation
of an undertaking, by or on behalf of such Director or officer (or other
person indemnified hereunder), to repay any such amount so advanced if it
shall ultimately be determined by final judicial decision from which there
is no further right of appeal that such Director, officer or other person
is not entitled to be indemnified for such expenses."
"The rights to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Section 8 shall not be
deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, the Certificate of Incorporation,
these By-laws, any agreement, any vote of stockholders or disinterested
Directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office."
"The rights to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Section 8 shall continue
as to a person who has ceased to be a Director or officer (or other person
indemnified hereunder) and shall inure to the benefit of the executors,
administrators, legatees and distributees of such person."
"The Corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a Director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such
person in any such capacity, or arising out of such person's status as
such, whether or not the Corporation would have the power to indemnify such
person against such liability under the provisions of this Section 8, the
Certificate of Incorporation or under Section 145 of the General
Corporation Law or any other provision of law."
"The provisions of this Section 8 shall be a contract between the
Corporation, on the one hand, and each Director and officer who serves in
such capacity at any time while this Section 8 is in effect and any other
person indemnified hereunder, on the other hand, pursuant to which the
Corporation and each such Director, officer or other person intend to be
legally bound. No repeal or modification of this Section 8 shall affect any
rights or obligations with respect to any state of facts then or
theretofore existing or thereafter arising or any proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such
state of facts."
"The rights to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Section 8 shall be
enforceable by any person entitled to such indemnification or reimbursement
or advancement of expenses in any court of competent jurisdiction. The
burden of proving that such indemnification or reimbursement or advancement
of expenses is not appropriate shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, its
independent legal counsel and its stockholders) to have made a
determination prior to the commencement of such action that such
indemnification or reimbursement or advancement of expenses is proper in
the circumstances nor an actual determination by the Corporation (including
its Board of Directors, its independent legal counsel and its stockholders)
that such person is not entitled to such indemnification or reimbursement
or advancement of expenses shall constitute a defense to the action or
create a presumption that such person is not so entitled. Such a person
shall also be indemnified for any expenses incurred in connection with
successfully establishing his or her right to such indemnification or
reimbursement or advancement of expenses, in whole or in part, in any such
proceeding."
II-2
<PAGE> 105
"Any Director or officer of the Corporation serving in any capacity
(a) another corporation of which a majority of the shares entitled to vote
in the election of its directors is held, directly or indirectly, by the
Corporation or (b) any employee benefit plan of the Corporation or any
corporation referred to in clause (a) shall be deemed to be doing so at the
request of the Corporation."
"Any person entitled to be indemnified or to reimbursement or
advancement of expenses as a matter of right pursuant to this Section 8 may
elect to have the right to indemnification or reimbursement or advancement
of expenses interpreted on the basis of the applicable law in effect at the
time of the occurrence of the event or events giving rise to the applicable
Proceeding, to the extent permitted by law, or on the basis of the
applicable law in effect at the time such indemnification or reimbursement
or advancement of expenses is sought. Such election shall be made, by a
notice in writing to the Corporation, at the time indemnification or
reimbursement or advancement of expenses is sought; provided, however, that
if no such notice is given, the right to indemnification or reimbursement
or advancement of expenses shall be determined by the law in effect at the
time indemnification or reimbursement or advancement of expenses is
sought."
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
No securities of the Company have been issued or sold by the Company within
the past three years which were not registered under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
INCORPORATED BY
REFERENCE TO
THE FOLLOWING
EXHIBIT EXHIBIT REGISTRATION NO.
NO. DESCRIPTION OF DOCUMENT NO. OR REPORT
- ------- ----------------------- ------- ----------------
<S> <C> <C> <C> <C>
*1.1 -- Form of U.S. Purchase Agreement
*1.2 -- Form of International Purchase Agreement
**1.3 -- Dealer Manager Agreement with Bankers Trust
Company
**2.1 -- Offers to Purchase and Consent Solicitations
Statement, dated August 27, 1997, relating to
the 13 1/4% Discount Debentures and the
12 1/2% Subordinated Notes together with the
accompanying letters of transmittal
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 -- Amended and Restated Certificate of
Incorporation of Ivex Packaging Corporation
("Holdings" or "Ivex")
*3.4 -- Amended By-Laws of Ivex
4.1 -- Indenture relating to IPC's 12 1/2% Senior
Subordinated Notes (including form of 12 1/2%
Senior Subordinated Notes) 4.1 Ivex Form S-4
(Registration No. 33-60714)
</TABLE>
II-3
<PAGE> 106
<TABLE>
<CAPTION>
INCORPORATED BY
REFERENCE TO
THE FOLLOWING
EXHIBIT EXHIBIT REGISTRATION NO.
NO. DESCRIPTION OF DOCUMENT NO. OR REPORT
- --------- -------------------------------------------------------- --------- -------------------------------
<C> <C> <C>
4.2 -- Indenture relating to Ivex's 13 1/4% Senior Discount
Debentures (including form of 13 1/4% Senior Discount
Debentures) 4.2 IPC 1992 Form 10-K
(File No. 33-52150)
*4.3 -- Registration Rights Agreement, dated as of ,
1997, among Ivex, Acadia Partners, L.P., and the other
stockholders party thereto
*4.4 -- Form of First Supplemental Indenture relating to IPC's
12 1/2% Senior Subordinated Notes
*4.5 -- Form of First Supplemental Indenture relating to Ivex's
13 1/4% Discount Debentures
*5.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom
(Illinois)
*10.1 -- Form of Senior Management Incentive Compensation Plan
for 1997
10.2 -- Form of Executive Deferred Compensation Plan 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 10.3 Ivex 1996 Form 10-K
(File No. 33-52150)
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 Agreement attached
thereto 10.2 IPC 1993 Form 10-K
(Registration No. 33-52150)
10.5 -- Form of Amended and Restated IPC, Inc. Stock Option and
Purchase Agreement and Amended and Restated Ivex
Packaging Corporation Stock Option and Purchase
Agreement, each dated as of January 1, 1996 10.16 Ivex 6/30/96 Form 10-Q
(File No. 33-60714)
10.6 -- IPC Retirement Plan and Trust, as amended and Restated
May 1, 1992 10.3 IPC Form S-1
(Registration No. 33-52150)
10.7 -- Amended and Restated Employment Agreement, dated as of
May 30, 1996, between George V. Bayly and IPC 10.14 Ivex 6/30/96 Form 10-Q
(File No. 33-60714)
10.8 -- Employment Agreement, dated as of December 31, 1992,
between IPC and Frank V. Tannura 10.30 IPC 6/30/93 Form 10-Q
(File No. 33-52150)
</TABLE>
II-4
<PAGE> 107
<TABLE>
<CAPTION>
INCORPORATED BY
REFERENCE TO
THE FOLLOWING
EXHIBIT EXHIBIT REGISTRATION NO.
NO. DESCRIPTION OF DOCUMENT NO. OR REPORT
- ------- ----------------------- ------- ----------------
<C> <C> <C>
10.9 -- 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 10.59 IPC 6/30/95 Form 10-Q
(File No. 33-52150)
10.10 -- Amendment No. 2 to Employment Agreement, dated May 30,
1996, between IPC and Frank V. Tannura 10.15 Ivex 6/30/96 Form 10-Q
(File No. 33-60714)
10.11 -- Stock Option Agreement, dated as of January 22, 1991,
among Ivex, Acadia Partners, L.P. and George V. Bayly 10.30 IPC Form S-1
(Registration No. 33-52150)
10.12 -- Form of Severance Agreement between the Company and
certain named executive officers 1.1 IPC 1994 Form 10-K
(File No. 33-52150)
10.13 -- 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 10.30 Ivex 1995 Form 10-K
(File No. 33-60714)
10.14 -- Pledge Agreement, dated as of December 7, 1995, among
Ivex, IPC, IPC's subsidiaries and NationsBank, N.A., as
agent 10.31 Ivex 1995 Form 10-K
(File No. 33-60714)
10.15 -- Security Agreement, dated as of December 7, 1995, among
Ivex, IPC, IPC's subsidiaries and NationsBank, N.A., as
agent 10.32 Ivex 1995 Form 10-K
(File No. 33-60714)
10.16 -- Form of Mortgage and Security Agreement in favor of
NationsBank, N.A., as agent 10.33 Ivex 1995 Form 10-K
(File No. 33-60714)
10.17 -- 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 10.34 Ivex 1996 Form 10-K
(File No. 33-60714)
10.18 -- 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 10.35 Ivex 1996 Form 10-K
(File No. 33-60714)
</TABLE>
II-5
<PAGE> 108
<TABLE>
<CAPTION>
INCORPORATED BY
REFERENCE TO
THE FOLLOWING
EXHIBIT EXHIBIT REGISTRATION NO.
NO. DESCRIPTION OF DOCUMENT NO. OR REPORT
- ------- ----------------------- ------- ----------------
<C> <C> <C>
10.19 -- 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 10.36 Ivex 1996 Form 10-K
(File No. 33-60714)
10.20 -- Form of Amended and Restated Pledge Agreement among IPC,
Ivex, certain of IPC's subsidiaries and NationsBank,
N.A., as agent 10.37 Ivex 1996 Form 10-K
(File No. 33-60714)
10.21 -- Form of Amended and Restated Security Agreement among
IPC, Ivex, and certain of IPC's subsidiaries and
NationsBank, N.A., as agent 10.38 Ivex 1996 Form 10-K
(File No. 33-60714)
10.22 -- Loan Agreement, dated as of December 1, 1987, between
the County of Kankakee, Illinois and Ivex of Delaware,
Inc. (n/k/a IPC, Inc.) 10.11 IPC Form S-1
(Registration No. 33-52150)
10.23 -- 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.) 10.13 IPC Form S-1
(Registration No. 33-52150)
10.24 -- Loan Agreement, dated as of October 1, 1987, between the
County of Will, Illinois and LPX, Inc. 10.15 IPC Form S-1
(Registration No. 33-52150)
10.25 -- Loan Agreement, dated as of April 1, 1988, between the
Illinois Development Finance Authority and Ivex of
Delaware, Inc. (n/k/a IPC, Inc.) 10.17 IPC Form S-1
(Registration No. 33-52150)
10.26 -- 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.) 10.19 IPC Form S-1
(Registration No. 33-52150)
10.27 -- Loan Agreement, dated November 1, 1985, between the
Village of Bridgeview, Illinois and L&CP Corporation 10.21 IPC Form S-1
(Registration No. 33-52150)
10.28 -- Loan Agreement, dated as of June 1, 1988, between City
of Troy, Ohio and L&CP Corporation (n/k/a IPC, Inc.) 10.23 IPC Form S-1
(Registration No. 33-52150)
10.29 -- Lease Agreement, dated as of December 5, 1996, between
State Street Bank and Trust Company and IPC 10.46 Ivex 1996 Form 10-K
(File No. 33-60714)
</TABLE>
II-6
<PAGE> 109
<TABLE>
<CAPTION>
INCORPORATED BY
REFERENCE TO
THE FOLLOWING
EXHIBIT EXHIBIT REGISTRATION NO.
NO. DESCRIPTION OF DOCUMENT NO. OR REPORT
- ------- ----------------------- ------- ----------------
<C> <C> <C>
10.30 -- Lease, dated as of October 4, 1988, between Seymour C.
Graham and Kama Corporation (n/k/a IPC, Inc) 10.33 IPC Form S-1
(Registration No. 33-52150)
10.31 -- Amendment to Lease, dated as of December 20, 1988,
between Seymour C. Graham and Kama Corporation (n/k/a
IPC, Inc) 10.34 IPC Form S-1
(Registration No. 33-52150)
10.32 -- Lease, dated June 20, 1995, between Howard H. Gelb and
Eunice Gelb and Kama Corporation Corporation (n/k/a IPC,
Inc.) 10.44 Ivex 1995 Form 10-K
(File No. 33-60714)
10.33 -- Industrial Building Lease, dated October 19, 1992,
between Telegraph Road Properties, Inc. and Packaging
Products, Inc. 10.45 Ivex 1995 Form 10-K
(File No. 33-60714)
10.34 -- Industrial Building Lease, dated October 23, 1985,
between IMAC Realty, Inc. and Packaging Products, Inc. 10.46 Ivex 1995 Form 10-K
(File No. 33-60714)
10.35 -- Letter Agreement, dated March 10, 1995, between
Packaging Products, Inc. and LeWa Company 10.47 Ivex 1995 Form 10-K
(File No. 33-60714)
10.36 -- Tri-Party Agreement, dated September 11, 1995, among
Packaging Products, Inc. and Telegraph Road Properties,
Inc. 10.48 Ivex 1995 Form 10-K
(File No. 33-60714)
10.37 -- Lease, dated as of September 11, 1996, by and between
Joseph P. Bennett and Trio Products, Inc. 10.54 Ivex 1996 Form 10-K
(File No. 33-60714)
10.38 -- 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.) 10.39 IPC Form S-1
(Registration No. 33-52150)
10.39 -- Consulting Agreement, dated as of December 17, 1992,
between IPC and Penobscot-MB Partners 10.39 IPC Form S-4
(Registration No. 33-60714)
10.40 -- Tax Sharing Agreement, dated as of December 17, 1992,
between Ivex and IPC and certain of IPC's subsidiaries 10.40 Ivex Form S-4
(Registration No. 33-60714)
</TABLE>
II-7
<PAGE> 110
<TABLE>
<CAPTION>
INCORPORATED BY
REFERENCE TO
THE FOLLOWING
EXHIBIT EXHIBIT REGISTRATION NO.
NO. DESCRIPTION OF DOCUMENT NO. OR REPORT
- --------- -------------------------------------------------------- --------- -------------------------------
<C> <C> <S> <C> <C>
10.41 -- 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. 10.46 IPC Form S-1
(Registration No. 33-52150)
10.42 -- Stockholders Agreement, dated as of October 14, 1992, by
and among MaxPack S.A. de C.V. and the stockholders
thereof 10.46 IPC Form S-1
(Registration No. 33-52150)
10.43 -- Agreement and Plan of Merger, dated as of May 17, 1996
(as amended), among IPC, CFI Industries, Inc. and Equity
Partners A-1 CFI Industries, Inc.'s Proxy
Statement dated 7/22/96
*10.44 -- Form of Ivex Packaging Corporation 1997 Performance
Incentive Plan
*10.45 -- Form of Ivex Packaging Corporation 1997 Stock Option
Plan
*10.46 -- Form of First Amendment to the Consulting Agreement,
dated as of January 1, 1991, between IPC and
Penobscot-MB Partners
*10.47 -- Form of Voting Agreement among Acadia, certain related
investors and certain members of Ivex Management
21.1 -- Subsidiaries of Ivex(1)
**23.1 -- Consent of Price Waterhouse LLP
*23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom
(Illinois) (included in Exhibit 5.1)
24.1 -- Powers of Attorney (included on signature page)
</TABLE>
- -------------------------
* To be filed by amendment.
** Filed herewith.
(1) Filed with Amendment No. 6 to the Company's Registration Statement on Form
S-1 filed with the Commission on August 1, 1997.
The following combined consolidated financial statement schedules are
included as part of the Registration Statement immediately following the
signature page:
(b) Combined Consolidated Financial Statement Schedules:
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION OF SCHEDULE
- -------- -----------------------
<S> <C>
Schedule I -- Condensed Financial Information
Schedule II -- Valuation and Qualifying Accounts and Reserves
</TABLE>
All other schedules of the Company for which provision is made in the
applicable accounting regulations of the Commission are not required, are
inapplicable or have been disclosed in the notes to the consolidated financial
statements and therefore have been omitted.
II-8
<PAGE> 111
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provision, or otherwise, the registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-9
<PAGE> 112
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of
Lincolnshire, State of Illinois, on September 4, 1997.
IVEX PACKAGING CORPORATION
By: /s/ G. DOUGLAS PATTERSON
------------------------------------
Name: G. Douglas Patterson
Title: Vice President and General
Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities indicated on September 4, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
GEORGE V. BAYLY* Director, Chairman of the Board, President and Chief
- --------------------------------------------- Executive Officer (Principal Executive Officer)
George V. Bayly
FRANK V. TANNURA* Director, Vice President and Chief Financial Officer
- --------------------------------------------- (Principal Financial Officer)
Frank V. Tannura
DAVID E. WARTNER* Corporate Controller (Principal Accounting Officer)
- ---------------------------------------------
David E. Wartner
ANTHONY P. SCOTTO* Director
- ---------------------------------------------
Anthony P. Scotto
GLENN R. AUGUST* Director
- ---------------------------------------------
Glenn R. August
*By /s/ G. DOUGLAS PATTERSON
- ---------------------------------------------
G. Douglas Patterson,
Attorney-in-fact
</TABLE>
II-10
<PAGE> 113
IVEX PACKAGING CORPORATION
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 37 $ 27
--------- ---------
Total current assets................................... 37 27
Investment in subsidiary.................................... 73,418 73,418
Debt issue costs, net....................................... 2,683 2,419
--------- ---------
Total assets........................................... $ 76,138 $ 75,864
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Long-term debt.............................................. $ 93,338 $ 106,139
--------- ---------
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, 1995 and 1996.......... 11 11
Paid in capital in excess of par value.................... 177,375 177,375
Accumulated deficit....................................... (194,586) (207,661)
--------- ---------
Total stockholders' deficit............................ (17,200) (30,275)
--------- ---------
Total liabilities and stockholders' deficit................. $ 76,138 $ 75,864
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
S-1
<PAGE> 114
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,
---------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Interest expense............................................ $ 10,217 $ 11,508 $ 13,075
-------- -------- --------
Loss before income taxes.................................... (10,217) (11,508) (13,075)
Income tax provision........................................ (6)
-------- -------- --------
Net loss.................................................... $(10,223) $(11,508) $(13,075)
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
S-2
<PAGE> 115
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.
S-3
<PAGE> 116
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,
---------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows used by operating activities:
Net loss.................................................... $(10,223) $(11,508) $(13,075)
Adjustments to reconcile net loss to net cash used by
operating activities:
Amortization of debt issue costs.......................... 263 264 264
Non-cash interest......................................... 9,916 11,232 12,801
-------- -------- --------
Net cash used by operating activities....................... (44) (12) (10)
-------- -------- --------
Net decrease in cash and cash equivalents................... (44) (12) (10)
Cash and cash equivalents at beginning of year.............. 93 49 37
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 49 $ 37 $ 27
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
S-4
<PAGE> 117
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.
S-5
<PAGE> 118
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION OF DOCUMENT PAGES
- ------- ----------------------- ------------
<S> <C> <C> <C>
1.1 -- Form of U.S. Purchase Agreement*
1.2 -- Form of International Purchase Agreement*
1.3 -- Dealer Manager Agreement with Bankers Trust Company(14)
2.1 -- Offers to Purchase and Consent Solicitations Statement,
dated August 27, 1997, relating to the 13 1/4% Discount
Debentures and the 12 1/2% Subordinated Notes together with
the accompanying letters of transmittal(14)
3.1 -- Certificate of Incorporation of IPC, Inc. ("IPC")(1)
3.2 -- By-Laws of IPC(1)
3.3 -- Amended and Restated Certificate of Incorporation of Ivex
Packaging Corporation ("Holdings" or "Ivex")*
3.4 -- Amended By-Laws of Ivex*
4.1 -- Indenture relating to IPC's 12 1/2% Senior Subordinated
Notes (including form of 12 1/2% Senior Subordinated
Notes)(2)
4.2 -- Indenture relating to Ivex's 13 1/4% Senior Discount
Debentures (including form of 13 1/4% Senior Discount
Debentures)(3)
4.3 -- Registration Rights Agreement, dated as of , 1997,
among Ivex, Acadia Partners, L.P., and the other
stockholders party thereto*
4.4 -- Form of First Supplemental Indenture relating to IPC's
12 1/2% Senior Subordinated Notes*
4.5 -- Form of First Supplemental Indenture relating to Ivex's
13 1/4% Discount Debentures*
5.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom (Illinois)*
10.1 -- Form of Senior Management Incentive Compensation Plan for
1997*
10.2 -- Form of Executive Deferred Compensation Plan(4)
10.3 -- Form of Trust Agreement, dated October 17, 1996, between
IPC, Inc. and the trustee thereof relating to executive
deferred compensation(5)
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 Agreement attached thereto(6)
10.5 -- Form of Amended and Restated IPC, Inc. Stock Option and
Purchase Agreement and Amended and Restated Ivex Packaging
Corporation Stock Option and Purchase Agreement, each dated
as of January 1, 1996(7)
10.6 -- IPC Retirement Plan and Trust, as amended and Restated May
1, 1992(1)
10.7 -- Amended and Restated Employment Agreement, dated as of May
30, 1996, between George V. Bayly and IPC(7)
10.8 -- Employment Agreement, dated as of December 31, 1992, between
IPC and Frank V. Tannura(8)
10.9 -- 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(9)
10.10 -- Amendment No. 2 to Employment Agreement, dated May 30, 1996,
between IPC and Frank V. Tannura(7)
</TABLE>
S-6
<PAGE> 119
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION OF DOCUMENT PAGES
- ------- ----------------------- ------------
<C> <C> <S> <C>
10.11 -- Stock Option Agreement, dated as of January 22, 1991, among
Ivex, Acadia Partners, L.P. and George V. Bayly(1)
10.12 -- Form of Severance Agreement between the Company and certain
named executive officers(4)
10.13 -- 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)
10.14 -- Pledge Agreement, dated as of December 7, 1995, among Ivex,
IPC, IPC's subsidiaries and NationsBank, N.A., as agent(10)
10.15 -- Security Agreement, dated as of December 7, 1995, among
Ivex, IPC, IPC's subsidiaries and NationsBank, N.A., as
agent(10)
10.16 -- Form of Mortgage and Security Agreement in favor of
NationsBank, N.A., as agent(10)
10.17 -- 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(11)
10.18 -- 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(11)
10.19 -- 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(11)
10.20 -- Form of Amended and Restated Pledge Agreement among IPC,
Ivex, certain of IPC's subsidiaries and NationsBank, N.A.,
as agent(11)
10.21 -- Form of Amended and Restated Security Agreement among IPC,
Ivex, and certain of IPC's subsidiaries and NationsBank,
N.A., as agent(11)
10.22 -- Loan Agreement, dated as of December 1, 1987, between the
County of Kankakee, Illinois and Ivex of Delaware, Inc.
(n/k/a IPC, Inc.)(1)
10.23 -- 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.)(1)
10.24 -- Loan Agreement, dated as of October 1, 1987, between the
County of Will, Illinois and LPX, Inc.(1)
10.25 -- Loan Agreement, dated as of April 1, 1988, between the
Illinois Development Finance Authority and Ivex of Delaware,
Inc. (n/k/a IPC, Inc.)(1)
10.26 -- 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.)(1)
10.27 -- Loan Agreement, dated November 1, 1985, between the Village
of Bridgeview, Illinois and L&CP Corporation(1)
10.28 -- Loan Agreement, dated as of June 1, 1988, between City of
Troy, Ohio and L&CP Corporation (n/k/a IPC, Inc.)(1)
10.29 -- Lease Agreement, dated as of December 5, 1996, between State
Street Bank and Trust Company and IPC(11)
10.30 -- Lease, dated as of October 4, 1988, between Seymour C.
Graham and Kama Corporation (n/k/a IPC, Inc)(1)
</TABLE>
S-7
<PAGE> 120
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION OF DOCUMENT PAGES
- ----------- ----------------------------------------------------------------------------------------- ---------------
<C> <C> <S> <C>
10.31 -- Amendment to Lease, dated as of December 20, 1988, between Seymour C. Graham and Kama
Corporation (n/k/a IPC, Inc)(1)
10.32 -- Lease, dated June 20, 1995, between Howard H. Gelb and Eunice Gelb and Kama Corporation
Corporation (n/k/a IPC, Inc.)(10)
10.33 -- Industrial Building Lease, dated October 19, 1992, between Telegraph Road Properties,
Inc. and Packaging Products, Inc.(10)
10.34 -- Industrial Building Lease, dated October 23, 1985, between IMAC Realty, Inc. and
Packaging Products, Inc.(10)
10.35 -- Letter Agreement, dated March 10, 1995, between Packaging Products, Inc. and LeWa
Company(10)
10.36 -- Tri-Party Agreement, dated September 11, 1995, among Packaging Products, Inc. and
Telegraph Road Properties, Inc.(10)
10.37 -- Lease, dated as of September 11, 1996, by and between Joseph P. Bennett and Trio
Products, Inc.(11)
10.38 -- 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.)(1)
10.39 -- Consulting Agreement, dated as of December 17, 1992, between IPC and Penobscot-MB
Partners(2)
10.40 -- Tax Sharing Agreement, dated as of December 17, 1992, between Ivex and IPC and certain of
IPC's subsidiaries(2)
10.41 -- 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.(1)
10.42 -- Stockholders Agreement, dated as of October 14, 1992, by and among MaxPack S.A. de C.V.
and the stockholders thereof(1)
10.43 -- Agreement and Plan of Merger, dated as of May 17, 1996 (as amended), among IPC, CFI
Industries, Inc. and Equity Partners(12)
10.44 -- Form of Ivex Packaging Corporation 1997 Performance Incentive Plan*
10.45 -- Form of Ivex Packaging Corporation 1997 Stock Option Plan*
10.46 -- Form of First Amendment to the Consulting Agreement, dated as of January 1, 1991, between
IPC and Penobscot-MB Partners*
10.47 -- Form of Voting Agreement among Acadia, certain related investors and certain members of
Ivex Management*
21.1 -- Subsidiaries of Ivex(13)
23.1 -- Consent of Price Waterhouse LLP(14)
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois) (included in Exhibit 5.1)*
24.1 -- Powers of Attorney (included on signature page)(13)
</TABLE>
- -------------------------
* To be filed by amendment.
(1) Incorporated by reference to Registration Statement of IPC on Form S-1
(33-52150).
(2) Incorporated by reference to Registration Statement of the Company on Form
S-4 (33-60714).
S-8
<PAGE> 121
(3) Incorporated by reference to Annual Report of IPC on Form 10-K for the
fiscal year ended December 31, 1992.
(4) Incorporated by reference to Annual Report of IPC on Form 10-K for the
fiscal year ended December 31, 1994.
(5) Incorporated by reference to Annual Report of the Company on Form 10-K for
the year ended December 31, 1996.
(6) Incorporated by reference to Annual Report of IPC on Form 10-K for the year
ended December 31, 1993.
(7) Incorporated by reference to Quarterly Report of the Company on Form 10-Q
for the three months ended June 30, 1996.
(8) Incorporated by reference to Quarterly Report of IPC on Form 10-Q for the
three months ended June 30, 1993.
(9) Incorporated by reference to Quarterly Report of IPC on Form 10-Q for the
three months ended June 30, 1995.
(10) Incorporated by reference to Annual Report of the Company on Form 10-K for
the year ended December 31, 1995.
(11) Incorporated by reference to Annual Report of the Company on Form 10-K for
the year ended December 31, 1996.
(12) Incorporated by reference to Proxy Statement of CFI Industries, Inc. dated
July 22, 1996.
(13) Filed with Amendment No. 6 to the Company's Registration Statement on Form
S-1 filed with the Commission on August 1, 1997.
(14) Filed herewith.
S-9
<PAGE> 1
EXHIBIT 1.3
DEALER MANAGER AGREEMENT
August 27, 1997
BT SECURITIES CORPORATION
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
IPC, Inc., a Delaware corporation ("IPC"), proposes to offer
(the "Subordinated Notes Tender Offer") to the holders of its 12 1/2% Senior
Subordinated Notes due 2002 (the "Subordinated Notes"), upon the terms and
subject to the conditions set forth in the Offers to Purchase and Consent
Solicitations Statement dated August 27, 1997 (as amended, modified or
supplemented from time to time in accordance with the terms of this Agreement,
the "Offers to Purchase"), to purchase for cash any and all of the outstanding
Subordinated Notes. Ivex Packaging Corporation, a Delaware corporation
("Packaging," and together with IPC, the "Issuers"), proposes to offer (the
"Discount Notes Tender Offer," and together with the Subordinated Notes Tender
Offer, the "Tender Offers") to the holders of its 13 1/4% Senior Discount
Debentures due 2005 (the "Discount Notes," and together with the Subordinated
Notes, the "Notes"), upon the terms and subject to the conditions set forth in
the Offers to Purchase, to purchase for cash any and all of the outstanding
Discount Notes. Concurrently with the Subordinated Notes Tender Offer, IPC is
soliciting consents (the "Subordinated Notes Consent Solicitation") from holders
of the Subordinated Notes to amendments (the "Proposed Subordinated Notes
Amendments") to certain of the provisions in the indenture governing the
Subordinated Notes (the "Subordinated Notes Indenture"), as described in the
Offers to Purchase. Concurrently with the Discount Notes Tender Offer, Packaging
is soliciting consents (the "Discount Notes Consent Solicitation," and together
with the Subordinated Notes Consent Solicitation, the "Consent Solicitations")
from holders of the Discount Notes to amendments (the "Proposed Discount Notes
Amendments," and together with the Proposed Subordinated Notes Amendments, the
"Proposed Amendments") to certain of the provisions in the indenture governing
the Discount Notes (the "Discount Notes Indenture," and together with the
Subordinated Notes Indenture, the "Indentures"), as described in the Offers to
Purchase. Upon receipt of the Requisite Consents (as defined in the Of-
<PAGE> 2
-2-
fers to Purchase) from holders of the Subordinated Notes, IPC, as issuer, and
United States Trust Company of New York, as trustee under the Subordinated Notes
Indenture (in such capacity, the "Subordinated Notes Trustee"), will enter into
a supplemental indenture that will give effect to the Proposed Subordinated
Notes Amendments (the "Subordinated Notes Supplemental Indenture"). Upon receipt
of the Requisite Consents (as defined in the Offers to Purchase) from holders of
the Discount Notes, Packaging, as issuer, and United States Trust Company of New
York, as trustee under the Discount Notes Indenture (in such capacity, the
"Discount Notes Trustee"), will enter into a supplemental indenture that will
give effect to the Proposed Discount Notes Amendments (the "Discount Notes
Supplemental Indenture," and together with the Subordinated Notes Supplemental
Indenture, the "Supplemental Indentures"). The Tender Offers and Consent
Solicitations will be made on the terms and subject to the conditions set forth
in the Offers to Purchase and the accompanying consents and letters of
transmittal (the "Letters of Transmittal"). Unless otherwise indicated, the use
of the term Subordinated Notes Tender Offer herein shall be deemed to include
the Subordinated Notes Consent Solicitation, the use of the term Discount Notes
Tender Offer herein shall be deemed to include the Discount Notes Consent
Solicitation and the use of the term Tender Offers herein shall be deemed to
include the Consent Solicitations.
IPC and Packaging hereby confirm their agreement with you as
follows:
1. Tender Offer Materials. Each of the Issuers agrees to
furnish you at its own expense with as many copies as you may reasonably request
of the Offers to Purchase, and all attachments thereto, and the Letters of
Transmittal and all other related offering materials prepared by the Issuers for
use in connection with the Tender Offers (collectively, as amended or
supplemented from time to time in accordance with the terms hereof and thereof
and including all of the documents incorporated by reference therein, the
"Offering Materials"). Each of the Issuers authorizes you to use the Offering
Materials in connection with the Tender Offers, and you agree that you shall not
use any material in connection therewith other than the Offering Materials and
such other materials, if any, as the Issuers may approve. Each of the Issuers
agrees to cause a copy of the Offering Materials to be mailed to each record
holder of the Notes and to use its best efforts to cause a copy of the Offering
Materials to be mailed to each beneficial holder of the Notes that is known to
the Issuers. Thereafter, to the extent practicable until the expiration of the
Tender Offers, each of the Issuers shall use its best efforts to cause copies
of the Offering Materials to be mailed to each person who becomes a record
holder of Notes and each beneficial holder
<PAGE> 3
-3-
of Notes that becomes known to the Issuers. You agree to use such information
only in connection with the Tender Offers and not to furnish any such
information to any other person except in connection with the Tender Offers.
The date on which the Offering Materials are first mailed or
otherwise distributed to holders of Notes is hereinafter referred to as the
"Commencement Date."
2. Agreement to Act as Dealer Manager. Each of the Issuers
hereby retains you, and you agree to act, as the exclusive dealer manager ("you"
or the "Dealer Manager") to the Issuers in connection with the Tender Offers,
until the earlier of (i) December 31, 1997 and (ii) (A)in the case of the
Subordinated Notes Tender Offer, the date of the consummation (the "Subordinated
Notes Closing") of the Subordinated Notes Tender Offer (the "Subordinated Notes
Closing Date") and (B) in the case of the Discount Notes Tender Offer, the date
of the consummation (the "Discount Notes Closing") of the Discount Notes Tender
Offer (the "Discount Notes Closing Date"). As Dealer Manager, you agree, in
accordance with your customary practices, to perform diligently those services
in connection with the Tender Offers as are customarily performed by investment
banking concerns in connection with tender offers and consent solicitations of
like nature, including, but not limited to, soliciting tenders and consents
pursuant to the Tender Offers and Consent Solicitations and communicating
generally regarding the Tender Offers with brokers, dealers, commercial banks
and trust companies and other persons, including the holders of the Notes. You
agree to act in accordance with the Tender Offer Materials and agree to furnish
no other written materials to any person in connection with the Tender Offers
without our consent.
(a) Each of the Issuers hereby authorizes you to act as Dealer
Manager in connection with the Tender Offers, and, on the basis of the
representations, warranties and agreements of the Issuers herein
contained and subject to the terms and conditions hereof, you agree to
act as Dealer Manager in connection with the Tender Offers.
(b) Each of the Issuers agrees to use its best efforts to
furnish you, or cause the Subordinated Notes Trustee or Discount Notes
Trustee, as the case may be, to furnish you, as soon as practicable
after the Commencement Date, with cards or lists or copies thereof
showing the names of persons who were the holders of record of Notes as
of the Commencement Date and, to the extent available to the Issuers,
the beneficial holders of the Notes as of the Commencement Date,
together with
<PAGE> 4
-4-
their addresses and the principal amount of Notes held by them.
Additionally, each of the Issuers will use its best efforts to update
such information from time to time during the term of this Agreement
as reasonably requested by you and to the extent such information is
reasonably available to the Issuers within the time constraints
specified. You shall act hereunder as an independent contractor and
nothing contained herein or in such information shall make (x) you the
agent of either of the Issuers or any of their respective affiliates
or (y) either of the Issuers or any of their respective affiliates an
agent of you or any of your affiliates. Nothing contained in this
Agreement shall constitute you a partner of or joint venturer with
either of the Issuers or any of their respective affiliates.
(c) Each of the Issuers agrees that any reference to the
Dealer Manager in any Offering Materials or in any press release or
other document or communication is subject to your prior approval. If
you resign or your engagement hereunder is terminated prior to the
dissemination of the Offering Materials or any other release or
communication, no reference shall be made therein to you. In the event
that applicable law requires a reference to the Dealer Manager, each of
the Issuers agrees to provide you with prompt notice of such
requirement to provide you a reasonable opportunity to seek an
appropriate protective order or other remedy.
(d) Each of the Issuers authorizes you to communicate with any
depositary designated or retained by the Issuers with respect to the
Tender Offers (the "Depositary").
(e) In full payment for services rendered and to be rendered
hereunder by the Dealer Manager, the Issuers shall pay to the Dealer
Manager on the Subordinated Notes Closing Date and/or the Discount
Notes Closing Date in connection with your services rendered hereunder
(i) upon consummation of the Subordinated Notes Tender Offer and the
Discount Notes Tender Offer, a nonrefundable fee, in cash, in the
aggregate amount of $250,000 with respect to both such offers or (ii)
in the event only one of the Subordinated Notes Tender Offer or the
Discount Notes Tender Offer is consummated, a nonrefundable fee, in
cash, in the amount of $125,000. In addition, each of the Issuers
agrees to reimburse the Dealer Manager promptly upon demand made from
time to time, and whether or not the Tender Offers are consummated, for
all reasonable out-of-pocket ex-
<PAGE> 5
-5-
penses (including all reasonable fees and expenses of Cahill Gordon &
Reindel, counsel for the Dealer Manager) incurred in connection with
your services as Dealer Manager for the Tender Offers.
3. Certain Covenants. Each of the Issuers covenants with you
as follows:
(a) Each of the Issuers will give the Dealer Manager notice of
its intention to amend, supplement or prepare any amendment or
supplement to any Offering Materials, will furnish the Dealer Manager
with copies of such amendment or supplement and will not use any such
amendment or supplement to which the Dealer Manager or counsel for the
Dealer Manager shall reasonably object in writing within three business
days after delivery thereof to the Dealer Manager.
(b) If, during the Tender Offers, any event occurs as a result
of which it shall, in the reasonable judgment of the Issuers or their
counsel or the Dealer Manager or its counsel, be necessary to amend or
supplement any of the Offering Materials in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or, if for any other reason it is necessary,
in the reasonable judgment of any such person, at any time to amend or
supplement any of the Offering Materials to comply in all material
respects with the procedural requirements of Rule 14e-1 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any other law, rule or regulation, such person shall promptly
inform the Issuers and the Dealer Manager, and (subject to Section 3(a)
above) the Issuers shall promptly prepare and furnish copies to you of
such amendments or supplements to such Offering Materials, so that
either (i) the statements in the Offering Materials, as so amended or
supplemented, will not, in the light of the circumstances under which
they were made, be misleading or (ii) such compliance is effected.
(c) Each of the Issuers shall comply in all material respects
with the applicable provisions, if any, of the Securities Act of 1933,
as amended, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder (the "Act"), the Exchange
Act and the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated thereunder (the "Trust
Indenture Act"), in connection with the Offering Materials, the Tender
Offers and the transactions contemplated hereby and thereby; each of
the Issuers will take on a timely
<PAGE> 6
-6-
basis all actions reasonably necessary or legally required in relation
to the Tender Offers and all other actions contemplated by this
Agreement and by the Offering Materials; and each of the Issuers will
take all necessary corporate action to authorize any amendments to or
modifications of the Tender Offers.
(d) Each of the Issuers will notify you, not less than two
hours prior to the open of business, New York City time, of the
Commencement Date or, after the Commencement Date, the date on which
they propose to extend the Subordinated Notes Tender Offer or the
Discount Notes Tender Offer, as the case may be and, immediately upon
the commencement of each Tender Offer, the Issuers shall advise or
cause the Depositary to advise you upon your reasonable request from
time to time during the period of, and promptly after the expiration
of, each Tender Offer, as to all names and addresses of the holders of
the Notes that have been tendered and in respect of which a consent has
been received, during the immediately preceding day, indicating the
aggregate principal amount of Notes verified to be in proper form for
tender and consent, rejected for tender or consent, and being
processed; and will notify you promptly following expiration of each
Tender Offer on the Expiration Date (as defined in the Offering
Materials), of the aggregate principal amount of Notes in respect of
which a consent has been verified to be in proper form, a tender and
consent has been rejected and which are being processed. The Issuers
shall promptly give you notice of changes in the Expiration Date with
respect to each Tender Offer. The Issuers will not accept tenders and
consents in respect of Notes, unless the conditions to the obligations
of the Dealer Manager set forth in Section 6 hereof have been
satisfied.
(e) The Issuers shall advise you promptly of (i) the
occurrence of any event that might reasonably be expected to cause any
Issuer to amend, withdraw or terminate either Tender Offer, (ii) the
occurrence of any event, or the discovery of any fact, the occurrence
or existence of which would cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material
respect, (iii) the issuance of any order or the taking of any other
action by the Commission or any other governmental or regulatory agency
with respect to either Tender Offer (and, if in writing, will promptly
furnish you with a copy thereof), (iv) the occurrence of any event that
might reasonably be expected to cause the Issuers to amend or
supplement any of the Offering Materials, (v) the issuance or, to the
knowledge of the Issuers, the threat-
<PAGE> 7
-7-
ened issuance of any order or the taking of any other action by any
administrative or judicial tribunal or governmental agency or
instrumentality concerning either Tender Offer (and, if in writing,
will promptly furnish you a copy thereof) and (vi) any other
information relating to either Tender Offer which you may from time to
time reasonably request.
(f) The Issuers will not commence the mailing of the Offering
Materials unless the conditions set forth in Section 6 hereof with
respect to the commencement of the Tender Offers shall have been
satisfied and complied with prior to or concurrently with the
commencement of such mailing or shall have otherwise been waived in
writing by the Dealer Manager.
4. Expenses. In addition to the obligations of the Issuers to
pay the fee and to reimburse the Dealer Manager for its reasonable out-of-pocket
expenses as provided in Section 2(e) hereof, each of the Issuers agrees to pay
all costs and expenses incident to the performance of its obligations under this
Agreement, whether or not the transactions contemplated herein are consummated
or this Agreement is terminated pursuant to Section 8 hereof, including, but not
limited to, all costs and expenses incident to (i) the printing, word processing
or other production of documents with respect to such transactions, including
any costs of printing the Offering Materials, (ii) all arrangements relating to
the delivery to the Dealer Manager of copies of the foregoing documents, (iii)
the fees and disbursements of counsel, accountants and any other experts or
advisors retained by the Issuers, (iv) the fees and disbursements of the
Subordinated Notes Trustee and the Discount Notes Trustee and the Depositary and
any information agent and (v) any meetings with holders of Notes relating to the
Tender Offers.
5. Representations and Warranties. Each of the Issuers,
jointly and severally, represents and warrants to and agrees with you that, as
of the Commencement Date, each date that any Offering Materials are published,
sent, given or otherwise distributed (each a "Mailing Date") and the
Subordinated Notes Closing Date and the Discount Notes Closing Date:
(a) The Offering Materials, as amended and supplemented from
time to time, do not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements made therein, in the light of the circumstances
under which they are made, not misleading, except that the Issuers make
no representation or warranty with respect to any statement contained
in the Offering Materials based upon information furnished in
<PAGE> 8
-8-
writing by the Dealer Manager expressly for use therein.
(b) The Offering Materials, as amended and supplemented from
time to time, comply and will comply in all material respects with all
applicable provisions of the Exchange Act, and with all applicable
rules or regulations of any governmental or regulatory authority or
body.
(c) Each of the Issuers has been duly incorporated and is
validly existing in good standing as a corporation under the laws of
the State of Delaware, and each Issuer has all necessary power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby and by the Offering Materials.
(d) This Agreement has been duly authorized, executed and
delivered by each of the Issuers.
(e) The Subordinated Notes Supplemental Indenture, when
executed and delivered by IPC, (assuming the due authorization,
execution and delivery thereof by the Subordinated Notes Trustee, and
assuming that written consents from the Holders of a majority in
aggregate principal amount of the Subordinated Notes outstanding held
by persons other than IPC and its affiliates are received and are valid
and binding consents of such Holders authorizing execution of the
Subordinated Notes Supplemental Indenture), will have been duly
authorized, executed and delivered by, and will be the legal, valid and
binding obligation of, IPC, and the Subordinated Notes Supplemental
Indenture will conform, in all material respects, to the description
thereof in the Offering Materials and will be enforceable against IPC
in accordance with its terms except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought;
(f) The Discount Notes Supplemental Indenture, when executed
and delivered by Packaging, (assuming the due authorization, execution
and delivery thereof by the Discount Notes Trustee, and assuming that
written consents from the Holders of a majority in aggregate principal
amount of the Discount Notes outstanding held by persons other than
Packaging and its affiliates are
<PAGE> 9
-9-
received and are valid and binding consents of such Holders authorizing
execution of the Discount Notes Supplemental Indenture), will have been
duly authorized, executed and delivered by Packaging, and will be the
legal, valid and binding obligation of, Packaging, and the Discount
Notes Supplemental Indenture will conform, in all material respects, to
the description thereof in the Offering Materials and will be
enforceable against Packaging in accordance with its terms except that
the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other similar
laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought;
(g) The Supplemental Indentures will comply in all material
respects with the TIA;
(h) The execution, delivery and performance by each of the
Issuers of this Agreement and consummation of the transactions
contemplated hereby and by the Offering Materials will not conflict
with or constitute or result in a breach or violation of any of (i) the
terms or provisions of, or constitute a default by either of the
Issuers or any of their respective subsidiaries under, any material
indenture, mortgage, deed of trust, loan agreement (other than any loan
agreement that will be repaid in full), note, lease, license, franchise
agreement or other material agreement or instrument to which either of
the Issuers or any of their respective subsidiaries is a party or to
which any of them or their respective properties is subject, subject to
the Issuers' obtaining such consents, waivers and amendments with
respect to the foregoing on or prior to the Consummation Date or the
Commencement Date, as applicable, as may be required under or pursuant
to the foregoing, (ii) the certificate of incorporation or bylaws of
either of the Issuers or any of their respective subsidiaries or (iii)
any statute, judgment, decree, order, rule or regulation (excluding
state securities and "Blue Sky" laws) of any court or governmental
agency or other body applicable to either of the Issuers or any of
their respective subsidiaries or any of their respective properties.
(i) No consent, approval waiver, license or authorization or
other action by, or filing or registration with, any court or
governmental regulatory body or authority is required for the
execution, delivery and performance by the Issuers of this Agreement or
the
<PAGE> 10
-10-
consummation of the Tender Offers as contemplated by the Offering
Materials.
The representations and warranties set forth in this Section 5
shall remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of any indemnified party referred to in
Section 7, (ii) any termination of this Agreement or (iii) any withdrawal by you
pursuant to Section 6 or otherwise; provided, that with respect to any
termination or withdrawal, such representations and warranties shall be limited
to the period prior to such termination or withdrawal.
6. Conditions of the Dealer Manager's Obligations. Your
obligations to act and to continue to act (as the case may be) as Dealer Manager
shall be subject, in your reasonable discretion, to the accuracy in all material
respects of the representations and warranties contained herein as of the
Commencement Date, as of each Mailing Date and as of each Closing Date as if
made on and as of such date (except as expressly provided therein), to the
accuracy in all material respects of the statements contained in certificates
delivered by the officers of the Issuers pursuant to the provisions hereof, to
the performance by each of the Issuers in all material respects of its covenants
and agreements hereunder and to the following additional conditions unless
waived in writing by the Dealer Manager:
(a) There shall not have been any legal action, order, decree
or other administrative proceeding instituted or threatened against
either of the Issuers or any of their respective subsidiaries or
against you relating to the Tender Offers or the Dealer Manager's
activities in connection therewith or any of the other transactions
contemplated hereby or by the Offering Materials.
(b) The proceedings taken at or prior to the Closing Date in
connection with the Tender Offers and the other transactions
contemplated hereby and by the Offering Materials shall be in form and
substance reasonably satisfactory to you and your counsel, and such
counsel shall have been furnished with all such documents and
certificates as they may reasonably request in order to evidence the
accuracy and completeness in all material respects of any of the
representations or warranties of the Issuers, the performance in all
material respects of any covenants of the Issuers theretofore to be
performed, or the compliance with any of the conditions herein
contained.
<PAGE> 11
-11-
(c) On the Commencement Date, you shall have received, dated
as of such date, (i) the opinion of Skadden, Arps, Slate, Meagher &
Flom (Illinois), counsel for the Issuers, substantially in the form of
Exhibit A hereto and (ii) the opinion of Doug Patterson, general
counsel for the Issuers, substantially in the form of Exhibit B hereto.
(d) On the Subordinated Notes Closing Date, you shall have
received, dated as of such date, the opinion of Skadden, Arps, Slate,
Meagher & Flom (Illinois), counsel for the Issuers, substantially in
the form of Exhibit C hereto.
(e) On the Discount Notes Closing Date, you shall have
received, dated as of such date, the opinion of Skadden, Arps, Slate,
Meagher & Flom (Illinois), counsel for the Issuers, substantially in
the form of Exhibit D hereto.
(f) Subsequent to the respective dates of the most recent
financial statements contained or incorporated by reference in the
Offering Materials, there shall have been no material adverse change in
the general affairs, management, business, condition (financial or
other) or results of operations of either of the Issuers and their
respective subsidiaries taken as a whole (a "Material Adverse Change").
(g) Neither the Tender Offer nor any of the other transactions
contemplated hereby or by the Offering Materials shall be enjoined
(temporarily or permanently) and no restraining order or other
injunctive order shall have been issued or any action, suit or
proceeding shall have been commenced with respect to the Tender Offer,
this Agreement or any of the other transactions contemplated hereby or
by the Offering Materials, before any court or governmental authority.
(h) On the Commencement Date, the Subordinated Notes Closing
Date and the Discount Notes Closing Date, the Dealer Manager shall have
received a certificate, dated such date, of the Chief Financial Officer
of IPC or Packaging, as the case may be, to the effect that:
(i) The representations and warranties in this
Agreement are true and correct in all material respects as if
made on and as of such date, and each of the Issuers has
performed in all material respects all covenants and
agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to such date;
<PAGE> 12
-12-
(ii) Subsequent to the date as of which information
is given in the Offering Materials, as of the date hereof,
there has not been any Material Adverse Change; and
(iii) To the best of his knowledge, neither the
Tender Offer, nor any of the other transactions contemplated
hereby or by the Offering Materials, has been enjoined
(temporarily or permanently).
(i) On or before the Subordinated Notes Closing Date, IPC and
the Subordinated Notes Trustee shall have executed and delivered the
Subordinated Notes Supplemental Indenture, which shall be reasonably
satisfactory in form and substance to the Dealer Manager and Cahill
Gordon & Reindel, counsel for the Dealer Manager, and shall be in full
force and effect.
(j) On or before the Discount Notes Closing Date, Packaging
and the Discount Notes Trustee shall have executed and delivered the
Discount Notes Supplemental Indenture, which shall be reasonably
satisfactory in form and substance to the Dealer Manager and Cahill
Gordon & Reindel, counsel for the Dealer Manager, and shall be in full
force and effect.
On or before the Commencement Date, the Subordinated Notes
Closing Date and the Discount Notes Closing Date, the Dealer Manager and counsel
for the Dealer Manager shall have received such further documents, certificates
and schedules or instruments relating to the business, corporate, legal and
financial affairs of the Issuers and their subsidiaries as they shall have
heretofore reasonably requested.
Each of the Issuers shall furnish to the Dealer Manager such
conformed copies of such opinions, certificates, letters, schedules, documents
and instruments in such quantities as the Dealer Manager shall reasonably
request.
In the event that any of the foregoing conditions is not met
when required to be met, then you shall be entitled to withdraw as Dealer
Manager in connection with any Tender Offer without any liability or penalty
(except that the fee provided for in Section 2(e) hereof shall not be payable in
the event you so withdraw) to you or any other "indemnified party" (as defined
in Section 7) and without loss of any right to the payment of all expenses
payable hereunder.
7. Indemnification. Each of the Issuers, jointly and
severally, agrees to indemnify and hold harmless the Dealer Manager and its
affiliates, the directors, officers, agents, representatives and employees of
the Dealer Manager or its af-
<PAGE> 13
-13-
filiates and each other person, if any, controlling the Dealer Manager and its
respective affiliates within the meaning of Section 15 of the Act or Section 20
of the Exchange Act (each, an "indemnified party") from and against any and all
losses, actions, claims, damages or liabilities, and will reimburse any
indemnified party for all reasonable costs and expenses (including reasonable
counsel fees) as they are incurred by such indemnified party in connection with
investigating, preparing to defend or defending any such action or claim caused
by or arising out of, or in connection with, the Tender Offers (whether or not
consummated), the performance by you of the services contemplated by this
Agreement, an untrue statement or alleged untrue statement of a material fact in
any of the Offering Materials or an omission or an alleged omission to state a
material fact in any of the Offering Materials necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or the transmittal of the Offering Materials to the Holders, or that
arise out of or are based upon any failure to accept Notes or consents properly
tendered pursuant to the Tender Offers; provided, however, that the Issuers will
not be liable to any indemnified party to the extent that any claims,
liabilities, losses, damages, costs or expenses are finally judicially
determined by a court of competent jurisdiction to have resulted from (x) the
gross negligence, bad faith or willful misconduct of such indemnified party or
(y) the breach by such indemnified party of this Agreement.
The Issuers will not, without the prior written consent of the
Dealer Manager, which consent shall not be unreasonably withheld or delayed,
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
may be sought by an indemnified party hereunder (whether or not any indemnified
party is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of the
indemnified parties from all liability arising out of such claim, action, suit
or proceeding.
Promptly after receipt by an indemnified party of notice of
the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the Issuers under this Section 7, notify
the Issuers of the commencement thereof; but the omission so to notify the
Issuers will not relieve the Issuers from any liability that it may have to any
indemnified party otherwise than under this Section 7. In case any such action
is brought against any indemnified party, and it notifies the Issuers of the
commencement thereof, the Issuers will be entitled to participate therein and,
to the extent that it may wish, to assume the defense
<PAGE> 14
-14-
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and any indemnifying party and the indemnified party shall
have been advised by counsel that the representation of both the indemnified
party and the indemnifying party by such counsel would constitute a conflict of
interest under applicable rules of professional conduct, then the indemnifying
parties shall not have the right to direct the defense of such action on behalf
of such indemnified party or parties and such indemnified party or parties shall
have the right to select separate counsel to defend such action on behalf of
such indemnified party or parties. After notice from the indemnifying parties to
such indemnified party of its election so to assume the defense thereof and
approval by such indemnified party of counsel appointed to defend such action,
the indemnifying parties will not be liable to such indemnified party under this
Section 7 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying parties shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Dealer Manager,
representing the indemnified parties, who are parties to such action or actions)
or (ii) the indemnifying parties have authorized the employment of counsel for
the indemnified party at the expense of the indemnifying parties. The
indemnifying parties will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the consent
of the indemnifying parties, unless such indemnified party waived in writing its
rights under this Section 7, in which case the indemnified party may effect such
a settlement without such consent.
In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section 7 is unenforceable or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof), each indemnifying party, in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party on
the other from the Tender Offers or (ii) if
<PAGE> 15
-15-
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by the Issuers on
the one hand and the indemnified parties on the other shall be deemed to be in
the same proportion as (i) the aggregate principal amount of Notes purchased
pursuant to the Tender Offers bears to (ii) the fees paid or proposed to be paid
by the Issuers to such indemnified party under this Agreement. The indemnity,
reimbursement and contribution obligations of the Issuers under this Agreement
shall be in addition to any rights that the Dealer Manager or any other
indemnified party may have at common law or otherwise. The Issuers and the
Dealer Manager agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation (even if the
Issuers on the one hand and the indemnified parties on the other hand were
treated as one entity for such purpose) or by any other method of allocation
that does not take into account the equitable considerations referred to in the
first sentence of this paragraph. Notwithstanding any other provision of this
paragraph, the indemnified parties shall not be obligated to make contributions
hereunder that in the aggregate exceed the total fees received by the Dealer
Manager under this Agreement, less the aggregate amount of any damages that the
indemnified parties have otherwise been required to pay for which
indemnification is provided for hereunder. For purposes of this paragraph, each
person, if any, who controls the Dealer Manager within the meaning of Section 15
of the Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Dealer Manager.
8. Termination. This Agreement may be terminated (i) by the
Dealer Manager at any time upon notice to the Issuers if (A) the Issuers shall
mail or otherwise distribute or propose to mail or otherwise distribute any
supplement to any Offering Materials to which the Dealer Manager shall
reasonably object or that shall be reasonably disapproved by its counsel, (B) at
any time prior to the Subordinated Notes Closing, the Subordinated Notes Tender
Offer is
<PAGE> 16
-16-
terminated or withdrawn for any reason (other than failure of the
Dealer Manager to perform its obligations hereunder) or any restraining order or
other injunctive order shall have been issued or any action, suit or proceeding
shall have been commenced with respect to the Subordinated Notes Tender Offer,
this Agreement or any of the other transactions contemplated by the Offering
Materials, before any court or governmental authority that makes it inadvisable
for the Dealer Manager, in its reasonable discretion, to continue to act as
Dealer Manager hereunder, (C) at any time prior to the Discount Notes Closing,
the Discount Notes Tender Offer is terminated or withdrawn for any reason (other
than failure of the Dealer Manager to perform its obligations hereunder) or any
restraining order or other injunctive order shall have been issued or any
action, suit or proceeding shall have been commenced with respect to the
Discount Notes Tender Offer, this Agreement or any of the other transactions
contemplated by the Offering Materials, before any court or governmental
authority that makes it inadvisable for the Dealer Manager, in its reasonable
discretion, to continue to act as Dealer Manager hereunder, or (D) any of the
conditions specified in Section 6 shall not have been fulfilled or waived or
(ii) by the Issuers if at any time the Issuers determine not to consummate the
Tender Offers. Termination of this Agreement pursuant to this Section 8 shall be
without liability of any party to any other party except as provided in Section
11 hereof.
9. Notices. Notice given pursuant to any of the provisions of
this Agreement shall be in writing and shall be mailed, telecopied or delivered
(a) to the Issuers:
c/o Ivex Packaging Corporation
100 Tri-State Drive
Suite 200
Lincolnshire, Illinois 60069
Attention: Chief Executive Officer
with a copy to:
c/o Ivex Packaging Corporation
100 Tri-State Drive
Suite 200
Lincolnshire, Illinois 60069
Attention: Vice President and General Counsel
and
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606-1285
Attention: William R. Kunkel, Esq.
or (b) to the Dealer Manager:
BT Securities Corporation
130 Liberty Street
New York, New York 10006
Attention: Mr. Tim Collins
with a copy to:
<PAGE> 17
-17-
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: William M. Hartnett, Esq.
Any notice given hereunder may be made by telecopier or
telephone, but if so made shall be subsequently confirmed in writing.
10. Tombstone. The Issuers acknowledge that the Dealer Manager
may at any time after consummation of the Tender Offers place an announcement in
such newspapers and periodicals as it may choose, at its own cost (but subject
to the reasonable approval of the Issuers), stating that the Dealer Manager
acted as dealer manager to the Issuers in connection with the Tender Offers.
11. Survival. The provisions of Sections 2(e) and 4 hereof,
the indemnity and contribution agreements contained in Section 7 hereof and the
representations and warranties set forth in Section 5 hereof shall remain
operative and in full force and effect regardless of (i) any investigation made
by or on behalf of the Dealer Manager, or by or on behalf of any affiliate of
the Dealer Manager or any person controlling the Dealer Manager or such
affiliate, (ii) consummation of the Tender Offers or (iii) any termination of
this Agreement or of the Dealer Manager's engagement hereunder, and shall be
binding upon and shall inure to the benefit of, any successors, assigns, heirs
and personal representatives of the Issuers, the Dealer Manager and the
indemnified parties referred to in Section 7 hereof.
12. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAWS AND ANY RIGHT TO TRIAL BY JURY
WITH RESPECT TO ANY CLAIM, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
CONTEMPLATED BY THIS AGREEMENT IS HEREBY WAIVED. THE PARTIES HEREBY SUBMIT TO
THE NONEXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED
IN THE CITY OF NEW YORK IN CONNECTION WITH ANY DISPUTE RELATED TO THIS AGREEMENT
OR ANY MATTERS CONTEMPLATED HEREBY.
13. Entire Agreement. This Agreement constitutes the
entire agreement among the parties hereto and supersedes all prior agreements,
understandings and arrangements, oral or written, among the parties hereto with
respect to the subject matter hereof.
14. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be
<PAGE> 18
-18-
an original, but all of which together shall constitute one and the same
instrument.
15. Benefits of Agreement. This Agreement has been and is made
solely for the benefit of the parties hereto and of the persons and controlling
persons referred to in Section 7 herein and their respective successors, assigns
and heirs, and no other person shall acquire or have any right under or by
virtue of this Agreement.
16. Headings. The section headings in this Agreement have
been inserted as a matter of convenience of reference only and are not a part
hereof.
<PAGE> 19
-19-
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between the
Issuers and the Dealer Manager.
Very truly yours,
IPC, INC.
By: /s/ G. DOUGLAS PATTERSON
----------------------------
Name: G. Douglas Patterson
Title: Vice President
IVEX PACKAGING CORPORATION
By: /s/ G. DOUGLAS PATTERSON
----------------------------
Name: G. Douglas Patterson
Title: Vice President
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
BT SECURITIES CORPORATION
By: /s/ FOTIS G. HASIOTIS
----------------------------
Name: Fotis G. Hasiotis
Title: Vice President
<PAGE> 1
EXHIBIT 2.1
OFFERS TO PURCHASE AND CONSENT SOLICITATIONS STATEMENT
IVEX PACKAGING CORPORATION
IPC, INC.
OFFERS TO PURCHASE AND SOLICITATIONS OF CONSENTS
WITH RESPECT TO
13 1/4% SENIOR DISCOUNT DEBENTURES DUE 2005 OF
IVEX PACKAGING CORPORATION
AND
12 1/2% SENIOR SUBORDINATED NOTES DUE 2002 OF
IPC, INC.
EACH OF THESE OFFERS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER
24, 1997 UNLESS EXTENDED (SUCH DATE, THE "INITIAL EXPIRATION DATE" AND, AS THE
SAME MAY BE EXTENDED, THE "EXPIRATION DATE"). HOLDERS OF NOTES (AS DEFINED
HEREIN) MUST TENDER THEIR NOTES ON OR PRIOR TO THE EXPIRATION DATE IN ORDER TO
RECEIVE THE TOTAL CONSIDERATION (AS DEFINED HEREIN). TENDERED NOTES MAY BE
WITHDRAWN AT ANY TIME ON OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE AND CONSENTS MAY BE REVOKED AT ANY TIME ON OR PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE INITIAL EXPIRATION DATE. EACH OF THESE OFFERS
IS SUBJECT TO THE SATISFACTION OF CERTAIN CONDITIONS, INCLUDING (I) THE VALID
TENDER OF AT LEAST A MAJORITY OF THE AGGREGATE PRINCIPAL AMOUNT OF THE
OUTSTANDING NOTES OF EACH SERIES, (II) THE CONSENT CONDITION (AS DEFINED
HEREIN), AND (III) THE FINANCING CONDITION (AS DEFINED HEREIN).
Ivex Packaging Corporation, a Delaware corporation (the "Company"), hereby
offers to purchase for cash, upon the terms and subject to the conditions set
forth in this Offers to Purchase and Consent Solicitations Statement (as it may
be supplemented from time to time, the "Statement"), and in the accompanying
Consent and Letter of Transmittal (the "Consent and Letter of Transmittal" and,
together with this Statement, the "Offers"), all of its outstanding 13 1/4%
Senior Discount Debentures due 2005 (the "Senior Debentures"), issued pursuant
to the Senior Debenture Indenture, dated as of March 8, 1993 (the "Senior
Debenture Indenture") and IPC, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("IPC"), hereby offers to purchase for cash, upon the
terms and subject to the conditions set forth in the Offers, all of its
outstanding 12 1/2% Senior Subordinated Notes due 2002, (the "Subordinated
Notes" and together with the Senior Debentures, the "Notes"), issued pursuant to
the Subordinated Note Indenture, dated as of December 15, 1992 (the
"Subordinated Note Indenture").
The consideration for each $1,000 principal amount of Senior Debentures
tendered pursuant to the Offers shall be equal to (i) the greater of (A) $815 or
(B) the present value on the Payment Date (as defined herein) of $1,000 assuming
such amount is payable on March 15, 2000 (the date the Senior Debentures first
accrete to their stated principal amount at maturity (the "Par Value Date")),
determined on the basis of a yield (the "Tender Offer Yield" with respect to the
Senior Debentures) to the Par Value Date equal to the sum of (x) the yield on
the U.S. Treasury Coupon Strip due April, 2000 (the "Reference Security" with
respect to the Senior Debentures), as calculated by the Dealer Manager in
accordance with standard market practice, based on the bid price for such
Reference Security as of 2:00 p.m., New York City time, on September 10, 1997,
the tenth business day immediately preceding the Initial Expiration Date (the
"Price Determination Date"), as displayed on the Bloomberg Government Pricing
Monitor on "Page PXS" or any recognized quotation source selected by the Dealer
Manager in its sole discretion if the Bloomberg Government Pricing Monitor is
not available, plus (y) 150 basis points (such price being rounded to the
nearest cent per $1,000 principal amount of Senior Debentures) (the
consideration referred to in this clause (i) with respect to the Senior
Debentures is referred to as the "Total Consideration"), minus (ii) $20 per each
$1,000 principal amount of the Senior Debentures, which is equal to the Consent
Payment, with respect to the Senior Debentures, referred to below (the Total
Consideration minus the Consent Payment with respect to the Senior Debentures is
referred to as the "Tender Offer Consideration"), payable on the date that the
Notes are accepted for payment pursuant to the Offers (the "Payment Date").
The consideration for each $1,000 principal amount of Subordinated Notes
tendered pursuant to the Offers shall be equal to (i) the greater of (A) $1,065
or (B) the present value on the Payment Date of $1,062.50 (the amount payable on
the first date (December 15, 1997) on which the Subordinated Notes are
redeemable (the "Earliest Redemption Date")) and all future interest payments
payable up to the Earliest Redemption Date, determined on the basis of a yield
(the "Tender Offer Yield" with respect to the Subordinated Notes) to the
Earliest Redemption Date equal to the sum of (x) the yield on the 5 1/4% U.S.
Treasury Note due December, 1997 (the "Reference Security" with respect to the
Subordinated Notes), as calculated by the Dealer Manager in accordance with
standard market practice, based on the bid price for such Reference Security as
of 2:00 p.m., New York City time, on the Price Determination Date, as displayed
on the Bloomberg Government Pricing Monitor on "Page PX3" or any recognized
quotation source selected by the Dealer Manager in its sole discretion if the
Bloomberg Government Pricing Monitor is not available, plus (y) 75 basis points
(such price being rounded to the nearest cent per $1,000 principal amount of
Subordinated Notes) (the consideration referred to in this clause (i) with
respect to the Subordinated Notes is referred to as the "Total Consideration"),
minus (ii) $20 per each $1,000 principal amount of the Subordinated Notes, which
is equal to the Consent Payment, with respect to the Subordinated Notes,referred
to below (the Total Consideration minus the Consent Payment with respect to the
Subordinated Notes is referred to as the "Tender Offer Consideration"), plus
(iii) accrued and unpaid interest to, but not including, the Payment Date,
payable on the Payment Date.
------------------
The Dealer Manager for the Tender Offers and Consent Solicitations is:
BT SECURITIES CORPORATION
The date of the Offers to Purchase and Consent Solicitations Statement is August
27, 1997
<PAGE> 2
In conjunction with the Offers, the Company and IPC hereby solicit (the
"Solicitations") consents (the "Consents") of (i) registered holders of Senior
Debentures to certain proposed amendments (the "Senior Indenture Proposed
Amendments") to the Indenture, dated as of March 8, 1993, (as amended from time
to time, the "Senior Debenture Indenture"), between the Company, as issuer, and
the United States Trust Company of New York, as trustee (the "Trustee"),
pursuant to which the Senior Debentures were issued, and (ii) registered holders
of Subordinated Notes (together with the Senior Debentures, the "Holders") to
certain proposed amendments (the "Subordinated Notes Proposed Amendments" and,
together with the Senior Debentures Proposed Amendments, the "Proposed
Amendments") to the Indenture, dated as of December 15, 1992, (as amended from
time to time, the "Subordinated Note Indenture" and, together with the Senior
Debenture Indenture, the "Indentures"), between IPC, as issuer, and the Trustee,
as trustee, pursuant to which the Subordinated Notes were issued. Subject to the
terms and conditions set forth in this Statement and the Consent and Letter of
Transmittal, the Company hereby offers to pay $20 to each Senior Debenture
Holder and IPC hereby offers to pay $20 to each Subordinated Note Holder who
validly consents to the Proposed Amendments on or prior to 5:00 p.m., New York
City time, on the Expiration Date for each $1,000 principal amount of the Notes
for which Consents have been validly delivered and not validly revoked (the
"Consent Payment"), with such payment to be made on the Payment Date if, but
only if, the Notes are accepted for payment pursuant to the terms of the Offers.
If any Holder's Notes are not properly tendered pursuant to the Offers on or
prior to 5:00 p.m., New York City time, on the Expiration Date (and Consents
thereby properly delivered with respect to such Notes), such Holder will not
receive the Consent Payment, even though the Proposed Amendments will be
effective as to all Notes that are not purchased in the Offers. Adoption of the
Proposed Amendments may have adverse consequences for Holders who elect not to
tender Notes in the Offers, because Holders of Notes outstanding after
consummation of the Offers will not be entitled to the benefit of substantially
all of the restrictive covenants and certain event of default provisions
presently contained in the Indentures. In addition, the trading market for any
Notes not tendered in response to the Offers is likely to be significantly more
limited. See "Certain Significant Considerations" and "Proposed Amendments to
the Indentures."
HOLDERS WHO TENDER NOTES IN THE OFFERS ARE OBLIGATED TO CONSENT TO THE
PROPOSED AMENDMENTS WITH RESPECT TO SUCH NOTES. PURSUANT TO THE TERMS OF THE
CONSENT AND LETTER OF TRANSMITTAL, THE COMPLETION, EXECUTION AND DELIVERY
THEREOF BY A HOLDER IN CONNECTION WITH THE TENDER OF NOTES WILL BE DEEMED TO
CONSTITUTE THE CONSENT OF SUCH TENDERING HOLDER TO THE PROPOSED AMENDMENTS WITH
RESPECT TO SUCH NOTES. HOLDERS MAY NOT DELIVER CONSENTS WITHOUT TENDERING THE
RELATED NOTES IN THE OFFERS, AND MAY NOT REVOKE CONSENTS WITHOUT WITHDRAWING THE
PREVIOUSLY TENDERED NOTES TO WHICH SUCH CONSENTS RELATE FROM THE OFFERS.
NOTWITHSTANDING ANY OTHER PROVISION OF THE OFFERS OR THE SOLICITATIONS, THE
COMPANY'S AND IPC'S OBLIGATIONS TO ACCEPT FOR PAYMENT, AND TO PAY FOR, NOTES
VALIDLY TENDERED PURSUANT TO THE OFFERS IS CONDITIONED UPON (A) RECEIPT OF THE
REQUISITE CONSENTS (AS DEFINED HEREIN) TO THE PROPOSED AMENDMENTS FROM NOT LESS
THAN A MAJORITY IN AGGREGATE PRINCIPAL AMOUNT OF THE OUTSTANDING NOTES OF EACH
SERIES AND THE EXECUTION BY THE TRUSTEE OF SUPPLEMENTAL INDENTURES TO EACH OF
THE INDENTURES IMPLEMENTING THE PROPOSED AMENDMENTS IN THE MANNER SET FORTH
BELOW (THE "CONSENT CONDITION"), (B) THERE HAVING BEEN VALIDLY TENDERED (AND NOT
WITHDRAWN) PRIOR TO THE EXPIRATION DATE NOT LESS THAN A MAJORITY OF THE
AGGREGATE PRINCIPAL AMOUNT OF THE NOTES OF EACH SERIES OUTSTANDING (THE "MINIMUM
TENDER CONDITION"), (C) SATISFACTION OF THE FINANCING CONDITION (AS DEFINED
HEREIN) AND (D) SATISFACTION OF THE GENERAL CONDITIONS (AS DEFINED HEREIN). SEE
"CONDITIONS TO THE OFFERS." SUBJECT TO APPLICABLE SECURITIES LAWS AND THE TERMS
SET FORTH IN THE OFFERS, THE COMPANY AND IPC RESERVE THE RIGHT (X) TO WAIVE ANY
AND ALL CONDITIONS TO THE OFFERS OR THE SOLICITATIONS, (Y) TO EXTEND OR TO
TERMINATE THE OFFERS OR THE SOLICITATIONS OR (Z) OTHERWISE TO AMEND THE OFFERS
OR THE SOLICITATIONS IN ANY RESPECT. THE COMPANY AND IPC ARE NOT OBLIGATED TO
EXTEND THE RIGHT OF A
ii
<PAGE> 3
HOLDER TO REVOKE ITS CONSENT BEYOND THE INITIAL EXPIRATION DATE IN THE EVENT THE
OFFERS AND SOLICITATIONS ARE SO EXTENDED.
As of the date hereof, there are $160.0 million in principal amount of
Senior Debentures outstanding and $158.0 million in principal amount of
Subordinated Notes outstanding.
IN THE EVENT THAT THE OFFERS AND THE SOLICITATIONS ARE WITHDRAWN OR
OTHERWISE NOT COMPLETED, THE TENDER OFFER CONSIDERATION AND CONSENT PAYMENT WILL
NOT BE PAID OR BECOME PAYABLE TO HOLDERS OF NOTES WHO HAVE VALIDLY TENDERED
THEIR NOTES AND DELIVERED CONSENTS IN CONNECTION WITH THE OFFERS AND THE
SOLICITATIONS.
Any questions or requests for assistance may be directed to the Dealer
Manager at its address and telephone number set forth below. Requests for
additional copies of this Statement, the Consent and Letter of Transmittal and
the Notice of Guaranteed Delivery may be directed to the Dealer Manager.
Beneficial owners may also contact their broker, dealer, commercial bank or
trust company for assistance concerning the Offers and the Solicitations.
The Dealer Manager for the Offers and Solicitations is:
BT SECURITIES CORPORATION
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
(212) 775-2822
iii
<PAGE> 4
CERTAIN OFFER AND CONSENT SOLICITATION MATTERS
The Company's and IPC's obligations to accept for purchase and to pay for
Notes and the adoption of the Proposed Amendments are each conditioned on the
satisfaction of the Consent Condition, the Minimum Tender Condition, the
Financing Condition and the General Conditions. See "Conditions to the Offers."
The purpose of the Offers is to acquire all outstanding Notes. The purpose
of the Solicitations and the Proposed Amendments is to eliminate or modify
certain covenants and other provisions contained in the Indentures.
The Proposed Amendments will be effected by supplemental indentures (the
"Supplemental Senior Debenture Indenture" and "Supplemental Subordinated Note
Indenture", respectively, and collectively, the "Supplemental Indentures") to
the Senior Debenture Indenture and Subordinated Note Indenture, each of which is
to be executed by the Company or IPC, as the case may be, and the Trustee on the
Initial Expiration Date. "Requisite Consents" shall be the Consents of Holders
who hold not less than a majority in aggregate principal amount of the Notes of
each series then outstanding. The elimination and modification of the covenants
set forth in the Supplemental Indentures will not become operative unless and
until the Offers are consummated on the Payment Date. The "Payment Date" is the
date that the Company and IPC accept Notes for purchase pursuant to the Offers.
If the Offers are terminated or withdrawn, or the Notes are never accepted for
payment, the Supplemental Indentures will never become operative.
Tenders of Notes may be validly withdrawn at any time on or prior to 5:00
p.m., New York City time, on the Expiration Date and Consents may be validly
revoked at any time on or prior to 5:00 p.m., New York City time, on the Initial
Expiration Date. A valid written withdrawal of tendered Notes on or prior to
5:00 p.m., New York City time, on the Initial Expiration Date will constitute
the concurrent valid revocation of such Holder's related Consent. In order for a
Holder to revoke a Consent, such Holder must withdraw the related tendered
Notes. In addition, tenders of Notes may be validly withdrawn if the Offers are
terminated without any Notes being purchased thereunder. In the event of a
termination of the Offers, the Notes tendered pursuant to the Offers will be
returned to the tendering Holder.
Both the Tender Offer Consideration and any Consent Payment which a
tendering Holder of Notes is entitled to receive pursuant to the Offers will be
paid on the Payment Date. If any Holder's Notes are not accepted for purchase
and payment by the Company or IPC pursuant to the Offers, such Holder will not
receive either the Tender Offer Consideration or the Consent Payment. See
"Withdrawal of Tenders and Revocation of Consents." Under no circumstances will
any interest be payable because of any delay in the transmission of funds to
Holders.
See "Certain Significant Considerations" and "Certain Federal Income Tax
Consequences" for discussions of certain factors that should be considered in
evaluating the Offers and the Solicitations, and also see "Proposed Amendments
to the Indentures" for a description of the Proposed Amendments.
Each of the Company and IPC expressly reserve the absolute right, in its
sole discretion, from time to time to purchase any Notes remaining outstanding
after consummation or expiration of the offers, through open market or privately
negotiated transactions, one or more additional tender or exchange offers or
otherwise on terms and at prices that may or may not differ materially from the
terms of the Offers.
NEITHER THE COMPANY OR IPC, NOR THE DEALER MANAGER, MAKE ANY RECOMMENDATION
AS TO WHETHER OR NOT HOLDERS SHOULD TENDER NOTES IN RESPONSE TO THE OFFERS OR
PROVIDE CONSENTS TO THE PROPOSED AMENDMENTS.
------------------
IMPORTANT
Any Holder desiring to tender Notes and deliver Consents should either (a)
in the case of a Holder who holds physical certificates evidencing such Notes,
complete and sign the Consent and Letter of Transmittal (or a facsimile thereof)
in accordance with the instructions therein, have his or her signature thereon
iv
<PAGE> 5
guaranteed (if required by Instruction 1 of the Consent and the Letter of
Transmittal) and send or deliver such manually signed Consent and Letter of
Transmittal (or a manually signed facsimile thereof), together with certificates
evidencing such Notes and any other required documents to the United States
Trust Company of New York, as Depositary (the "Depositary"), or (b) in the case
of a Holder who holds Notes in book-entry form, request such Holder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such Holder. A beneficial owner who has Notes registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
such beneficial owner desires to tender and deliver Consents for Notes so
registered. See "Procedures for Tendering Notes and Delivering Consents."
Any Holder who desires to tender Notes but who cannot comply with the
procedures set forth herein for tender on a timely basis or whose certificates
for Notes are not immediately available may tender the Notes by following the
procedures for guaranteed delivery set forth under "Procedures for Tendering
Notes and Delivering Consents -- Guaranteed Delivery."
The Depository Trust Company ("DTC") has authorized DTC participants that
hold Notes on behalf of beneficial owners of Notes through DTC to tender their
Notes and consent to the Proposed Amendments as if they were Holders. To effect
a tender and consent, DTC participants may, in lieu of physically completing and
signing the Consent and Letter of Transmittal, transmit their acceptance to DTC
through the DTC Automated Tender Offer Program ("ATOP") for which the
transaction will be eligible and follow the procedure for book-entry transfer
set forth in "Procedures for Tendering Notes and Delivering Consents." A
beneficial owner of Notes that are held of record by a custodian bank,
depositary, broker, trust company or other nominee must instruct such Holder to
tender the Notes on the beneficial owner's behalf. A Letter of Instructions is
included in the solicitation materials provided along with this Statement which
may be used by a beneficial owner in this process to effect the tender. See
"Procedures for Tendering Notes and Delivering Consents."
Tendering Holders will not be obligated to pay brokerage fees or
commissions of the Dealer Manager or the Depositary.
Questions and requests for assistance may be directed to the Dealer Manager
at its address and telephone number set forth on the back cover of this
Statement. Additional copies of this Statement, the Consent and Letter of
Transmittal, the Notice of Guaranteed Delivery and other related materials may
be obtained from the Dealer Manager. Beneficial owners may also contact their
brokers, dealers, commercial banks or trust companies through which they hold
the Notes with questions and requests for assistance.
THIS STATEMENT CONSTITUTES NEITHER OFFERS TO PURCHASE NOR SOLICITATIONS OF
CONSENTS IN ANY JURISDICTION IN WHICH, OR TO OR FROM ANY PERSON TO OR FROM WHOM,
IT IS UNLAWFUL TO MAKE SUCH OFFERS OR SOLICITATIONS UNDER APPLICABLE SECURITIES
OR BLUE SKY LAWS. THE DELIVERY OF THIS STATEMENT SHALL NOT UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN ANY ATTACHMENTS HERETO OR IN
THE AFFAIRS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR AFFILIATES SINCE THE
DATE HEREOF.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS STATEMENT AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MAY NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, IPC OR THE DEALER MANAGER.
v
<PAGE> 6
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated by reference in this
Statement, including, without limitation, statements containing the words
"believes," "anticipates," "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company or IPC, or industry results,
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: international, national and local general economic
and market conditions; demographic changes; the size and growth of the paper and
plastic packaging markets for both consumer and industrial uses; the ability of
the Company or IPC to sustain, manage or forecast its growth; the ability of the
Company or IPC to successfully make and integrate acquisitions; the size, timing
and mix of purchases of the Company's or IPC's products; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; contingent liabilities and other claims asserted
against the Company or IPC; competition; the loss of significant customers or
suppliers; fluctuations and difficulty in forecasting operating results; changes
in business strategy or development plans; business disruptions; the ability to
attract and retain qualified personnel; the ability to protect technology; and
the use of proceeds from the Offering. Given these uncertainties, Holders are
cautioned not to place undue reliance on such forward-looking statements. The
Company and IPC disclaim any obligation to update any such factors or to
publicly announce the result of any revisions to any of the forward-looking
statements contained herein to reflect future events or developments.
vi
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1. Summary..................................................... 1
2. Available Information; Incorporation of Documents by 3
Reference...................................................
3. Terms of the Offers and the Solicitations................... 3
4. Certain Significant Considerations.......................... 5
5. Purpose of the Offers and the Solicitations................. 7
6. Certain Information Concerning the Company and IPC.......... 7
7. Proposed Amendments to the Indentures....................... 10
8. Acceptance for Payment and Payment for Notes; Acceptance of 12
Consents....................................................
9. Procedures for Tendering Notes and Delivering Consents...... 13
10. Withdrawal of Tenders and Revocation of Consents............ 16
11. Source and Amount of Funds.................................. 17
12. Conditions to the Offers.................................... 17
13. Certain Federal Income Tax Consequences..................... 18
14. The Dealer Manager and the Depositary....................... 19
15. Fees and Expenses........................................... 19
16. Miscellaneous............................................... 19
</TABLE>
Appendix A -- Proposed Amendments to the Senior Debenture Indenture
Appendix B -- Proposed Amendments to the Subordinated Note Indenture
vii
<PAGE> 8
1. SUMMARY
The following summary is provided solely for the convenience of the Holders
of the Notes. This summary is not intended to be complete and is qualified in
its entirety by reference to the full text and more specific details contained
in this Statement and any amendments hereto. Holders of the Notes are urged to
read this Statement in its entirety. Each of the capitalized terms used this
Summary and not defined herein has the meaning set forth elsewhere in this
Statement.
The Company................... Ivex Packaging Corporation, a specialty
packaging company that designs and manufactures
plastic and paper-based flexible packaging
products.
IPC........................... IPC, Inc., a wholly-owned subsidiary of the
Company.
The Senior Debentures......... 13 1/4% Senior Discount Debentures due 2005 of
the Company, issued pursuant to the Senior
Debenture Indenture.
The Subordinated Notes........ 12 1/2% Senior Subordinated Notes due 2002 of
IPC, issued pursuant to the Subordinated Note
Indenture.
The Notes..................... The Senior Debentures and the Subordinated
Notes.
The Offers.................... The Company and IPC hereby offer to purchase
all of the outstanding Notes at the prices set
forth below.
Expiration Date............... The Initial Expiration Date of the Offers shall
be 5:00 p.m., New York City time, on September
24, 1997, and, as the same may be extended, the
Expiration Date.
Consent Payment............... The Company and IPC are also soliciting from
Holders Consents to the Proposed Amendments to
the Indentures, and the Company and IPC are
offering to pay to each Holder who validly
Consents to the Proposed Amendments on or prior
to 5:00 p.m., New York City time, on the
Expiration Date, a Consent Payment in cash
equal to $20 per each $1,000 principal amount
of the Notes for which Consents have been
validly delivered, with such payment to be made
following the Expiration Date if, but only if,
the Notes are accepted for payment pursuant to
the terms of the Offers.
Requisite Consents............ Duly executed (and not revoked) Consents to the
Proposed Amendments from Holders representing a
majority in aggregate principal amount
outstanding of each of the Senior Debentures
and Subordinated Notes (excluding for such
purposes any Notes owned at such time by the
Company or IPC or any of their affiliates).
Total Consideration per $1,000
Principal Amount of Senior
Debentures.................... The greater of (A) $815 or (B) the present
value on the Payment Date of $1,000 determined
on the basis of the Tender Offer Yield to the
Par Value Date, equal to the sum of (x) the
yield on the U.S. Treasury Coupon Strip due
April, 2000 as of 2:00 p.m., New York City
time, on the Price Determination Date plus (y)
150 basis points.
Total Consideration per $1,000
Principal Amount of
Subordinated Notes............ The greater of (A) $1,065 or (B) the present
value on the Payment Date of $1,062.50 and all
future interest payments
1
<PAGE> 9
payable up to the Earliest Redemption Date
(December 15, 1997) determined on the basis of
the Tender Offer Yield to the Earliest
Redemption Date, equal to the sum of (x) the
yield on the 5 1/4% U.S. Treasury Note due
December, 1997 as of 2:00 p.m., New York City
time, on the Price Determination Date plus (y)
75 basis points.
Tender Offer Consideration.... Total Consideration less the Consent Payment.
Payment Date.................. The Payment Date shall be the date that the
Notes are accepted for payment pursuant to the
Offers, which shall be a date shortly after the
Expiration Date of the Offers.
How to Tender Notes or Deliver
Consents...................... See "Procedures for Tendering Notes and
Delivering Consents." For further information,
call the Dealer Manager or consult your broker,
dealer, commercial bank or trust company for
assistance.
Withdrawal Rights............. Tenders of Notes may be withdrawn at any time
on or prior to 5:00 p.m., New York City time,
on the Expiration Date and Consents may be
revoked at any time on or prior to 5:00 p.m.,
New York City time, on the Initial Expiration
Date. A valid written withdrawal of tendered
Notes on or prior to 5:00 p.m., New York City
time, on the Initial Expiration Date will
constitute the concurrent valid revocation of
such Holder's related Consent. In order for a
Holder to revoke a Consent, such Holder must
withdraw the related tendered Notes. See
"Withdrawal of Tenders and Revocation of
Consents."
Purpose of the Offers and
Solicitations................. The purpose of the Offers is to acquire all
outstanding Notes. The purpose of the
Solicitations and the Proposed Amendments is to
eliminate or modify certain covenants and other
provisions contained in the Indentures.
Source of Funds............... The Company and IPC expect to finance the
purchase of Notes with the net proceeds from
the underwritten public offering of the
Company's common stock and borrowings under its
New Credit Facility (as defined and discussed
in "Certain Information Concerning the Company
and IPC -- The Refinancing").
Brokerage Commissions......... No brokerage commissions are payable by Holders
of the Notes.
Further Information........... Additional copies of this Statement, the
Consent and Letter of Transmittal and other
related materials may be obtained by
contacting, and questions about the Offers
should be directed to, the Dealer Manager at
its address and telephone number set forth on
the back cover of this Statement.
2
<PAGE> 10
2. AVAILABLE INFORMATION; INCORPORATION OF DOCUMENTS BY REFERENCE.
Under the terms of the Senior Debenture Indenture and the Subordinated Note
Indenture, the Company and IPC have agreed to voluntarily comply with the
informational requirements of the Securities Exchange Act of 1934, as amended,
(the "Exchange Act"), and in accordance therewith file reports and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports and other information can be inspected and copied at the Public
Reference Section of the Commission located at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington D.C. 20549 and at regional public reference
facilities maintained by the Commission located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at prescribed
rates. Such material may also be accessed electronically by means of the
Commission's home page on the World Wide Web (http://www.sec.gov).
The Company's Annual Report on Form 10-K for its fiscal year ended December
31, 1996 and the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997 are incorporated herein by reference and shall
be deemed to be a part hereof, except as superseded or modified herein. IPC's
Annual Report on Form 10-K for its fiscal year ended December 31, 1996 and IPC's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997 and June
30, 1997 are incorporated herein by reference and shall be deemed to be a part
hereof, except as superseded or modified herein.
All documents and reports filed by the Company and IPC with the Commission
after the date of this Statement and on or prior to the termination of the
Offers shall be deemed incorporated herein by reference and shall be deemed to
be a part hereof from the date of filing of such documents and reports. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Statement to the extent that a statement contained herein or in any
subsequently filed document or report that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Statement.
3. TERMS OF THE OFFERS AND THE SOLICITATIONS.
Upon the terms and subject to the conditions of the Offers (including, if
the Offers are extended or amended, the terms and conditions of any such
extension or amendment), the Company is offering to purchase for cash all of the
outstanding Senior Debentures and IPC is offering to purchase for cash all of
the outstanding Subordinated Notes at a price, for each $1,000 principal amount
of Notes tendered pursuant to the Offers, equal to the Tender Offer
Consideration with respect to such Notes plus, in the case of the Subordinated
Notes, accrued and unpaid interest to, but not including, the Payment Date. The
Tender Offer Consideration is equal to the Total Consideration (as defined
herein) minus the Consent Payment, which is equal to $20 for each $1,000
principal amount of Notes.
The Total Consideration for each $1,000 principal amount of Senior
Debentures is equal to (i) the greater of (A) $815 or (B) the present value on
the Payment Date of $1,000, determined on the basis of the Tender Offer Yield to
the Par Value Date, equal to the sum of (x) the yield on the Reference Security,
as calculated by the Dealer Manager in accordance with standard market practice,
based on the bid price for such Reference Security as of 2:00 p.m., New York
City time, on the Price Determination Date, as displayed on the Bloomberg
Government Pricing Monitor on "Page PXS" or any recognized quotation source
selected by the Dealer Manager in its sole discretion if the Bloomberg
Government Pricing Monitor is not available, plus (y) 150 basis points (such
price being rounded to the nearest cent per $1,000 principal amount of Senior
Debentures).
The Total Consideration for each $1,000 principal amount of Subordinated
Notes is equal to (i) the greater of (A) $1,065 or (B) the present value on the
Payment Date of $1,062.50 and all future interest payments payable up to the
Earliest Redemption Date (December 15, 1997), determined on the basis of the
Tender Offer Yield to the Earliest Redemption Date, equal to the sum of (x) the
yield on the Reference Security, as calculated by the Dealer Manager in
accordance with standard market practice, based on the bid
3
<PAGE> 11
price for such Reference Security as of 2:00 p.m., New York City time, on the
Price Determination Date, as displayed on the Bloomberg Government Pricing
Monitor on "Page PX3" or any recognized quotation source selected by the Dealer
Manager in its sole discretion if the Bloomberg Government Pricing Monitor is
not available, plus (y) 75 basis points (such price being rounded to the nearest
cent per $1,000 principal amount of Subordinated Notes).
In addition, upon the terms and subject to the conditions of the
Solicitations (including, if the Solicitations are extended or amended, the
terms of any such extension or amendment), the Company and IPC are soliciting
Consents to the Proposed Amendments to the Indentures from Holders, and are
offering to pay to each Holder who consents to the Proposed Amendments on or
prior to 5:00 p.m., New York City time, on the Expiration Date, a Consent
Payment in cash equal to $20 per $1,000 principal amount of the Notes for which
Consents have been validly delivered and not validly revoked on or prior to 5:00
p.m. on the Expiration Date, with such payment to be made following the
Expiration Date if, but only if, the Notes are accepted for payment pursuant to
the terms of the Offers.
Although the Tender Offer Yield on the Reference Security on the Price
Determination Date will be determined only from the source noted above,
information regarding the closing yield of the Reference Security may also be
found in The Wall Street Journal and The New York Times. The yield on the
Reference Security for the Senior Debentures as of 12:00 p.m., New York City
time, on August 27, 1997 was 6.08% and the Reference Security for the
Subordinated Notes at such time was 5.30%. Accordingly, if such yield were
determined to be the yield on the Reference Security on the Price Determination
Date and September 30, 1997 were to be the Payment Date for the Notes, the
Tender Offer Yield, the Tender Offer Consideration and the Total Consideration
(i.e., the Tender Offer Consideration plus the Consent Payment) per $1,000
principal amount of a Senior Debenture would be 7.58%, $812.90 and $832.90,
respectively, and of a Subordinated Note would be 6.05%, $1,054.50 and
$1,074.50, respectively.
Promptly after the Price Determination Date, but in any event before 9:00
a.m., New York City time, on the following business day, the Company or IPC will
publicly announce the pricing information referred to above by press release to
Dow Jones News Service.
If the Notes are accepted for payment pursuant to the Offers, Holders who
validly tender their Notes pursuant to the Offers on or prior to 5:00 p.m., New
York City time, on the Expiration Date will receive total consideration equal to
the Tender Offer Consideration with respect to such Notes plus the Consent
Payment (i.e., the Total Consideration), plus, with respect to the Subordinated
Notes, accrued and unpaid interest to, but not including, the Payment Date.
BECAUSE THE TOTAL CONSIDERATION IS BASED IN PART ON A FIXED SPREAD PRICING
FORMULA LINKED TO A YIELD ON THE APPLICABLE REFERENCE SECURITY, THE TENDER OFFER
CONSIDERATION MAY BE AFFECTED BY CHANGES IN SUCH YIELD PRIOR TO THE PRICE
DETERMINATION DATE.
HOLDERS WHO TENDER NOTES IN THE OFFERS ARE OBLIGATED TO CONSENT TO THE
PROPOSED AMENDMENTS. PURSUANT TO THE TERMS OF THE CONSENT AND LETTER OF
TRANSMITTAL, THE COMPLETION, EXECUTION AND DELIVERY THEREOF BY A HOLDER IN
CONNECTION WITH THE TENDER OF NOTES WILL BE DEEMED TO CONSTITUTE THE CONSENT OF
SUCH TENDERING HOLDER TO THE PROPOSED AMENDMENTS. HOLDERS MAY NOT DELIVER
CONSENTS WITHOUT TENDERING THEIR NOTES IN THE OFFERS AND MAY NOT REVOKE CONSENTS
WITHOUT WITHDRAWING FROM THE OFFERS THE PREVIOUSLY TENDERED NOTES TO WHICH SUCH
CONSENTS RELATE.
All Notes validly tendered in accordance with the procedures set forth in
Section 9 and not withdrawn in accordance with the procedures set forth in
Section 10 on or prior to the Expiration Date will, upon the terms and subject
to the conditions hereof, including satisfaction of the Consent Condition, the
Minimum Tender Condition, the Financing Condition and the General Conditions be
accepted for payment by the Company or IPC, as the case may be, and payments
will be made therefor, shortly after the Expiration Date. All conditions to the
Offers will, if Notes are to be accepted for payment shortly after the
Expiration Date, be either satisfied or waived by the Company or IPC, as the
case may be, prior to the expiration of the Offers on the Expiration Date.
4
<PAGE> 12
The Proposed Amendments will be effected by the execution of the
Supplemental Indentures on the Initial Expiration Date. "Requisite Consents"
shall be the Consents of Holders who hold not less than a majority in aggregate
principal amount of each of the Senior Debentures and Subordinated Notes then
outstanding (excluding for such purposes any Notes owned at the time by the
Company or IPC or any of their affiliates) to the Proposed Amendments. The
elimination and modification of the covenants set forth in the Supplemental
Indentures will not become operative unless and until the Offers are consummated
on the Payment Date. The "Payment Date" is the date that the Company or IPC, as
the case may be, accepts Notes for purchase pursuant to the Offers. If the
Offers are terminated or withdrawn, or the Notes are not accepted for payment,
the Supplemental Indentures will not become operative.
Tenders of Notes may be validly withdrawn at any time on or prior to 5:00
p.m., New York City time, on the Expiration Date and Consents may be validly
revoked at any time on or prior to 5:00 p.m., New York City time, on the Initial
Expiration Date, but not thereafter. A valid withdrawal of tendered Notes on or
prior to 5:00 p.m., New York City time, on the Initial Expiration Date will
constitute the concurrent valid revocation of such Holder's related Consent. In
order for a Holder to revoke a Consent, such Holder must withdraw the related
tendered Notes in writing. If, after the Expiration Date, the Company or IPC, as
the case may be, reduces either (A) the principal amount of Notes subject to the
Offers or (B) the Tender Offer Consideration, then previously tendered Notes
with respect to such Offer may be validly withdrawn in writing until the
expiration of ten business days after the date that notice of any such reduction
is first published, sent or given to Holders by the Company or IPC, as the case
may be. In addition, tenders of Notes may be validly withdrawn if the Offers are
terminated without any Notes being purchased thereunder. In the event of a
termination of the Offers, the Notes tendered pursuant to the Offers will be
returned to the tendering Holder.
Each of the Company's and IPC's obligation to accept, and pay for, Notes
validly tendered pursuant to the Offers is conditional upon satisfaction of (a)
the Consent Condition, (b) the Minimum Tender Condition, (c) the Financing
Condition and (d) the General Conditions. Consent Payments to Holders who have
validly consented to the Proposed Amendments on or prior to 5:00 p.m., New York
City time, on the Expiration Date are conditioned upon (a) satisfaction of the
Consent Condition and (b) the Company's and IPC's acceptance of the Notes for
purchase pursuant to the Offers. Subject to applicable securities laws and the
terms set forth in this Statement, each of the Company and IPC reserve the
right, prior to the expiration of the Offers on the Expiration Date, (i) to
waive any and all conditions to the Offers or the Solicitations, (ii) to extend
or to terminate the Offers or the Solicitations or (iii) otherwise to amend the
Offers or the Solicitations in any respect. See "Conditions to the Offers." The
rights reserved by the Company and IPC in this paragraph are in addition to the
Company's and IPC's rights to terminate the Offers described in Section 12. Any
extension, amendment or termination will be followed as promptly as practicable
by public announcement thereof, the announcement in the case of an extension of
the Offers to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which any public announcement may be made, neither the Company nor
IPC shall have any obligation to publish, advertise or otherwise communicate any
such public announcement other than by issuing a press release to the Dow Jones
News Service.
If the Company or IPC makes a material change in the terms of the Offers or
the Solicitations or the information concerning the Offers or the Solicitations,
the Company or IPC, as the case may be, will disseminate additional Offer and
Solicitation materials and extend such Offers or, if applicable, the
Solicitations, to the extent required by law. See "Withdrawal of Tenders and
Revocation of Consents."
4. CERTAIN SIGNIFICANT CONSIDERATIONS.
The following considerations, in addition to the other information
described elsewhere herein, should be carefully considered by each Holder before
deciding whether to participate in the Offers and the Solicitations.
Effects of the Proposed Amendments. Notes not purchased pursuant to the
Offers will remain outstanding. If the Proposed Amendments become operative, the
principal restrictive covenants contained in the Indentures will be eliminated.
The Indentures, as so amended, will continue to govern the terms of all Notes
related thereto that remain outstanding under such Indentures after the
consummation of the Offers. The
5
<PAGE> 13
elimination of these restrictive covenants and other provisions would permit the
Company or IPC, as the case may be, insofar as the Indentures are concerned, to,
among other things, incur indebtedness, pay dividends or make other restricted
payments, incur liens or engage in other transactions which would otherwise not
have been permitted pursuant to the Indentures. It is possible that any such
actions that the Company or IPC would be permitted to take as a result of the
changes to the Indentures effected by the Supplemental Indentures will increase
the credit risk with respect to the Company or IPC, as the case may be, faced by
the non-tendering Holders or otherwise adversely affect the interests of the
non-tendering Holders. See "Proposed Amendments to the Indentures."
Leverage. The Company and IPC are, and immediately following the
Refinancing will remain, significantly leveraged. As set forth under "Certain
Information Concerning the Company and IPC -- Capitalization," on a pro forma
basis (assuming completion of the Refinancing) the Company would have had $352.0
million of long-term indebtedness outstanding (excluding current maturities) and
stockholders' deficit of $53.1 million as of June 30, 1997 and IPC would have
had $352.0 million of long-term indebtedness outstanding (excluding current
maturities) and stockholder's deficit of $22.9 million as of June 30, 1997. Each
of the Company's and IPC's future operating performance and ability to service
or refinance its indebtedness will be subject to future economic conditions and
to financial, business and other factors, many of which are beyond its control,
and consequently the Company and IPC may be unable to service all of their debt
in the future. There can be no assurance that the Company's and IPC's future
operating performance and the availability under the New Credit Facility will be
sufficient to service such indebtedness or that the Company or IPC, as the case
may be, will be able to refinance its indebtedness in whole or in part.
The degree to which the Company and IPC are leveraged could have important
consequences to Holders of the Notes, including the following: (i) the Company's
and IPC's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or other
purposes may be limited; (ii) a substantial portion of the Company's and IPC's
cash flow from operations will be dedicated to the payment of the principal of
and interest on their existing indebtedness, thereby reducing funds available
for operations; (iii) the agreements governing the Company's and IPC's long-term
indebtedness and bank loans contain, and the New Credit Facility is expected to
contain, certain restrictive covenants, including certain covenants that limit
the payment of dividends and other distributions by IPC to the Company; (iv)
borrowings under the New Credit Facility will be at floating rates of interest,
causing the Company and IPC to be vulnerable to increases in interest rates; and
(v) each of the Company's and IPC's substantial degree of leverage could make it
more vulnerable to a downturn in economic conditions. The Company's and IPC's
ability to make scheduled payments of the principal of or interest on, or to
refinance, their indebtedness will depend on its future operating performance
and cash flow, which are subject to prevailing economic conditions, primarily
interest rate levels and financial, competitive, business and other factors,
many of which are beyond their control.
Limited Trading Market. The Notes are not listed on any national or
regional securities exchange. To the extent that the Notes are tendered and
accepted in the Offers, any existing trading market for the remaining Notes will
become more limited because of the smaller principal amount of Notes
outstanding. A debt security with a smaller outstanding principal amount
available for trading (a smaller "float") may command a lower price than would a
comparable debt security with a greater float. Consequently, the liquidity,
market value and price volatility of Notes which remain outstanding may be
adversely affected. Holders of unpurchased Notes may attempt to obtain
quotations for the Notes from their brokers; however, there can be no assurance
that any trading market will exist for the Notes following consummation of the
Offers. The extent of the public market for the Notes following consummation of
the Offers would depend upon the number of Holders remaining at such time, the
interest in maintaining a market in Notes on the part of securities firms and
other factors.
Although the Company and IPC believe that the Notes trade on a negotiated
basis between certain market makers and Holders of the Notes, no generally
reliable public pricing information for the Notes is available. Holders of Notes
are urged to contact their brokers to obtain the best available information as
to potential current market prices.
6
<PAGE> 14
5. PURPOSE OF THE OFFERS AND THE SOLICITATIONS.
The purpose of the Offers, which are conditioned on satisfaction of the
Consent Condition, the Minimum Tender Condition, the Financing Condition and the
General Conditions, is to acquire all of the outstanding Notes. From time to
time in the future, the Company, IPC or their affiliates may seek to acquire any
Notes which remain outstanding following consummation or expiration of the
Offers, through open market or privately negotiated transactions, tender offers,
exchange offers or otherwise, upon such terms and at such prices as it may
determine, which may be more or less than the price to be paid pursuant to the
Offers and could be for cash or other consideration. Alternatively, the Company
or IPC may consider taking other steps in order to render inapplicable the
restrictions contained in the relevant covenants of the Indentures. There can be
no assurance as to which, if any, of these alternatives (or combinations
thereof) the Company or IPC may pursue or whether they would be successful.
The purpose of the Solicitations and the Proposed Amendments is to
eliminate or modify certain of the restrictive covenants and other provisions
contained in the Indentures.
6. CERTAIN INFORMATION CONCERNING THE COMPANY AND IPC.
The Company, through IPC, is a vertically integrated specialty packaging
company that designs and manufactures value-added plastic and paper-based
flexible packaging products. The Company serves a variety of markets, providing
packaging for food, medical devices and electronic goods and protective
packaging for industrial products.
Consumer Packaging. Consumer Packaging designs and manufactures plastic and
paper-based products for food packaging applications and, more recently, for
applications in the medical and electronics industries. The Company produces a
broad array of items, including plastic containers for prepared foods, produce
and baked goods; specialty paper products such as fluted baking cups and liners
for cookies and other based goods; microwaveable packaging materials; and
protective packaging for medical devices and electronics products. Consumer
Packaging markets its products to a variety of end users, including national
wholesale bakeries, supermarket chains, foodservice distributors, fast-food
chains, major agricultural growers, medical equipment suppliers and electronics
manufacturers. The Company also manufactures a variety of plastic sheet and film
products from several different resins for internal use and sales to third party
converters. Ivex is the leading producer of OPS sheet in the world. Consumer
Packaging represented approximately 56% of the Company's net sales and 58% of
the Company's EBITDA during the 12 months ended June 30, 1997.
Industrial Packaging. Industrial Packaging manufactures and coats film,
paper and foil products for protective packaging and specialty papers. The
Company produces products for some of the fastest growing applications in the
protective packaging industry, including film and paper maskings and
self-sealing coated packaging applications. These products are marketed
primarily to consumer durable goods manufacturers, automotive companies, other
industrial manufacturers and integrated paper producers. The Company also
manufactures a variety of recycled kraft paper made from post-consumer and
post-industrial fibers and specialty lightweight paper made primarily from
virgin pulp for internal use and sales to third party converters. Industrial
Packaging represented approximately 44% of the Company's net sales and 42% of
the Company's EBITDA during the 12 months ended June 30, 1997.
The Refinancing. The Offers are a component of a comprehensive refinancing
strategy of the Company. As part of this refinancing, IPC is in the process of
negotiating a new credit facility (the "New Credit Facility") that will
refinance its existing credit facility. The Company also intends to raise
additional equity financing through an underwritten public offering of its
common stock that is expected to result in net proceeds to the Company of
approximately $92.3 million (the "Stock Offering"). The Company intends to use
the proceeds of the Stock Offering together with borrowings under the New Credit
Facility to refinance substantially all of its existing indebtedness. The
purchase of Notes pursuant to the Offers is subject, among other things, to the
satisfactory completion of the New Credit Facility and funding thereunder and
the consummation of the Stock Offering. See "Conditions to the Offers."
7
<PAGE> 15
Specifically, IPC presently intends to use funds to be provided under the
New Credit Facility to retire the entire $158 million aggregate principal amount
of its Subordinated Notes. The Company presently intends to use the proceeds of
the Stock Offering and borrowings under the New Credit Facility to retire the
entire $160 million aggregate principal amount of its Senior Debentures. See
"Capitalization".
The New Credit Facility is expected to provide for IPC to borrow up to $475
million principal amount at variable interest rates. On a pro forma basis at
June 30, 1997, the Company expects IPC to borrow approximately $327.7 million
under the New Credit Facility in connection with the Refinancing.
Capitalization. The following table sets forth the capitalization of each
of the Company and IPC as of June 30, 1997, on a historical basis and as
adjusted to give effect to the Stock Offering, the application of the net
proceeds thereof, the New Credit Facility and the purchase of all of the
outstanding Senior Debentures at an assumed price of $130.5 million and all of
the outstanding Subordinated Notes at an assumed price of $170.5 million.
8
<PAGE> 16
THE COMPANY
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
HISTORICAL PRO FORMA(1)
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt........................ $ 8,012 $ 16,137(2)
========= =========
Long-term debt:
Existing Credit Facility.................................. $ 94,825 (2)
New Credit Facility....................................... $ 312,732(2)
Industrial revenue bonds.................................. 37,623 37,623
12 1/2% Subordinated Notes, net of discount............... 157,395 (3)
13 1/4% Discount Debentures, net of discount.............. 113,095 (3)
Other debt................................................ 1,674 1,674
--------- ---------
Total long-term debt................................... 404,612 352,029
--------- ---------
Stockholders' deficit:
Ivex Packaging Corporation common stock................... 11 183
Paid in capital in excess of par value.................... 177,375 299,745
Accumulated deficit....................................... (300,879) (352,172)(4)
Foreign currency translation adjustment................... (899) (899)
--------- ---------
Total stockholders' deficit............................ (124,392) (53,143)
--------- ---------
Total capitalization........................................ $ 280,220 $ 298,886
========= =========
</TABLE>
- -------------------------
NOTES TO CAPITALIZATION TABLE (THE COMPANY) (IN THOUSANDS)
(1) Adjusted for (i) the issuance and sale of shares of Common Stock by the
Company (assuming net proceeds of $92,316), (ii) the issuance of the
Company's shares to management in connection with the conversion of certain
IPC common stock options held by management (the "IPC Options") and (iii)
borrowings under the New Credit Facility, and the anticipated use of net
proceeds from such transactions to purchase the Subordinated Notes and the
Senior Debentures as if such issuances and borrowings had occurred on June
30, 1997. Accordingly, the pro forma adjustments reflect the refinancing of
the Existing Credit Facility, the repurchase of all of the outstanding
Subordinated Notes and all of the outstanding Senior Debentures.
(2) Reflects borrowings of $300,000 under the term loan portion and $27,732
under the revolving credit portion of the New Credit Facility and the
refinancing of $52,500 term loans and $49,200 revolving credit loans under
the Existing Credit Facility.
(3) Reflects the repurchase of all outstanding Subordinated Notes and Senior
Debentures.
(4) The pro forma accumulated deficit balance is adjusted for a non-cash
extraordinary expense of $8,141 for previously capitalized debt issuance
costs and a cash extraordinary expense of $30,496 for prepayment costs
assumed to have been paid in connection with the repurchase of all of the
outstanding Subordinated Notes and Senior Debentures. The pro forma
accumulated deficit balance is also adjusted for a nonrecurring compensation
charge of approximately $46,900 in connection with the conversion of the IPC
Options. The nonrecurring compensation charge consists of (i) a non-cash
compensation charge of $30,300 associated with the conversion of the IPC
Options into shares of the Company's common stock and (ii) a compensation
charge of approximately $16,600 associated with the accrual of future
Company payments to senior management of an amount which (after taxes) will
enable such management to pay the interest on the loans made to them by the
Company. Such loans were made to senior management to enable them to pay
income taxes payable in connection with the conversion of the IPC Options.
The extraordinary expense and nonrecurring charge are reflected as an
increase to pro forma accumulated deficit, net of a tax benefit of
approximately $34,200.
9
<PAGE> 17
IPC
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
HISTORICAL PRO FORMA(1)
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt........................ $ 8,012 $ 16,137(2)
======== =========
Long-term debt:
Existing Credit Facility.................................. $ 94,825 (2)
New Credit Facility....................................... $ 312,732(2)
Industrial revenue bonds.................................. 37,623 37,623
12 1/2% Subordinated Notes, net of discount............... 157,395 (3)
Other debt................................................ 1,674 1,674
-------- ---------
Total long-term debt................................... 291,517 352,029
-------- ---------
Stockholders' deficit:
IPC, Inc. common stock.................................... 1 1
Paid in capital in excess of par value.................... 73,417 103,643
Accumulated deficit....................................... (86,119) (125,603)(4)
Foreign currency translation adjustment................... (899) (899)
-------- ---------
Total stockholders' deficit............................ (13,600) (22,858)
-------- ---------
Total capitalization........................................ $277,917 $ 329,171
======== =========
</TABLE>
- -------------------------
NOTES TO THE CAPITALIZATION TABLE (IPC) (IN THOUSANDS)
(1) Adjusted for (i) the issuance of the Company's shares to management in
connection with the conversion of the IPC Options and (ii) borrowings under
the New Credit Facility and the anticipated use of net proceeds from the New
Credit Facility to purchase the Subordinated Notes and extend an
intercompany loan to the Company to provide for a portion of the funds
required to purchase Senior Debentures, as if such transactions had occurred
on June 30, 1997. Accordingly, the pro forma adjustments reflect the
refinancing of the Existing Credit Facility, the repurchase of all of the
outstanding Subordinated Notes and the extension of a loan to the Company to
purchase Senior Debentures.
(2) Reflects borrowings of $300,000 under the term loan portion and $27,732
under the revolving credit portion of the New Credit Facility and the
refinancing of $52,500 term loans and $49,200 revolving credit loans under
the Existing Credit Facility.
(3) Reflects the repurchase of all outstanding Subordinated Notes.
(4) The pro forma accumulated deficit balance is adjusted for a non-cash
extraordinary expense of approximately $5,854 for previously capitalized
debt issuance costs and a cash extraordinary expense of $13,104 for
prepayment costs assumed to have been paid in connection with the repurchase
of all of the outstanding Subordinated Notes. The pro forma accumulated
deficit is also adjusted for a nonrecurring compensation charge of
approximately $46,900 in connection with the conversion of the IPC Options.
The nonrecurring compensation charge consists of (i) a non-cash compensation
charge of approximately $30,300 associated with the conversion of the IPC
Options into shares of the Company's common stock and (ii) a compensation
charge of approximately $16,600 associated with the accrual of future IPC
payments to senior management of an amount which (after taxes) will enable
such management to pay the interest on the loans made to them by IPC. Such
loans were made to senior management to pay income taxes payable in
connection with the conversion of the IPC Options. The extraordinary expense
and nonrecurring charge are reflected as an increase to pro forma
accumulated deficit, net of tax benefit of approximately $26,300.
7. PROPOSED AMENDMENTS TO THE INDENTURES.
This section sets forth a brief description of the Proposed Amendments to
each of the Indentures for which Consents are being sought pursuant to the
Solicitations. The Proposed Amendments to the Senior
10
<PAGE> 18
Debenture Indenture and the Proposed Amendments to the Subordinated Note
Indenture are substantially identical insofar as this description of proposed
amendments is concerned except as otherwise specifically set forth below. The
summaries of provisions of the Indentures set forth below are qualified in their
entireties by reference to the full and complete terms contained in the
respective Indentures. Capitalized terms appearing below but not defined in this
Statement have the meanings assigned to such terms in the respective Indentures.
The elimination and modification of the covenants set forth in the
Supplemental Indentures, as described below, will not become operative unless
and until the Offers are consummated on the Payment Date. The Proposed
Amendments to each of the Indentures are as follows:
Deletion of Restrictive Covenants and Events of Default Related
Thereto. The Proposed Amendments would delete in their entireties the following
restrictive covenants and references thereto from both the Indentures (except as
noted) as well as the events of default related solely to such restrictive
covenants:
<TABLE>
<S> <C> <C>
Section 801 - Limitation on Mergers and Consolidations. Restricts the
ability of the Company or IPC, as the case may be, to
consolidate with or merge with or into another Person.
Section 1005 - Maintenance of Properties. Requires the Company or IPC, as
the case may be, and their respective subsidiaries to
maintain all properties used in conduct of their business so
that the business may be properly conducted.
Section 1006 - Payment of Taxes and Other Claims. Requires the Company or
IPC, as the case may be, and their respective subsidiaries
to pay or discharge all taxes and claims which might become
liens.
Section 1007 - Limitations on Additional Indebtedness. Restricts the
ability of the Company (in the case of the Senior
Debentures), IPC or any Subsidiary of IPC to incur
additional Indebtedness or issue preferred stock.
Section 1008 - Limitations on Issuance and Sale of Subsidiary
(Senior Stock. Restricts the ability of IPC to issue any capital
Debenture stock other than to the Company or its wholly-owned
Indenture only) subsidiaries.
Section 1009 - Limitations on Sale and Leaseback Transactions. Restricts
the ability of the Company (in the case of the Senior
Debentures), IPC or any Subsidiary of IPC to enter into sale
and leaseback transactions except in certain circumstances.
Section 1010 - Limitations on Restricted Payments. Restricts the ability of
the Company (in the case of the Senior Debentures), IPC or
any Subsidiary of IPC to make restricted payments, including
(i) certain dividends or distributions in respect of Capital
Stock of the Company, IPC or any Subsidiary of IPC, (ii)
certain purchases, redemptions, other acquisitions or
retirements of Capital Stock or subordinated debt of the
Company, IPC or any Subsidiary of IPC or (iii) Prohibited
Investments.
Section 1011 - Limitations on Restrictions on Distributions from Certain
Subsidiaries. Prevents the Company or IPC, as the case may
be, from limiting the ability of IPC or any Subsidiary of
IPC to (i) pay dividends, make distributions or repay
Indebtedness to the Company, IPC or any Subsidiary of IPC,
(ii) make loans or advances to the Company, IPC or any
Subsidiary of IPC or (iii) transfer its property or assets
to the Company, IPC or any Subsidiary of IPC.
Section 1012 - Limitations on Asset Sales. Restricts the ability of the
Company (in the case of the Senior Debentures), IPC and any
Subsidiary of IPC to sell assets other than for fair market
value and consideration at least 80% of which is cash and
requires the proceeds of any such sale to be applied, among
other things, to repay senior debt and repurchase Notes.
Section 1013 - Limitations on Transactions with Affiliates. Restricts the
ability of the Company (in the case of the Senior
Debentures), IPC and any Subsidiary of IPC to engage in
transactions with Affiliates.
</TABLE>
11
<PAGE> 19
<TABLE>
<S><C>
Section 1014 - Limitation on Liens. Restricts the ability of the Company or
IPC, as the case may be, and their respective Subsidiaries
to incur Liens with respect to its property or assets.
In addition, the Proposed Amendments to the Subordinated Note Indenture
would also delete in its entirety the following restrictive covenants and
references thereto from the Subordinated Note Indenture as well as the events of
default related solely to such restrictive covenants:
Section 704 - Reports by Company. Requires IPC to file certain reports
with the Commission.
Section 1008 - Limitations on Preferred Stock of Subsidiaries. Restricts
the ability of IPC to permit any of its Subsidiaries to
issue any Preferred Stock other than to IPC or its wholly-
owned subsidiaries.
Section 1015 - Restriction on Additional Senior Subordinated
Indebtedness. Restricts the ability of IPC to incur
indebtedness subordinate to IPC's Senior Indebtedness and
senior to the Subordinated Notes.
</TABLE>
Deletion of Definitions. The Proposed Amendments would delete those
definitions from the Indentures when references to such definitions would be
eliminated as a result of the foregoing.
A description of the foregoing covenants and events of default and the
related definitions is set forth in Appendix A and Appendix B to this Statement.
As to each Indenture, the Proposed Amendments constitute a single proposal
and a tendering and consenting Holder must consent to the Proposed Amendments as
an entirety and may not consent selectively with respect to certain of the
Proposed Amendments.
The elimination and modification of the covenants set forth in the
Supplemental Indentures will not become operative unless and until the Offers
are consummated on the Payment Date.
IF THE PROPOSED AMENDMENTS BECOME OPERATIVE, THE HOLDERS OF NOTES WILL BE
BOUND THEREBY. THEREFORE, CONSUMMATION OF THE OFFERS AND THE ADOPTION OF THE
PROPOSED AMENDMENTS MAY HAVE ADVERSE CONSEQUENCES FOR HOLDERS WHO ELECT NOT TO
TENDER IN THE OFFERS.
Pursuant to the terms of each of the Indentures, the Proposed Amendments
require the written consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes issued under such Indenture,
excluding for such purposes any Notes owned at the time by the Company or IPC,
as the case may be, or any of their affiliates.
The valid tender by a Holder of Notes pursuant to the Offers will be deemed
to constitute the giving of a Consent by such Holder to the Proposed Amendments
with respect to such Notes. The Company and IPC are not soliciting and will not
accept Consents from Holders who are not tendering their Notes pursuant to the
Offers.
8. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR NOTES; ACCEPTANCE OF CONSENTS.
Upon the terms and subject to the conditions of the Offers (including if
the Offers are extended or amended, the terms and conditions of any such
extension or amendment) and applicable law, the Company or IPC, as the case may
be, will purchase, by accepting for payment, and will pay for, all Notes validly
tendered pursuant to the Offers (and not withdrawn, or if withdrawn validly
re-tendered), such payment to be made by the deposit of the aggregate Tender
Offer Consideration plus the aggregate Consent Payments in immediately available
funds by the Company or IPC, as the case may be, promptly after the Expiration
Date with the Depositary, which will act as agent for tendering Holders for the
purpose of receiving payment from the Company or IPC and transmitting such
payment to tendering Holders. Under no circumstances will interest on the Tender
Offer Consideration and the Consent Payment be paid by the Company or IPC by
reason of any delay in making payment. The Company and IPC expressly reserve the
right, in their sole discretion and subject to Rule 14e-1(c) under the Exchange
Act, to delay acceptance for payment of or payment for Notes in order to comply,
in whole or in part, with any applicable law. See "Conditions to the Offers." In
all cases, payment by the Depositary to Holders or beneficial owners of the
Tender Offer Consideration for Notes
12
<PAGE> 20
purchased pursuant to the Offers will be made only after timely receipt by the
Depositary of (i) certificates representing such Notes or timely confirmation of
a book-entry transfer of such Notes into the Depositary's account at DTC
pursuant to the procedures set forth in Section 9, (ii) a properly completed and
duly executed Consent and Letter of Transmittal (or manually signed facsimile
thereof) or a properly transmitted Agent's Message (as defined herein) and (iii)
any other documents required by the Consent and Letter of Transmittal.
For purposes of the Solicitations, Consents received by the Depositary will
be deemed to have been accepted if, as and when (a) the Company or IPC, as the
case may be, and the Trustee have executed the Supplemental Indentures on or
promptly after 5:00 p.m., New York City time, on the Initial Expiration Date,
and (b) the Company or IPC, as the case may be, has accepted the Notes for
purchase and payment pursuant to the Offers. For purposes of the Offers,
tendered Notes will be deemed to have been accepted for payment, if, as and when
the Company or IPC, as the case may be, gives oral or written notice thereof to
the Depositary.
If any tendered Notes are not purchased pursuant to the Offers for any
reason, such Notes not purchased will be returned, without expense, to the
tendering Holder (or, in the case of Notes tendered by book-entry transfer, such
Notes will be credited to the account maintained at DTC from which such Notes
were delivered) after the expiration or termination of the Offers.
Tendering Holders will not be obligated to pay brokerage fees or
commissions to the Dealer Managers, the Depositary, the Company or IPC, or,
except as set forth in Instruction 7 of the Consent and Letter of Transmittal,
transfer taxes on the purchase of Notes pursuant to the Offers or the payment of
the Consent Payment.
The Company and IPC reserve the right to transfer or assign, in whole at
any time or in part from time to time, to one or more of their affiliates, the
right to purchase Notes tendered pursuant to the Offers, but any such transfer
or assignment will not relieve the Company or IPC of its obligations under the
Offers or prejudice the rights of tendering Holders to receive payment for Notes
validly tendered and accepted for payment pursuant to the Offers.
It is a condition precedent to each of the Company's and IPC's obligation
to purchase the Notes pursuant to the Offers, among other conditions, that the
Supplemental Indentures have been executed. It is a condition subsequent to
effectiveness of the Proposed Amendments contained in the Supplemental
Indentures that the Company or IPC, as the case may be, accept for payment all
the Notes validly tendered (and not withdrawn) pursuant to the Offers (in which
event the Company or IPC, as the case may be, will be obligated to pay all the
Tender Offer Consideration for the Notes so accepted). See "Conditions to the
Offers."
9. PROCEDURES FOR TENDERING NOTES AND DELIVERING CONSENTS.
THE TENDER OF NOTES PURSUANT TO THE OFFERS AND IN ACCORDANCE WITH THE
PROCEDURES DESCRIBED BELOW WILL CONSTITUTE THE DELIVERY OF A CONSENT WITH
RESPECT TO THE NOTES TENDERED. HOLDERS WHO DESIRE TO TENDER THEIR NOTES PURSUANT
TO THE OFFERS AND RECEIVE THE TENDER OFFER CONSIDERATION ARE REQUIRED TO DELIVER
CONSENTS TO THE PROPOSED AMENDMENTS. HOLDERS MAY NOT DELIVER CONSENTS WITHOUT
VALIDLY TENDERING THEIR NOTES PURSUANT TO THE OFFERS.
Tender of and Consent for Notes. The tender by a Holder of Notes (and
subsequent acceptance of such tender by the Company or IPC, as the case may be)
pursuant to one of the procedures set forth below will constitute a binding
agreement between such Holder and the Company or IPC in accordance with the
terms and subject to the conditions set forth herein and in the Consent and
Letter of Transmittal.
Only Holders are authorized to tender their Notes and consent to the
Proposed Amendments. The procedures by which Notes may be tendered and Consents
given by beneficial owners that are not Holders will depend upon the manner in
which the Notes are held. Holders who wish to transfer Notes without tendering
prior to the Expiration Date and who wish to retain the benefit of the Consent
Payment or wish to provide such benefit to a transferee should validly tender
the Notes and deliver the related Consents, designating the transferee as payee
in the boxes marked "Special Issuance/Delivery Instructions," as applicable,
contained in the Consent and Letter of Transmittal.
13
<PAGE> 21
Tender of Notes Held in Physical Form. To effectively tender Notes held in
physical form pursuant to the Offers, a properly completed Consent and Letter of
Transmittal (or a facsimile thereof duly executed by the Holder thereof) and any
other documents required by the Consent and Letter of Transmittal must be
received by the Depositary at its address set forth on the back cover of this
Statement (or delivery of Notes may be effected through the deposit of Notes
with DTC and making book-entry delivery as set forth below) on or prior to the
Expiration Date, as applicable; provided, however, that the tendering Holder may
instead comply with the guaranteed delivery procedure set forth below. CONSENTS
AND LETTERS OF TRANSMITTAL AND NOTES SHOULD BE SENT ONLY TO THE DEPOSITARY AND
SHOULD NOT BE SENT TO THE COMPANY, IPC OR THE DEALER MANAGER.
Tender of Notes Held Through a Custodian. To effectively tender Notes that
are held of record by a custodian bank, depositary, broker, trust company or
other nominee, the beneficial owner thereof must instruct such Holder to tender
the Notes on the beneficial owner's behalf. A Letter of Instructions is included
in the Solicitation materials provided with this Statement which may be used by
a beneficial owner in this process to effect the tender. Any beneficial owner of
Notes held of record by DTC or its nominee, through authority granted by DTC,
may direct the DTC participant through which such beneficial owner's Notes are
held in DTC to execute on such beneficial owner's behalf a consent with respect
to Notes beneficially owned by such beneficial owner on the day of execution
without tendering the Notes.
Tender of Notes Held Through DTC. To effectively tender Notes that are held
through DTC, DTC participants may, in lieu of physically completing and signing
the Consent and Letter of Transmittal and delivering it to the Depositary,
electronically transmit their acceptance through ATOP (and thereby provide their
Consents to the Proposed Amendments), and DTC will then edit and verify the
acceptance end send an Agent's Message to the Depositary for its acceptance.
Delivery of tendered Notes must be made to the Depositary pursuant to the
book-entry delivery procedures set forth below or the tendering DTC participant
must comply with the guaranteed delivery procedures set forth below.
THE METHOD OF DELIVERY OF NOTES AND CONSENTS AND LETTERS OF TRANSMITTAL,
ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING
DELIVERY THROUGH DTC AND ANY ACCEPTANCE OF AN AGENT'S MESSAGE TRANSMITTED
THROUGH ATOP, IS AT THE ELECTION AND RISK OF THE PERSON TENDERING NOTES AND
DELIVERING CONSENTS AND LETTERS OF TRANSMITTAL AND, EXCEPT AS OTHERWISE PROVIDED
IN THE CONSENT AND LETTER OF TRANSMITTAL, DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, IT IS SUGGESTED
THAT THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE TO PERMIT DELIVERY TO THE DEPOSITARY PRIOR TO SUCH DATE.
Except as provided below, unless the Notes being tendered are deposited
with the Depositary on or prior to the Expiration Date (accompanied by a
properly completed and duly executed Consent, as applicable, and Letter of
Transmittal or a properly transmitted Agent's Message), the Company and IPC may,
at their option, treat such tender as defective for purposes of the right to
receive the Consent Payment and Tender Offer Consideration, respectively.
Payment for the Notes will be made only against deposit of the tendered Notes
and delivery of all other required documents.
Book-Entry Delivery Procedures. The Depositary will establish accounts with
respect to the Notes at DTC for purposes of the Offers within two business days
after the date of this Statement, and any financial institution that is a
participant in DTC may make book-entry delivery of the Notes by causing DTC to
transfer such Notes into the Depositary's account in accordance with DTC's
procedures for such transfer. However, although delivery of Notes may be
effected through book-entry transfer into the Depositary's account at DTC, the
Consent and Letter of Transmittal (or facsimile thereof), with any required
signature guarantees or an Agent's Message in connection with a book entry
transfer, and any other required documents, must in any case be transmitted to
and received by the Depositary at one or more of its addresses set forth on the
back cover of this Statement on or prior to the Expiration Date, or the
guaranteed delivery procedure described below must be followed. Delivery of
documents to DTC does not constitute delivery to the Depositary. The
confirmation of a book-entry transfer into the Depositary's account at DTC as
described above is referred to herein as a "Book-Entry Confirmation."
14
<PAGE> 22
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Depositary and forming a part of the Book-Entry Confirmation,
which states that DTC has received an express acknowledgment from each
participant in DTC tendering the Notes and that such participants have received
the Consent and Letter of Transmittal and agree to be bound by the terms of the
Consent and Letter of Transmittal and the Company or IPC may enforce such
agreement against such participants.
Signature Guarantees. Signatures on all Consents and Letters of Transmittal
must be guaranteed by a recognized participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (a "Medallion Signature Guarantor"), unless
the Notes tendered thereby are tendered (i) by a registered Holder of Notes (or
by a participant in DTC whose name appears on a security position listing as the
owner of such Notes) who has not completed any of the boxes entitled "Special
Issuance Delivery Instructions" on the Consent and Letter of Transmittal, or
(ii) for the account of a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc.
("NASD") or a commercial bank or trust company having an office or correspondent
in the United States (each of the foregoing being referred to as an "Eligible
Institution"). See Instruction 1 of the Consent and Letter of Transmittal. If
the Notes are registered in the name of a person other than the signer of the
Consent and Letter of Transmittal or if Notes not accepted for payment or not
tendered are to be returned to a person other than the registered Holder, then
the signatures on the Consents and Letters of Transmittal accompanying the
tendered Notes must be guaranteed by a Medallion Signature Guarantor as
described above. See Instructions 1 and 5 of the Consent and Letter of
Transmittal.
Guaranteed Delivery. If a Holder desires to deliver Consents and tender
Notes pursuant to the Offers and Solicitations and time will not permit the
Consents and Letter of Transmittal, certificates representing such Notes and all
other required documents to reach the Depositary, or the procedures for
book-entry transfer cannot be completed, on or prior to the Expiration Date,
such Holder may nevertheless deliver its Consents, and such Notes may
nevertheless be tendered, with the effect that such delivery and/or tender will
be deemed to have been received on or prior to the Expiration Date if all of the
following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Company or IPC
herewith, or an Agent's Message with respect to guaranteed delivery that is
accepted by the Company or IPC, is received by the Depositary on or prior
to 5:00 p.m., New York City time, on the Expiration Date as provided below;
and
(iii) the certificates for the tendered Notes, in proper form for
transfer (or a Book-Entry Confirmation of the transfer of such Notes into
the Depositary's account at DTC as described above), together with a
Consent and Letter of Transmittal (or facsimile thereof) properly completed
and duly executed, with any required signature guarantees and any other
documents required by the Consent and Letter of Transmittal or a properly
transmitted Agent's Message, are received by the Depositary within three
New York Stock Exchange, Inc. ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be sent by hand delivery, telegram,
facsimile transmission or mail to the Depositary and must include a guarantee by
an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
Failure to complete the guaranteed delivery procedure outlined above will
not, of itself, affect the validity of, or effect a revocation of, any Consent
properly executed by a Holder of Notes who attempted to use the guaranteed
delivery procedures.
Notwithstanding any other provision hereof, payment of the Tender Offer
Consideration and the Consent Payment for Notes tendered and accepted for
payment pursuant to the Offers will, in all cases be made only after timely
receipt (i.e., on or prior to 5:00 p.m., New York City time, on the Expiration
Date) by the Depositary of the tendered Notes (or Book-Entry Confirmation of the
transfer of such Notes into the Depositary's account at DTC as described above),
and a Consent and Letter of Transmittal (or facsimile
15
<PAGE> 23
thereof) with respect to such Notes, properly completed and duly executed, with
any required signature guarantees and any other documents required by the
Consent and Letter of Transmittal, or a properly transmitted Agent's Message.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE COMPANY OR IPC BY
REASON OF ANY DELAY IN MAKING PAYMENT TO ANY PERSON USING THE GUARANTEED
DELIVERY PROCEDURES. THE TENDER OFFER CONSIDERATION FOR NOTES TENDERED PURSUANT
TO THE GUARANTEED DELIVERY PROCEDURES WILL BE THE SAME AS THAT FOR NOTES
DELIVERED TO THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE, EVEN IF THE
NOTES TO BE DELIVERED PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES ARE NOT SO
DELIVERED TO THE DEPOSITARY, AND THEREFORE PAYMENT BY THE DEPOSITARY ON ACCOUNT
OF SUCH NOTES IS NOT MADE, UNTIL AFTER THE PAYMENT DATE.
Back-up U.S. Federal Income Tax Withholding. To prevent backup U.S. federal
income tax withholding, each tendering Holder of Notes must provide the
Depositary with such Holder's correct taxpayer identification number and certify
that such Holder is not subject to backup U.S. federal income tax withholding by
completing the Substitute Form W-9 included in the Consent and Letter of
Transmittal.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tendered Notes or
Consents pursuant to any of the procedures described above will be determined by
the Company or IPC, as the case may be, in its sole discretion (whose
determination shall be final and binding). The Company and IPC reserve the
absolute right to reject any or all tenders of any Notes or Consents determined
by it not to be in proper form or, in the case of Notes, if the acceptance for
payment of, or payment for, such Notes may, in the opinion of the Company's or
IPC's counsel, be unlawful. The Company and IPC also reserve the absolute right,
in their sole discretion, to waive any of the conditions of the Offers or any
defect or irregularity in any tender with respect to Notes or Consents of any
particular Holder, whether or not similar defects or irregularities are waived
in the case of other Holders. The Company's and IPC's interpretation of the
terms and conditions of their respective Offers and Solicitations (including the
Consent and Letter of Transmittal and the Instructions thereto) will be final
and binding. None of the Company, IPC, the Depositary, the Dealer Manager, the
Trustee or any other person will be under any duty to give notification of any
defects or irregularities in tenders or will incur any liability for failure to
give any such notification. If the Company or IPC waives its right to reject a
defective tender of Notes, the Holder will be entitled to the Total
Consideration.
10. WITHDRAWAL OF TENDERS AND REVOCATION OF CONSENTS.
Tenders of Notes may be withdrawn in writing at any time on or prior to
5:00 p.m., New York City time, on the Expiration Date and the related Consents
may be revoked at any time on or prior to 5:00 p.m., New York City time, on the
Initial Expiration Date. A valid withdrawal of tendered Notes effected on or
prior to 5:00 p.m., New York City time, on the Initial Expiration Date will
constitute the concurrent valid revocation of such Holder's related Consent.
For a withdrawal of a tender or revocation of a Consent to be effective, a
written, telegraphic or facsimile transmission notice of withdrawal or
revocation must be timely received by the Depositary at its address set forth on
the back cover of this Statement. Any such notice or withdrawal or revocation
must (A) specify the name of the person who tendered the Notes to be withdrawn
or to which the revocation of Consents relates, (B) contain the description of
the Notes to be withdrawn or to which the revocation of Consents relates and
identify the certificate number or numbers shown on the particular certificate
evidencing such Notes (unless such Notes were tendered by book-entry transfer)
and the aggregate principal amount represented by such Notes and (C) be signed
by the Holder of such Notes in the same manner as the original signature on the
Consent and Letter of Transmittal by which such Notes were tendered (including
any required signature guarantees) or related Consent was given or be
accompanied by (x) documents of transfer sufficient to have the Trustee register
the transfer of the Notes into the name of the person withdrawing such Notes
and/or revoking such related Consent and (y) a properly completed irrevocable
proxy that authorized such person to effect such revocation on behalf of such
Holder. If the Notes to be withdrawn have been delivered or otherwise identified
to the Depositary, a signed notice of withdrawal is effective immediately upon
written or
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<PAGE> 24
facsimile notice of withdrawal even if physical release is not yet effected. A
withdrawal of Notes or revocation of Consents can only be accomplished in
accordance with the foregoing procedures.
ALL QUESTIONS AS TO THE FORM AND VALIDITY (INCLUDING TIME OF RECEIPT) OF
NOTICES OF WITHDRAWAL OR REVOCATION WILL BE DETERMINED BY THE COMPANY OR IPC, AS
THE CASE MAY BE, IN ITS SOLE DISCRETION (WHOSE DETERMINATION WILL BE FINAL AND
BINDING). NONE OF THE COMPANY, IPC, THE DEPOSITARY, THE TRUSTEE OR ANY OTHER
PERSON WILL BE UNDER ANY DUTY TO GIVE NOTIFICATION OF ANY DEFECTS OR
IRREGULARITIES IN ANY NOTICE OF WITHDRAWAL OR REVOCATION OR INCUR ANY LIABILITY
FOR FAILURE TO GIVE ANY SUCH NOTIFICATION.
Any Notes properly withdrawn will be deemed to be not validly tendered for
purposes of the Offers. Withdrawn Notes may be tendered and revoked Consents may
be given by following one of the procedures described in Section 9 at any time
prior to the Expiration Date.
11. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Company and IPC to purchase all
of the Notes pursuant to the Offers and to pay related fees and expenses is
estimated to be approximately $304.7 million (assuming 100% of the outstanding
principal amount of Notes are tendered and accepted for payment on or before
September 30, 1997). The Company and IPC will obtain such funds from the
proceeds of the Stock Offering and borrowings under the New Credit Facility.
12. CONDITIONS TO THE OFFERS.
Notwithstanding any other provisions of the Offers and in addition to (and
not in limitation of) the Company's and IPC's rights to extend and amend the
Offers at any time in their sole discretion, neither the Company nor IPC shall
be required to accept for payment, purchase or pay for, and may delay the
acceptance for payment of, any tendered Notes, in each event subject to Rule
14e-1(c) under the Exchange Act, and may terminate the Offers, if there shall
not have been satisfied the Consent Condition, the Minimum Tender Condition, the
Financing Condition and the General Conditions (each as defined herein).
The "Consent Condition" with respect to each of the Senior Debentures and
Subordinated Notes shall mean (i) receipt of the Requisite Consents from the
Holders of both of the Senior Debentures and Subordinated Notes with respect to
the Proposed Amendments and (ii) execution of both of the Supplemental
Indentures pertaining to the Notes and providing for the Proposed Amendments.
See "Terms of the Offers and the Solicitations" and "Proposed Amendments to the
Indentures".
The "Minimum Tender Condition" shall mean there having been validly
tendered (and not withdrawn) prior to the Expiration Date not less than a
majority of the aggregate principal amount of the Notes of each series
outstanding.
The "Financing Condition" shall mean (i) the consummation of the Stock
Offering and receipt by the Company of net proceeds therefrom of not less than
$92.3 million and (ii) the execution of the New Credit Facility on terms
acceptable to IPC in its sole discretion and providing for borrowings by IPC
thereunder of not less than $475 million in the aggregate.
For purposes of the foregoing provision, the "General Conditions" shall be
deemed to have been satisfied unless any of the following conditions shall occur
on or after the date of this Statement and prior to the acceptance for payment
of any Notes tendered pursuant to the Offers:
(a) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, trading in securities in the United States
securities or financial markets, (ii) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States
(whether or not mandatory), (iii) any limitation by any governmental
authority on the extension of credit by banks or other lending institutions
in the United States, (iv) a commencement of a war, armed hostilities or
other national or international crisis involving the United States or (v)
in the case of any of the foregoing existing on the date hereof, a material
acceleration or worsening thereof;
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<PAGE> 25
(b) there exists an order, statute, rule, regulation, executive order,
stay, decree, judgment or injunction that shall have been proposed,
enacted, entered, issued, promulgated, enforced or deemed applicable by any
court or governmental, regulatory or administrative agency or
instrumentally that, in the sole judgment of the Company or IPC, would or
might prohibit, prevent, restrict or delay consummation of the Offers;
(c) there shall have been instituted or threatened or be pending any
action or proceeding before or by any court, governmental regulatory or
administrative agency or instrumentality, or by any other person, in
connection with the Offers or the Solicitations, that is, or is reasonably
likely to be, in the sole judgment of the Company or IPC, materially
adverse to the business, operations, properties, condition (financial or
otherwise), assets, liabilities or prospects of the Company or IPC; or
(d) the Trustee under either the Indenture shall have objected in any
respect to, or taken any action that could, in the sole judgment of the
Company or IPC, adversely affect the consummation of the Offers or the
Company's or IPC's ability to effect the Proposed Amendments, or shall have
taken any action that challenges the validity or effectiveness of the
procedures used by the Company or IPC in soliciting the Consents (including
the form thereof) or in the making of the Offers or the acceptance of the
Notes or the Consents or the payment for the Notes.
The foregoing conditions are for the sole benefit of the Company and IPC
and may be asserted by the Company or IPC regardless of the circumstances giving
rise to any such condition (including any action or inaction by the Company or
IPC) and may be waived by the Company or IPC, in whole or in part, at any time
and from time to time, in the sole discretion of the Company or IPC, as the case
may be. The failure by the Company or IPC at any time to exercise any of the
foregoing rights will not be deemed a waiver of any other right and each right
will be deemed an ongoing right which may be asserted at any time and from time
to time.
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain U.S. federal income tax consequences
of the Offers and the Proposed Amendments. This summary does not address all tax
consequences that may be applicable to a Holder of a Note, nor does it address
the tax consequences to (i) a Holder that may be subject to special treatment
under U.S. federal income tax law, such as banks, insurance companies, thrift
institutions, tax-exempt organizations and dealers in securities or currencies
or (ii) a Holder that does not hold a Note as a capital asset. This summary is
based on the Internal Revenue Code of 1986, as amended, Treasury regulations,
Internal Revenue Service ruling and pronouncements and judicial decisions as of
the date hereof, all of which are subject to change at any time, possibly on a
retroactive basis. In addition, the recently enacted Taxpayer Relief Act of 1997
could affect the federal income tax consequences of the Offers in that, among
other things, it reduces the rate of federal income tax imposed on capital gains
of individual taxpayers for capital assets held more than eighteen months.
The receipt of cash for Notes pursuant to the Offers will be a taxable
transaction for U.S. federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign tax laws. In general, a
Holder who receives cash for Notes pursuant to the Offers will recognize gain or
loss for U.S. federal income tax purposes equal to the difference between the
amount realized in exchange for the Notes sold (the amount of cash received by
such Holder less any cash received in respect of accrued and unpaid interest on
the Notes not previously includible in income) and such Holder's adjusted tax
basis in such Notes. A Holder's adjusted tax basis for a Note generally is the
price such Holder paid for the Note increased by the original issue discount or
market discount, if any, previously included in such Holder's income and reduced
(but not below zero) by any amortized premium. Except as provided below, any
gain or loss recognized on a sale of a Note will give rise to capital gain or
loss if the Note is held as a capital asset and will be long term capital gain
or loss if the Holder has had the Note for more than one year at the time of
sale. A Holder who has acquired a Note with market discount generally will be
required to treat a portion of any gain on a sale of the Note as ordinary income
to the extent of the market discount accrued to the date of the disposition,
less any accrued market discount income previously included in such Holder's.
Amounts received by a Holder in respect of
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<PAGE> 26
accrued and unpaid interest on the Notes not previously includible in income
will be taxable as ordinary income.
For U.S. federal income tax purposes, the Proposed Amendments to the
Indentures should not constitute a significant modification in the terms of the
Notes. Accordingly, the Proposed Amendments should not result in a deemed
exchange of Notes for U.S. federal income tax purposes and should have no U.S.
federal income tax consequences to the Holders of Notes.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW. HOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFERS TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM
TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
14. THE DEALER MANAGER AND THE DEPOSITARY.
BT Securities Corporation has been engaged to act as the Dealer Manager in
connection with the Offers and the Solicitations. In its capacity as Dealer
Manager, BT Securities Corporation may contact Holders regarding the Offers and
the Solicitations and may request brokers, dealers, commercial banks, trust
companies and other nominees to forward the Offers to Purchase and Consent
Solicitations Statement and related materials to beneficial owners of Notes. BT
Securities Corporation has provided certain investment banking and financial
advisory services to the Company in the past and is a lender under IPC's
Existing Credit Facility and is expected to be a co-agent bank under the New
Credit Facility. At any given time, BT Securities Corporation may trade the
Notes for its own accounts or for the accounts of customers, and, accordingly,
may hold a long or short position in the Notes. The Company and IPC have agreed
to indemnify the Dealer Manager and its affiliates against certain liabilities,
including certain liabilities under the federal securities laws relating to or
arising out of the Offers and the Solicitations.
Any Holder that has questions concerning the terms of the Offers or the
Solicitations may contact the Dealer Manager at its address and telephone number
set forth on the back cover of this Statement.
Holders of Notes may also contact their broker, dealer, commercial bank or
trust company for assistance concerning the Offers or the Solicitations.
United States Trust Company of New York has been appointed as Depositary
for the Offers and the Solicitations. Consents and Letters of Transmittal and
all correspondence in connection with the Offers or the Solicitations should be
sent or delivered by each Holder or a beneficial owner's broker, dealer,
commercial bank, trust company or other nominee to the Depositary at the address
and telephone number set forth on the back coverage page of this Statement. Any
Holder or beneficial owner that has questions concerning tender or consent
procedures or whose Notes have been mutilated, lost, stolen or destroyed should
contact the Depositary at the address and telephone number set forth on the back
cover page of this Statement.
15. FEES AND EXPENSES.
The Dealer Manager will receive customary fees upon consummation of the
Offers, and reimbursement for its reasonable out-of-pocket expenses (including
reasonable fees and disbursements of counsel) in connection with the Offers and
the Solicitations. The Depositary will also receive reasonable and customary
fees for its services and reimbursement for its reasonable out-of-pocket
expenses in connection therewith. Brokerage houses and other custodians,
nominees and fiduciaries will be reimbursed for their reasonable out-of-pocket
expenses incurred in forwarding copies of this Statement and related documents
to the beneficial owners of Notes.
16. MISCELLANEOUS.
The Company and IPC are not aware of any jurisdiction in which the making
of the Offers and the Solicitations is not in compliance with applicable law. If
the Company or IPC become aware of any jurisdiction in which the making of the
Offers and the Solicitations would not be in compliance with applicable law, the
Company or IPC will make a good faith effort to comply with any such law. If,
after such
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<PAGE> 27
good faith effort, the Company or IPC cannot comply with any such law, the
Offers and the Solicitations will not be made to (nor will tenders of Notes and
Consents be accepted from or on behalf of) the Holders residing in such
jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY OR IPC NOT CONTAINED IN THIS STATEMENT
OR IN THE CONSENT AND LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
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Facsimile copies of the Consent and Letter of Transmittal, properly
completed and duly executed, will be accepted. The Consent and Letter of
Transmittal, Notes and any other required documents should be sent or delivered
by each Holder or its broker, dealer, commercial bank or other nominee to the
Depositary at its address set forth below.
THE DEPOSITARY FOR THE OFFERS AND THE SOLICITATIONS IS:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<C> <C>
By Facsimile: By Mail:
(212) 780-0592 United States Trust Company of New York
Attention: Customer Service P.O. Box 843 Cooper Station
Confirm by Telephone to: (800) 548-6565 New York, New York 10276
Attention: Corporate Trust Services
By Hand before 4:30 p.m.: By Overnight Courier and By Hand after 4:30
United States Trust Company of New York p.m.:
111 Broadway United States Trust Company of New York
New York, New York 10006 770 Broadway, 13th Floor
Attention: Lower Level Corporate Trust Window New York, New York 10003
</TABLE>
Any questions or requests for assistance or additional copies of this
Statement, the Consent and Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Dealer Manager at the telephone number and
location listed below. You may also contact your broker, dealer, commercial bank
or trust company or nominee for assistance concerning the Offers and the
Solicitations.
THE DEALER MANAGER FOR THE OFFERS AND THE SOLICITATIONS IS:
BT SECURITIES CORPORATION
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
(212) 775-2822
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APPENDIX A
PROPOSED AMENDMENTS TO THE SENIOR DEBENTURE INDENTURE
Set forth below are the provisions of the Senior Debenture Indenture (the
"Indenture") that would be deleted or amended by the Proposed Amendments. The
following is qualified in its entirety by reference to the Indenture, copies of
which can be obtained without charge from the Dealer Manager. Capitalized terms
not otherwise defined in this Appendix A have the meanings assigned thereto in
the Indenture. Certain defined terms are set forth at the end of this Appendix
A. For purposes of this Appendix A, Ivex Packaging Corporation is referred to as
"Holdings".
If the Proposed Amendments are adopted, the following sections will be
deleted in their entirety from the Indenture, effective as of the Consent Date:
Section 801. Holdings May Consolidate, Merge, Only on Certain Terms.
Holdings shall not consolidate or merge with or into any Person,
unless:
(1) the Person formed by or surviving such consolidation or merger (if
other than Holdings) (collectively, the "Successor"), is a corporation or
other legal entity organized and existing under the laws of the United
States or any State thereof or the District of Columbia, and the Successor
assumes by supplemental indenture in a form reasonably satisfactory to the
Trustee all of the obligations of Holdings under the Securities and this
Indenture;
(2) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction and the use of
any net proceeds therefrom on a pro forma basis, the Consolidated Net Worth
of Holdings or the Successor, as the case may be, would be at least equal
to the Consolidated Net Worth of Holdings immediately prior to such
transaction; and
Holdings shall deliver to the Trustee prior to the consummation of the
proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed transaction and such supplemental
indenture comply with this Indenture.
Section 1005. Maintenance of Properties.
Holdings shall cause all properties owned by Holdings or any of its
Subsidiaries or used or held for use in the conduct of its business or the
business of any such Subsidiary to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and supplied with
all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of Holdings may be necessary so that the business carried on in
connection therewith may be properly conducted at all times; provided that
noting in this Section shall prevent Holdings from selling or otherwise
disposing of such properties or discontinuing the operation or maintenance of
any of such properties if such discontinuance is, in the judgment of Holdings,
desirable in the conduct of its business or the business of any such Subsidiary.
Section 1006. Payment of Taxes and Other Claims.
Holdings will, and will cause each of its Subsidiaries to, pay or discharge
or cause to be paid or discharged, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges levied or imposed upon Holdings
or any of its Subsidiaries or upon the income, profits or property of Holdings
or any of its Subsidiaries, and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of
Holdings or any of its Subsidiaries; provided that Holdings or any of its
Subsidiaries shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.
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Section 1007. Limitations on Additional Indebtedness.
(a) Holdings shall not permit the Company or any of the Company's
Subsidiaries to create, incur, issue, assume, guarantee or otherwise become
liable for or with respect to (collectively, for purposes of this Section,
"incur") any Indebtedness (other than Permitted Indebtedness) or issue
Preferred Stock unless (a) no Default or Event of Default shall have
occurred and be continuing at the time of, or after giving effect to, the
incurrence of such Indebtedness or the issuance of such Preferred Stock and
(b) immediately after giving pro forma effect to the incurrence of such
Indebtedness or such issuance of Preferred Stock, the Consolidated Fixed
Charge Coverage Ratio of the Company, as at the date such Indebtedness is
incurred or such Preferred Stock is issued, would be 1.75 to 1 if such
Indebtedness is incurred or such Preferred Stock is issued on or prior to
December 15, 1993 or 2.00 to 1 if such Indebtedness is incurred or such
Preferred Stock is issued thereafter.
(b) Holdings shall not incur any Indebtedness (other than the
Securities or Permitted Indebtedness without duplication to the extent
permitted to be incurred under paragraph (a) of this Section), unless (i)
no Default or Event of Default shall have occurred and be continuing at the
time of incurring, or after giving effect to, the incurrence of, such
Indebtedness; and (ii) immediately after giving pro forma effect to the
incurrence of such Indebtedness, the Consolidated Fixed Charge Coverage
Ratio of Holdings, as at the date such Indebtedness is incurred, would be
at least 1.75 to 1.
Section 1008. Limitations on Issuance and Sale of Subsidiary Stock.
Holdings shall not permit the Company to issue any shares of its Capital
Stock to any Person other than to Holdings or one or more Wholly Owned
Subsidiary of Holdings. Notwithstanding the foregoing, the Subsidiaries of
Holdings (other than the Company) may issue shares of Capital Stock to any
Person other than Holdings or one or more Wholly Owned Subsidiaries of Holdings
and may issue Preferred Stock to Persons other than Holdings or a Wholly Owned
Subsidiary of Holdings if the issuance of such Preferred Stock is permitted
under Section 1007 hereof.
Section 1009. Limitations on Sale and Leaseback Transactions.
Holdings shall not, and shall not permit the Company or any of the
Company's Subsidiaries to, enter into any arrangement with any Person providing
for the leasing by Holdings, the Company or any such Subsidiary of the Company
of any real or tangible personal property (except for leases between Holdings
and the Company or any of such Subsidiaries or between Subsidiaries of the
Company), which property has been or is to be sold or transferred by Holdings,
the Company or such Subsidiary to such Person in contemplation of such leasing,
unless (i) Holdings, the Company or such Subsidiary would be permitted under
Section 1007 to incur indebtedness in an amount equal to the Attributable
Indebtedness with respect to such arrangement and (ii) the gross proceeds of
such sale are at least equal to the fair market value of such property and
Holdings, the Company or such Subsidiary applies the Net Cash Proceeds of such
sale as provided in Section 1012 hereof.
Section 1010. Limitations on Restricted Payments.
(a) Holdings shall not, and shall not permit the Company or any of the
Company's Subsidiaries to, directly or indirectly, make any Restricted
Payment unless:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Restricted
Payment;
(ii) immediately after giving effect to such Restricted Payment,
the aggregate of all Restricted Payments declared or made after the
Issue Date does not exceed the sum of (A) 50% of the Consolidated Net
Income of Holdings (or in the event such Consolidated Net Income shall
be a deficit, minus 100% of such deficit) from January 1, 1993 through
the last day of the latest full fiscal quarter of Holdings prior to the
date of such Restricted Payment (taken as one accounting period), plus
(B) 100% of the aggregate net cash proceeds of, and the fair market
value of marketable securities (as determined in good faith by the Board
of Directors and evidenced by a Board Resolution) received by Holdings
from, the issue or sale after the Issue Date of Capital Stock of
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<PAGE> 31
Holdings or from a capital contribution to Holdings after the Issue Date
(other than the issue or sale of (w) Disqualified Stock, (x) Capital
Stock of Holdings to any Subsidiary of Holdings, (y)any capital
contribution to Holdings by the Company or any Subsidiary of the Company
or (z) the proceeds of any sale of Capital Stock of the Company or any
Subsidiary of the Company that are subsequently contributed by Holdings
(through a capital contribution or purchase of Capital Stock or
otherwise) to a Subsidiary of Holdings other than the Company or a
Subsidiary of the Company), including Indebtedness or other securities
of Holdings convertible into or exercisable for Capital Stock (other
than Disqualified Stock) of Holdings which has been so converted or
exercised, as the case may be, plus (C) $2.5 million; and
(iii) at the time of and immediately after giving effect to such
Restricted Payment, Holdings would be entitled to incur (as the term is
used in Section 1007) at least $1 of additional Indebtedness under the
tests described in Section 1007.
(b) The provisions of clause (a) above shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such date payment
would comply with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement or other acquisition,
in whole or in part, of any of Holdings', the Company's or any of the
Company's Subsidiaries' Capital Stock in exchange for, or out of the net
proceeds of the substantially concurrent sale (other than to a
Subsidiary of Holdings) of, other Capital Stock (other than Disqualified
Stock) of Holdings; and
(iii) the redemption or repurchase of any Indebtedness of Holdings,
the Company or any Subsidiary of the Company in exchange for, by
conversion into, or out of the net proceeds of, a substantially
concurrent (x) issue or sale of Capital Stock (other than Disqualified
Stock) of Holdings or (y) incurrence of Refinancing Indebtedness; and
(iv) the repurchase of equity securities or rights of Holdings or
the Company from the management of Holdings or the Company upon such
management's termination of employment with Holdings or the Company.
The foregoing proviso will not affect the determination of whether the
payment, retirement or redemption is a "Restricted Payment" pursuant to
paragraph (a) of this section. In addition, the foregoing shall not prohibit the
redemption of approximately $46.5 million of Holdings Preferred Stock and the
repayment of approximately $15.0 million of principal payments under the Credit
Facility with the proceeds of the sale of the Securities.
Section 1011. Limitations on Restrictions on Distributions from Certain
Subsidiaries.
Holdings shall not, and shall not permit the Company or any Subsidiary of
the Company to, create, incur or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction (other than encumbrances or
restrictions imposed by law or by judicial or regulatory action or by provisions
in leases or other agreements that restrict the assignability thereof) if such
encumbrance or restriction would by its terms prohibit the Company or any
Subsidiary of the Company from (a) paying dividends or making any other
distributions on its Capital Stock or paying any indebtedness owed to Holdings,
the Company or any Subsidiary of the Company, (b) making loans or advances to
Holdings, the Company or any Subsidiary of the Company or (c) transferring any
of its properties or assets to Holdings, the Company or any Subsidiary of the
Company, except for encumbrances or restrictions existing under or by reason of
(i) applicable law; (ii) such covenants or restrictions existing as of the Issue
Date under or by reason of indebtedness existing as of the Issue Date; (iii)
such encumbrances or restrictions in the Credit Facility or the Ivex Indenture;
(iv) any covenants or restrictions contained in agreements creating or
evidencing any Acquired Indebtedness permitted to be incurred under this
Indenture, provided that such restrictions and encumbrances only apply to assets
that were subject to such restrictions and encumbrances prior to the acquisition
of such assets by Holdings, the Company or the Company's Subsidiaries; (v)
restrictions or encumbrances replacing those permitted by clause (ii), (iii) or
(iv) above which are not more restrictive; and (vi) any restrictions or
encumbrances
A-3
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arising in connection with Refinancing Indebtedness, provided that any
restrictions and encumbrances of the type described in this clause (vi) that
arise under such Refinancing Indebtedness are not more restrictive than those
under the agreement creating or evidencing the Indebtedness being refunded or
refinanced. For purposes of this Section 1011, restrictions of the types set
forth in the following sections of the Credit Facility as in effect of the date
of this Indenture (and all amendments, modifications or changes thereto to the
extent such amendments, modifications or changes do not alter the type of
encumbrance or restriction contained therein) shall not be deemed to be
consensual encumbrances or restrictions of the kind prohibited by this Section
1011: Sections 2.4, 2.6, 2.7, 2.8, 2.9, 2.10, 2.14, 5.5, 5.6, 5.7, 5.8, 5.11,
5.13, 5.14, 5.15, 5.16, 5.18, 5.20, 5.21, 5.22, 5.23, 5.25, 8.3 and 9.17,
provided, however, that the omission of a particular section of the Credit
Facility (other than Sections 5.9 and 5.17(b)) from the foregoing list shall not
be deemed to restrict the Company from amending, modifying or changing the
encumbrance or restriction contained in such omitted section if otherwise
permitted under clause (iv).
Section 1012. Limitations on Asset Sales.
Holdings shall not and shall not permit the Company or any of the Company's
Subsidiaries to sell, transfer or otherwise dispose of any shares of its Capital
Stock of any of its Subsidiaries to any Person unless, at the time of such sale,
transfer or other disposition, all shares of Capital Stock of such Subsidiary
then owned by Holdings, the Company or any of the Company's Subsidiaries are so
sold, transferred or otherwise disposed of by Holdings or any of its
Subsidiaries.
(a) Holdings shall not, and shall not permit the Company or any of the
Company's Subsidiaries to, make any Asset Sale unless:
(i) Holdings or such Subsidiary receives consideration at the time
of such Asset Sale at least equal to the fair market value of the assets
sold or otherwise disposed of (as determined by Holdings' Board of
Directors and, if such fair market value shall exceed $10 million, by an
independent financial adviser);
(ii) at least 80% of the consideration received by Holdings or such
Subsidiary from such Asset Sale is in the form of cash (or 50% in the
case of an Asset Sale of the properties located at Kenilworth, New
Jersey; Markham, Ontario; and Hillside, Illinois); provided that the
amount of (A) any liabilities of Holdings or such Subsidiary (as shown
on the most recent balance sheet of Holdings or such Subsidiary or in
the notes thereto) that are assumed by the transferee in any such
transaction and (B) any Cash Equivalents or notes or other obligations
received by Holdings or such Subsidiary from such transferee that are
promptly converted by Holdings or such Subsidiary into cash, shall both
be deemed to be cash for purposes of this clause (ii); and
(iii) the Net Cash Proceeds received by Holdings, the Company or
such Subsidiary from such Asset Sale are applied in accordance with the
following paragraphs.
(b) Within 180 days following the receipt of cash proceeds from any
Asset Sale, Holdings may (subject to clause (c) below) cause the Net Cash
Proceeds received by Holdings, the Company or any of the Company's
Subsidiaries from such Asset Sale to be applied:
(i) to the repayment of Indebtedness of the Company or any of the
Company's Subsidiaries under the Credit Facility, the Ivex Indenture or
other Indebtedness of the Company or any of its Subsidiaries; provided
that, any such repayment shall result in a permanent reduction in any
revolving credit or other commitment relating thereto in an amount equal
to the principal amount so repaid; or
(ii) in a manner that would constitute a Related Business
Expenditure.
If at any time any non-cash consideration received by Holdings, the Company or
any of the Company's Subsidiaries from any Asset Sale is converted into or sold
or otherwise disposed of for cash, then such cash will constitute Net Cash
Proceeds for purposes of the foregoing provision.
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(c) If, upon completion of the 180-day period provided for in clause
(b) above (the "Net Proceeds Offer Trigger Date"), any portion of the Net
Cash Proceeds of an Asset Sale shall not have been applied by Holdings, the
Company or such Subsidiary of the Company in accordance with clause (b)
above and such remaining Net Cash Proceeds, together with the remaining Net
Cash Proceeds of any prior Asset Sale, exceed $5 million, then Holdings
will be obligated to apply such remaining Net Cash Proceeds to the purchase
of Securities tendered to Holdings for purchase at a price equal to 100% of
Accreted Value thereof if such date of purchase is on or prior to March 15,
2000, or 100% of the principal amount thereof, plus accrued interest, if
any, to the date of purchase if such date of purchase is after March 15,
2000, pursuant to an offer to purchase made by Holdings or the applicable
Subsidiary (a "Net Proceeds Offer") with respect to the Securities. The Net
Proceeds Offer shall be deemed to have commenced upon mailing of the notice
described in clause (d) below and shall terminate 20 Business Days after
its commencement, unless a longer offering period is required by applicable
law. If the date on which the Net Proceeds Offer terminates (the "Net
Proceeds Payment Date") is on or after a Regular Record Date and on or
before the related Interest Payment Date, any Accreted Value or accrued
interest, as the case may be, shall be paid to the Person in whose name a
Security is registered at the close of business on such Regular Record
Date, and no additional Accreted Value or interest shall be payable to
Holders who tender Securities pursuant to the Net Proceeds Offer.
(d) Within 180 days after a Net Proceeds Offer Trigger Date, Holdings
(with notice to the Trustee), or the Trustee at the request and expense of
Holdings, shall mail or cause to be mailed, first-class postage prepaid, to
all Holders as of the Net Proceeds Offer Trigger Date, a notice of the Net
Proceeds Offer. Such notice shall contain all instructions and materials
necessary to enable Holders to tender Securities pursuant to the Net
Proceeds Offer. Such notice, which shall govern the terms of the Net
Proceeds Offer, shall state:
(i) that the Net Proceeds Offer is being made pursuant to this
Section and the length of time that the Net Proceeds Offer will remain
open, and that all Securities or portions thereof tendered will be
accepted for payment on a pro rata basis;
(ii) the purchase price (including the amount of Accreted Value or
accrued interest, if any) and the Net Proceeds Payment Date;
(iii) that any Security not tendered will continue to accrete value
or accrue interest as the case may be;
(iv) that unless Holdings defaults in making payment therefor, any
Security accepted for payment pursuant to the Net Proceeds Offer shall
cease to accrete value or accrue interest as the case may be on the Net
Proceeds Payment Date;
(v) that Holders electing to have a Security purchased pursuant to
a Net Proceeds Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Security completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day prior to
the Net Proceeds Payment Date;
(vi) that Holders will be entitled to withdraw their election if
the Paying Agent receives, no later than two Business Days prior to the
Net Proceeds Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a statement that such
Holder is withdrawing its election to have such Security purchased;
(vii) that if Securities in a principal amount in excess of the
principal amount of the Securities to be acquired pursuant to the Net
Proceeds Offer are tendered and not withdrawn pursuant to the Net
Proceeds Offer, Holdings shall purchase Securities on a pro rata basis
(with such adjustment as may be deemed appropriate by Holdings so that
only Securities in denominations of $1,000 or integral multiples thereof
shall be so acquired); and
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(viii) that the Holder of any Security purchased only in part will
be issued a new Security or Securities in a principal amount equal to
the unpurchased portion of the Securities surrendered provided that the
foregoing shall have no effect on the calculation of the Accreted Value
with respect to such unpurchased portion of the Security.
(e) On or before a Net Proceeds Payment Date, Holdings shall, to the
extent lawful, (i) accept for payment the Securities or portions thereof
tendered pursuant to the Net Proceeds Offer (on a pro rata basis if
required pursuant to clause (d)(7) above), (ii) deposit with the Paying
Agent an amount sufficient to pay the purchase price of all Securities or
portions thereof to be purchased and (iii) deliver to the Trustee
Securities so accepted together with an Officers' Certificate identifying
the Securities or portions thereof accepted for payment by Holdings in
accordance with the terms of this Section. The Paying Agent shall promptly
mail or deliver to each tendering holder an amount equal to the purchase
price of the Securities tendered by such Holder and accepted by Holdings
for purchase, and the Trustee shall promptly authenticate and mail or
deliver to the Holders a new Security or Securities equal in principal
amount to any unpurchased portion of any Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by
Holdings to the Holder thereof, and any amounts remaining after the
purchase of Securities shall be returned by the Trustee to Holdings.
Holdings will publicly announce the results of the Net Proceeds Offer as
promptly as practicable following the Net Proceeds Payment Date. For
purposes of this Section, the Trustee shall act as the Paying Agent. Any
Net Proceeds Offer shall be conducted in compliance with Rule 14e-1 under
the Exchange Act, if so required, and all applicable laws in making any
such offer to purchase Securities.
Section 1013. Limitations on Transactions with Affiliates.
(a) Holdings shall not, and shall not permit the Company or any of the
Company's Subsidiaries to, make any loan, advance, guarantee or capital
contribution to, or for the benefit of, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or for the benefit
of, or purchase or lease any property or assets from, or enter into or
amend any contract, agreement or understanding with, or for the benefit of,
(i) any Affiliate of Holdings or any Affiliate of any of Holdings'
Subsidiaries or (ii) any Person (or any Affiliate of such Person) holding
10% or more of the Common Equity of Holdings or any of its Subsidiaries
(each an "Affiliate Transaction"), except in either case on terms that are
no less favorable to Holdings or the relevant Subsidiary, as the case may
be, than those that could have been obtained in a comparable transaction on
an arm's length basis from a Person that is not an Affiliate; provided,
however, that items (i) through (vi) of the proviso of the definition of
Restricted Payment and item (iv) of Section 1010(b) shall not be prohibited
by this provision. Capital contributions to the Company or any of its
Subsidiaries from Holdings or to Holdings from one or more of its
stockholders and additional purchases of the Common Equity of the Company
by Holdings or of the Common Equity of Holdings by one or more of its
stockholders shall not constitute an Affiliate Transaction.
(b) Holdings shall not, and shall not permit the Company or any of the
Company's Subsidiaries to, enter into an Affiliate Transaction, or any
series of related Affiliate Transactions, involving or having a value of
more than $500,000 unless Holdings has either (i) obtained the approval of
a majority of the disinterested members of the Board of Directors or (ii)
delivered to the Trustee an opinion of a qualified Independent Financial
Advisor to the effect that such transaction or transactions are fair to
Holdings or the relevant Subsidiary, as the case may be, from a financial
point of view.
(c) Holdings shall not, and shall not permit the Company or any of the
Company's Subsidiaries to, enter into any Affiliate Transaction, or any
series of related Affiliate Transactions, involving or having a value of
more than $10 million unless such Affiliate Transaction has been approved
by a majority of the disinterested members of the Board of Directors and
Holdings has delivered the opinion referred to in clause (b)(ii) above.
(d) Holdings shall not permit the Company or any of the Company's
Subsidiaries to merge or consolidate with or into an Affiliate unless:
(i) immediately after giving effect to the transaction no Default
or Event of Default shall have occurred and be continuing;
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(ii) immediately after giving effect to such transaction and the
use of proceeds therefrom, if any, on a pro forma basis, the
Consolidated Net Worth of the surviving entity would be at least equal
to the Consolidated Net Worth of the Company or such Subsidiary, as the
case may be, immediately prior to such transaction; and
(iii) the surviving entity shall be a Subsidiary of Holdings and be
treated as the Company (in the case of a merger or consolidation
involving the Company) or a Subsidiary of the Company (in the case of
any other merger or consolidation governed by this paragraph (d)) for
the purposes of this Indenture.
Section 1014. Limitations on Liens.
Holdings will not, and will not permit any of its Subsidiaries to, create,
incur or otherwise cause or suffer to exist or become effective any Lien of any
kind upon any of the Holdings' property or assets, now owned or hereafter
acquired, unless all payments due under this Indenture and the Securities are
secured on an equal and ratable basis with the obligations so secured until such
time as such obligation is no longer secured by a Lien, provided that the
following Liens on Holdings' property and assets may be created or incurred or
may exist or become effective without any requirement that such Securities be
equally and ratably secured:
(i) Liens existing on the Issue Date;
(ii) Liens now or hereafter securing Indebtedness outstanding under
the Credit Facility and Liens now or hereafter securing the interest
rate hedging obligations which the Company is required to enter into
with respect to the Term Loans under the Credit Facility; and
(iii) Permitted Liens.
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RELEVANT SENIOR DEBENTURE INDENTURE DEFINITIONS
"Accreted Value" means, as of any date of determination on or prior to
March 15, 2000, the sum of (a) the initial offering price of the Securities and
(b) the portion of the principal amount of each Security over such initial
offering price which shall have been amortized through such date, such amount to
be so amortized on a daily basis and compounded semiannually on each March 15
and September 15 at the rate of 13 3/4% per annum from the date of issuance of
the Security through the date of determination.
"Acquired Indebtedness" means (i) with respect to any Person that becomes a
Subsidiary of the Company or of any Subsidiary of the Company after the Issue
Date, Indebtedness of such Person and its Subsidiaries existing at the time such
Person becomes a Subsidiary of the Company or of any Subsidiary of the Company
that was not incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary of the Company or of any Subsidiary of the Company and
(ii) with respect to the Company or any of its Subsidiaries, any Indebtedness
assumed by Holdings or any of its Subsidiaries in connection with the
acquisition of any asset from another Person, which Indebtedness was not
incurred by such other Person in connection with, or in contemplation of, such
acquisition.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Notwithstanding the foregoing, the term "Affiliate" shall not include, (i) with
respect to Holdings; the Company or any Subsidiary of the Company or (ii) with
respect to the Company or any Subsidiary of the Company; Holdings, the Company
or any such Subsidiary of the Company. The term "Affiliate" with respect to
Holdings, the Company and any of the Companies Subsidiaries shall apply,
however, to any Subsidiary of Holdings which is neither the Company nor a
Subsidiary of the Company.
"Asset Sale" for any Person means the sale, lease, conveyance or other
disposition (including, without limitation, by merger or consolidation, and
whether by operation of law or otherwise) of any of that Person's assets
(including, without limitation, (x) any sale and leaseback arrangement, (y) any
sale or other disposition of Capital Stock of any Subsidiary of such Person,
whether by such Person or by such Subsidiary and (z) any sale or other
disposition of any non-cash consideration received by such Person from any prior
transaction or series of related transactions that constituted an Asset Sale
hereunder), whether owned on the Issue Date or subsequently acquired, in one
transaction or a series of related transactions; provided that the following
shall not constitute Asset Sales: (i) a transaction or series of related
transactions (other than transactions described in clause (z) above) in which
the fair market value of the cash and/or other consideration received
(including, without limitation, the unconditional assumption of Indebtedness) is
less than $250,000; (ii) a transaction or series of related transactions that
results in a Change of Control; (iii) transactions between Holdings and any of
its Wholly Owned Subsidiaries or among such Wholly Owned Subsidiaries; (iv)
Investments in any joint venture or corporation permitted under clause (viii) of
the proviso to the definition of "Restricted Payment"; and (v) any execution on
security interests granted in collateral securing the obligations of the Company
and its Subsidiaries under the Credit Facility.
"Attributable Indebtedness", when used with respect to any sale and
leaseback arrangement, means, as at the time of determination, the greater of
(i) the fair market value of the property subject to such arrangement and (ii)
the present value (discounted at a rate equivalent to the Company's then current
weighted average cost of funds for borrowed money as at the time of
determination, compounded on a semi-annual basis) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such arrangement (including any period for which such lease has been
extended).
"Board of Directors" means with respect to any Person, either the board of
directors or any duly authorized committee of that board empowered to act for it
with respect to this Indenture.
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"Board Resolution" of any Person means a copy of a resolution certified by
the Secretary or an Assistant Secretary of such Person to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
financial institutions in that Place of Payment are authorized or obligated by
law, regulation or executive order to close.
"Capital Stock" of any Person means any and all shares, rights to purchase,
warrants or options (whether or not currently exercisable), participations or
other equivalents of or interests in (however designated) the equity (which
includes, but is not limited to, common stock, preferred stock and partnership
and joint venture interests) of such Person (excluding any debt securities that
are convertible into, or exchangeable for, such equity).
"Cash Equivalents", when used in Article X, means (i) obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof, or obligations issued by any agency or instrumentality thereof and
backed by the full faith and credit of the United States of America, in each
case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest ratings obtainable
from either Standard & Poor's Corporation or Moody's Investors Service, Inc.;
(iii) commercial paper maturing no more than one year from the date of creation
thereof and, at the time of acquisition, having a rating of at least A-1 or the
equivalent thereof from Standard & Poor's Corporation or P-1 or the equivalent
thereof from Moody's Investors Service, Inc.; (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any domestic commercial bank having combined capital and
surplus of not less than $250,000,000; and (v) repurchase agreements and reverse
repurchase agreements with any bank meeting the qualifications specified in
clause (iv) above relating to securities of the types described in clauses (i),
(ii) or (iv) above, in each case maturing within one year from the date of
acquisition thereof.
"Change of Control" means any of the following: (i) the direct or indirect
sale, lease, conveyance or other disposition of all or substantially all of
Holdings' or the Company's assets to any Person or "group" (within the meaning
of Section 13(d)(3) of the Exchange Act as in effect on the Issue Date) in one
or a series of transactions, other than any such sale or other disposition to,
or to any such "group" that is controlled by Acadia and its Affiliates; (ii) the
liquidation or dissolution of Holdings or the Company; or (iii) any transaction
or series of transactions (as a result of a tender offer, merger, consolidation
or otherwise) that results in, or that is in connection with, any Person or
"group" (within the meaning of Section 13(d)(3) of the Exchange Act as in effect
on the Issue Date) acquiring after the Issue Date "beneficial ownership" (as
defined in Rule 13d-3 under the Exchange Act as in effect on the Issue Date),
directly or indirectly, of more than 50% of the aggregate voting power of all
classes of Common Equity of Holdings or the Company (other than any such
acquisition by, or by any such "group" that is controlled by, Acadia and its
Affiliates); provided that, to the extent that any of the following would
otherwise constitute a Change of Control, a Change of Control shall not be
deemed to occur upon (i) the acquisition by the current partners of Acadia of
shares of the Company's or Holdings' Common Equity pursuant to a distribution
made in connection with the winding-up of Acadia or (ii) the acquisition of
shares of the Company's or Holdings' Common Equity 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.
"Common Equity" of any Person means all Capital Stock of such Person that
is generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, with
respect to any determination date, the ratio of (i) Consolidated Cash Flow
Available for Fixed Charges of such Person for the prior four full fiscal
quarters for which financial results have been reported immediately preceding
such determination date
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to (ii) the sum of (x) Consolidated Interest Expense of such Person which shall
accrue during the next succeeding four full fiscal quarters for which financial
results will be reported immediately following such determination date, such
Consolidated Interest Expense to be calculated on the basis of the amount of
such Person's Indebtedness (on a consolidated basis) outstanding on the
determination date and reasonably anticipated by the Board of Directors of such
Person to be outstanding from time to time during such period and (y) all
dividends on preferred stock of such Person which shall accrue during the next
succeeding four fiscal quarters for which financial results will be reported
immediately following such determination date, the amount of such dividend to be
calculated on the basis of the amount of such Person's Preferred Stock
reasonably anticipated by the Board of Directors of such Person to be paid
during such period times a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal.
"Consolidated Net Income" of any Person for any period means the net income
(or loss) of such Person and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded from such net income (to the extent otherwise included therein),
without duplication, (i) the net income (or loss) of any Person (other than a
Subsidiary of the referent Person) in which any Person other than the referent
Person has an ownership interest, except to the extent that any such income has
actually been received by such Person or any of its Subsidiaries in the form of
dividends or similar distributions during such period; (ii) to the extent
includable in the consolidated net income of such Person, the net income (or
loss) of any Person that accrued prior to the date that (A) such Person becomes
a Subsidiary of the referent Person or is merged into or consolidated with the
referent Person or any of its Subsidiaries or (B) the assets of such Person are
acquired by the referent Person or any of its Subsidiaries; (iii) the net income
of any Subsidiary of the referent Person to the extent that (but only as long
as) the declaration or payment of dividends or similar distributions by that
referent Person's Subsidiary of such net income is not permitted by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary during
such period; (iv) any gain or loss, together with any related provisions for
taxes, realized during such period by the referent Person or any of its
Subsidiaries upon (A) the acquisition of any securities, or the extinguishment
of any Indebtedness, of the referent Person or any of its Subsidiaries or (B)
any Asset Sale by the referent Person or any of its Subsidiaries; (v) any
extraordinary gain or loss, together with any related provision for taxes on any
such extraordinary gain or loss, realized by the referent Person or any of its
Subsidiaries during such period; and (vi) in the case of a successor to the
referent Person by consolidation, merger or transfer of its assets, any earnings
of the successor prior to such merger, consolidation or transfer of assets; and
provided, further, that there shall be included in such net income (to the
extent not otherwise included therein) the net income of any Subsidiary of the
referent Person to the extent such net income is actually received by the
referent Person or a Subsidiary of such Person in the form of cash dividends or
other cash distributions from such Subsidiary.
"Consolidated Net Worth" of any Person as of any date means the
stockholders' equity (including any Preferred Stock that is classified as equity
under GAAP, other than Disqualified Stock) of such Person and its Subsidiaries
on a consolidated basis at such date, as determined in accordance with GAAP.
"corporation" includes corporations, associations, companies and business
trusts.
"Credit Facility" means that certain First Amended and Restated Credit
Agreement, dated December 17, 1992, and amended as of the date hereof, among the
Company and its Subsidiaries, the banks and other financial institutions parties
thereto and Wells Fargo Bank, N.A., as Agent and Banque Paribas, Houston Agency,
as Co-Agent, and the notes, letters of credit, guarantees, pledge agreements,
mortgages or other collateral agreements, documents, certificates or instruments
now or hereafter arising with respect thereto, as the same may be amended,
supplemented, extended, renewed, restated, increased or otherwise modified from
time to time prior to, on or after the issue date of the Ivex 12 1/2% Notes,
together with any and all the refinancings, refundings and replacements from
time to time prior to, on, or after the issue date of the Ivex 12 1/2% Notes.
"Default" means any event that is, or after notice or lapse of time or both
would be, an Event of Default.
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"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Securities.
"Dollars" and the sign "$" means the currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts.
"Event of Default" has the meaning specified in Article V of the Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Holdings" means Ivex Holdings Corporation, a Delaware corporation.
"incur", when used with respect to any Indebtedness, means to, directly or
indirectly, create, incur, assume, issue, guarantee or otherwise become liable
for or with respect to such Indebtedness; and the terms "incurred", "incurrence"
and "incurring" have meanings correlative to the foregoing.
"Indebtedness" of any Person at any date means, without duplication, (i)
all indebtedness of such Person for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such Person or only to a portion
thereof), (ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of such Person in
respect of letters of credit or other similar instruments (or reimbursement
obligations with respect thereto), other than standby letters of credit incurred
by such Person in the ordinary course of business, (iv) all obligations of such
Person with respect to Hedging Obligations (other than foreign currency exchange
agreements entered into in the ordinary course of business of such Person that
do not relate to indebtedness for borrowed money of such Person), (v) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, except trade payables and accrued expenses incurred in the
ordinary course of business, (vi) all Capitalized Lease Obligations of such
Person, (vii) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, (viii) all
Indebtedness of others guaranteed by such Person to the extent of such guarantee
and (ix) all Attributable Indebtedness. The amount of Indebtedness of any Person
at any date shall be (a) the outstanding balance at such date of all
unconditional obligations as described above, (b) the maximum liability of such
Person for any contingent obligations under clause (v) above at such date and
(c) in the case of clause (vii) above, the lesser of (A) the fair market value
of any asset subject to a Lien securing the Indebtedness of others on the date
that the Lien attaches and (B) the amount of the Indebtedness secured. To the
extent such Person guarantees the obligation of another Person to pay interest
on indebtedness owed by such other Person, then a designated percentage of the
interest guaranteed or the principal amount of the underlying indebtedness, as
the case may be, shall be deemed indebtedness of the referent Person. For
purposes of this definition, the amount of such deemed indebtedness of the
referent Person shall be equal to the lesser of: (x) the aggregate principal
amount of the underlying indebtedness relating to such interest guarantee and
(y) the aggregate amount of interest due and payable over the term of such
indebtedness (or the term of the Securities if shorter) determined based upon
the rate of interest in effect as of the date of such determination, together
with the maximum prepayment premium or penalty which could become due or payable
with respect to such indebtedness if such indebtedness was prepaid prior to the
maturity of the Securities. Notwithstanding the foregoing, the term Indebtedness
shall include all indebtedness, obligations, liabilities and undertakings under
the Credit Facility.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
reasonable judgment of the Board of Directors, (i) qualified to perform the task
for which it has been engaged and (ii) disinterested and independent with
respect to Holdings, all of its Subsidiaries and each Affiliate of Holdings
and/or its Subsidiaries that is involved in the
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transaction with respect to which such firm has been engaged; provided that,
notwithstanding the foregoing, Donaldson, Lufkin & Jenrette Securities
Corporation and Shearson Lehman Brothers Inc. shall each be deemed qualified to
serve as an Independent Financial Advisor.
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Issue Date" means the date on which the Securities are originally issued
under this Indenture.
"Ivex Indenture" means the Indenture relating to the Ivex 12 1/2% Notes
Offering.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest or other similar encumbrance of any kind in
respect of such property or asset, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, and any lease in the nature thereof, any option or other
agreement to sell, and any filing of, or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Net Cash Proceeds" means the Net Proceeds of any Asset Sale received in
the form of cash or Cash Equivalents.
"Net Proceeds Offer" has the meaning specified in Section 1012.
"Net Proceeds Offer Trigger Date" has the meaning specified in Section
1012.
"Net Proceeds Payment Date" has the meaning specified in Section 1012.
"Officers' Certificate" means with respect to any Person a certificate
signed by the Chairman of the Board, the President or a Vice President and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of such Person, and delivered to the Trustee.
"Opinion of Counsel" means with respect to any Person a written opinion of
counsel, who may be counsel for such Person (including in-house counsel) or the
Trustee, and who shall be acceptable to the Trustee.
"Paying Agent" means any Person authorized by Holdings to pay the Accreted
Value, or the principal of (and, in either case, premium, if any) or interest on
any Securities on behalf of Holdings.
"Permitted Indebtedness" means (i) Indebtedness of Holdings, the Company
and any of the Company's Subsidiaries under the Credit Facility in an amount not
in excess of $170.0 million aggregate principal amount reduced by (A) any
scheduled principal payments irrevocably and indefeasibly made in cash and (B)
any amounts by which the revolving credit facilities commitment is permanently
reduced and the revolving credit loans, to the extent required, are indefeasibly
and irrevocably repaid in cash; (ii) Indebtedness of Holdings, the Company and
any of the Company's Subsidiaries outstanding on the Issue Date; (iii)
Indebtedness of Holdings to Company or any Subsidiary of the Company and
Indebtedness of any Subsidiary of the Company to Holdings, the Company or
another Subsidiary of the Company; (iv) Hedging Obligations required by the
terms of the Credit Facility; (v) Indebtedness of Holdings, the Company and any
of the Company's Subsidiaries in an aggregate principal amount not to exceed
$20.0 million at any one time outstanding (exclusive of Indebtedness permitted
by any other clause of this paragraph or under Section 1007); (vi) additional
Indebtedness of any of Holdings, the Company and any of the Company's
Subsidiaries in an aggregate principal amount not to exceed $10.0 million at any
one time outstanding (exclusive of Indebtedness permitted by any other clause of
this paragraph or under Section 1007) either under the Credit Facility or under
another facility approved by the Banks under the Credit Facility; and (vii)
Refinancing Indebtedness.
"Permitted Liens" means (i) Liens for taxes, assessments or governmental
charges or claims that either (A) are not yet delinquent or (B) are being
contested in good faith by appropriate proceedings and as to which appropriate
reserves have been established or other provisions have been made in accordance
with GAAP; (ii) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other Liens imposed by law
and arising in the ordinary course of business and with respect to amounts that,
to the extent applicable, either (A) are not yet delinquent or (B) are being
contested in good
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faith by appropriate proceedings and as to which appropriate reserves have been
established or other provisions have been made in accordance with GAAP; (iii)
Liens (other than any Lien imposed by the Employer Retirement Income Security
Act of 1974, as amended) incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security; (iv) Liens incurred or deposits made to secure
the performance of tenders, bids, leases, statutory obligations, surety and
appeal bonds, progress payments, government contracts and other obligations of
like nature (exclusive of obligations for the payment of borrowed money), in
each case, incurred in the ordinary course of business; (v) attachment or
judgment Liens not giving rise to a Default or an Event of Default; and (vi)
easements, rights-of-way, restrictions and other similar charges or encumbrances
not materially interfering with the ordinary conduct of the business of
Holdings, the Company or any of its Subsidiaries.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" of any Person means all Capital Stock of such Person
which has a preference in liquidation or a preference with respect to the
payment of dividends.
"redemption", when used with respect to any Security, includes any purchase
of such Security by Holdings pursuant to a Change of Control Offer or Net
Proceeds Offer.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness of Holdings or its Subsidiaries outstanding on the
Issue Date or other Indebtedness permitted to be incurred by Holdings, the
Company or its Subsidiaries pursuant to the terms of this Indenture, but only to
the extent that (i) any Refinancing Indebtedness of Holdings is subordinated to
the Securities to the same extent as the Indebtedness of Holdings being
refunded, refinanced or extended, if at all, (ii) the Refinancing Indebtedness
is scheduled to mature either (a) no earlier than the Indebtedness being
refunded, refinanced or extended, or (b) if Indebtedness of Holdings, after the
maturity date of the Securities or if Indebtedness of the Company or any
Subsidiary of the Company, after the maturity date of the Ivex 12 1/2% Notes,
(iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to
mature on or prior to the maturity date of the Securities or the Ivex 12 1/2%
Notes, as the case may be, has a Weighted Average Life to Maturity at the time
such Refinancing Indebtedness is incurred that is equal to or greater than the
Weighted Average Life to Maturity of the portion of the Indebtedness being
refunded, refinanced or extended that is scheduled to mature on or prior to the
maturity date of the Securities or the Ivex 12 1/2% Notes, as the case may be,
(iv) such Refinancing Indebtedness is in an aggregate principal amount that is
equal to or less than the sum of (a) the aggregate principal amount then
outstanding under the Indebtedness being refunded, refinanced or extended, (b)
the amount of accrued and unpaid interest, if any, on such Indebtedness being
refunded, refinanced or extended and (c) the amount of customary fees, expenses
and costs related to the incurrence of such Refinancing Indebtedness and (v)
such Refinancing Indebtedness is incurred by the same Person that initially
incurred the Indebtedness being refunded, refinanced or extended, except that
(x) Holdings may incur Refinancing Indebtedness to refund, refinance or extend
Indebtedness of any Subsidiary of Holdings and (y) any Subsidiary of Holdings
may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness
of the Company or a Subsidiary of the Company; provided, however, that nothing
contained in this definition shall limit or restrict the holders of the
liabilities, undertakings, indebtedness and obligations now or hereafter
evidenced by the Credit Facility from refinancing, refunding or replacing such
obligations and indebtedness from time to time.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the June 1 and December 1 (whether or not a Business Day) next preceding
such Interest Payment Date.
"Related Business Expenditure" means any capital expenditure, Investment or
operating expense reasonably related to the business of the Company and its
Subsidiaries as such business is conducted on the Issue Date.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution on Capital Stock of Holdings,
the Company or any Subsidiary of the Company or any payment made to the direct
or indirect holders (in their capacities as such) of Capital Stock of Holdings,
the
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Company or any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock)
and (y) in the case of Subsidiaries of Holdings, dividends or distributions
payable to Holdings or to the Company or one of its Subsidiaries; (ii) the
purchase, redemption or other acquisition or retirement for value of any Capital
Stock of Holdings, the Company or any of the Company's Subsidiaries held by any
Person; (iii) the making of any principal payment on, or the purchase,
defeasance, repurchase, redemption or other acquisition or retirement for value,
prior to any scheduled maturity, scheduled repayment or scheduled sinking fund
payment, of any Indebtedness of Holdings which is subordinated in right of
payment to the Securities (other than Indebtedness acquired in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition); and (iv) the
making of any Prohibited Investment or guarantee of any Prohibited Investment in
any Person; provided, however, that the following shall not be deemed Restricted
Payments: (i) the payment by the Company and its Subsidiaries to Holdings of
their respective shares of the consolidated tax liability pursuant to the Tax
Sharing Agreement among Holdings, the Company and the Company's Subsidiaries;
(ii) advances to employees, officers, directors, agents and representatives for
travel and other reasonable and ordinary business expenses; (iii) advances and
loans to employees and officers in connection with their relocation; (iv) loans
to key employees to finance the purchase of Capital Stock of the Company or
Holdings' but only to the extent the proceeds of such loans used to purchase the
Capital Stock of Holdings are concurrently contributed by Holdings to the
Company; (v) the payment to Acadia or its affiliates of consulting fees or
$400,000 plus expenses per year pursuant to the terms of the Consulting
Agreement; (vi) the payment by the Company to Holdings of management fees under
or pursuant to the terms of the Management Agreement, provided such fees
represent payment at cost for customary and ordinary expenses under leases and
other contractual rights of Holdings during the period commencing on the Issue
Date and terminating on the earlier to occur of (x) the 180th day after the
Issue Date, or (y) the completion of the transfer by Holdings to the Company of
all such leases and contractual rights; (vii) the redemption or retirement of
indebtedness of a Subsidiary in exchange for, by conversion into, or out of the
net proceeds of, a substantially concurrent incurrence of Refinancing
Indebtedness; and (viii) Prohibited Investments by the Company or any of its
Subsidiaries in any joint venture or corporation organized under the laws of a
jurisdiction other than the United States, not in excess of $5.0 million in the
aggregate (net of return of capital from such joint ventures or corporations)
since December 31, 1992; and (ix) Prohibited Investments and Restricted Payments
made with the proceeds of, and substantially concurrently with, any capital
contribution to Holdings, or out of the net proceeds of any sale of Holdings
Capital Stock (other than Disqualified Stock) or of Subsidiaries of Holdings
other than the Company or its Subsidiaries.
"Securities" means, collectively, the Series A Senior Discount Debentures
due 2005 and, and when and if issued as provided in the Registration Rights
Agreement, the Series B Senior Discount Debentures.
"Subsidiary" of any Person means (i) any corporation of which at least a
majority of the aggregate voting power of all classes of the Common Equity is
owned by such Person directly or through one or more other Subsidiaries of such
Person and (ii) any entity other than a corporation in which such Person,
directly or indirectly, owns at least a majority of the Common Equity of such
entity.
"Successor" has the meaning specified in Section 801.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"Wholly Owned Subsidiary" of any Person means (i) a Subsidiary, of which
100% of the Common Equity (except for directors' qualifying shares or certain
minority interests owned by other persons solely due to local law requirements
that there be more than one stockholder, but which interest is not in excess of
what is required for such purpose) is owned directly by such Person or through
one or more other Wholly Owned Subsidiaries of such Person or (ii) any entity
other than a corporation in which such Person, directly or indirectly, owns all
of the Common Equity of such entity.
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APPENDIX B
PROPOSED AMENDMENTS TO THE SUBORDINATED NOTE INDENTURE
Set forth below are the provisions of the Indenture that would be deleted
or amended by the Proposed Amendments. The following is qualified in its
entirety by reference to the Indenture, copies of which can be obtained without
charge from the Information Agent or the Dealer Managers. Capitalized terms not
otherwise defined in this Appendix B have the meanings assigned thereto in the
Indenture. Certain defined terms are set forth at the end of this Appendix B.
For purposes of this Appendix B, IPC, Inc. is referred to as the "Company".
If the Proposed Amendments are adopted, except as otherwise noted below,
the following sections will be deleted in their entirety from the Indenture,
effective as of the Consent Date:
Section 704. Reports by Company.
(a) The Company shall remain subject to the informational filing
requirements of the Commission pursuant to the Exchange Act. The Company shall
deliver to the Trustee and the holders of the Securities, within 15 days after
it files the same with the Commission, copies of the annual reports and the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) that the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. The Company shall also comply with the provisions of
Section 314(a) of the Trust Indenture Act.*
(b) If the Company is required to furnish annual or quarterly reports to
its stockholders pursuant to the Exchange Act, the Company shall, within 15 days
after it delivers the same to its stockholders, cause any annual report
furnished to its stockholders generally and any quarterly or other financial
reports furnished by it to its stockholders generally to be delivered to the
Trustee and mailed to the Holders at their addresses appearing in the register
of Securities maintained by the Registrar.
Section 801. Company May Consolidate, etc., Only on Certain Terms.
The Company shall not consolidate or merge with or into any Person, or
sell, lease, convey or otherwise dispose of all or substantially all of its
assets (including by way of liquidation or dissolution) or assign any of its
obligations hereunder or under the Securities to any Person, unless:
(1) the Person formed by or surviving such consolidation or merger (if
other than the Company), or to which such sale, lease, conveyance or other
disposition or assignment shall be made (collectively, the "Successor"), is
a corporation or other legal entity organized and existing under the laws
of the United States or any State thereof or the District of Columbia, and
the Successor assumes by supplemental indenture in a form reasonably
satisfactory to the Trustee all of the obligations of the Company under the
Securities and this Indenture;
(2) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction and the use of
any net proceeds therefrom on a pro forma basis, the Consolidated Tangible
Net Worth of the Company or the Successor, as the case may be, would be at
least equal to the Consolidated Tangible Net Worth of the Company
immediately prior to such transaction; and
(4) the Consolidated Fixed Charge Coverage Ratio of the Company or the
Successor, as the case may be, immediately after giving effect to such
transaction, would be such that the Company or the Successor, as the case
may be, would be entitled to incur at least $1 of additional Indebtedness
under the Consolidated Fixed Charge Coverage Ratio test contained in
Section 1007.
The Company shall deliver to the Trustee prior to the consummation of the
proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel stating that the proposed transaction and such supplemental
indenture comply with this Indenture.
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* The last sentence of Section 704(a) shall not be deleted as a result of the
Proposed Amendments and shall remain in effect after the Consent Date.
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Section 1005. Maintenance of Properties.
The Company shall cause all properties owned by the Company or any of its
Subsidiaries or used or held for use in the conduct of it business or the
business of any such Subsidiary to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and supplied with
all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly conducted at all times; provided that
nothing in this Section shall prevent the Company from selling or otherwise
disposing of such properties or discontinuing the operation or maintenance of
any of such properties if such discontinuance is, in the judgment of the
Company, desirable in the conduct of its business or the business of any such
Subsidiary.
Section 1006. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon the Company or any of its Subsidiaries or upon
the income, profits or property of the Company or any of its Subsidiaries, and
(ii) all lawful claims for labor, materials and supplies which, if unpaid, might
by law become a lien upon the property of the Company or any of its
Subsidiaries; provided that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
Section 1007. Limitations on Additional Indebtedness.
The Company shall not, and shall not permit any of its subsidiaries to,
incur any Indebtedness (other than Permitted Indebtedness), unless (i) no
Default or Event of Default shall have occurred and be continuing at the time of
incurring, or after giving effect to, the incurrence of, such Indebtedness; and
(ii) immediately after giving pro forma effect to the incurrence of such
Indebtedness, the Consolidated Fixed Charge Coverage Ratio of the Company, as at
the date such Indebtedness is incurred, would be at least 1.75 to 1 if such
Indebtedness is incurred on or prior to December 15, 1993 or 2.0 to 1.0 if such
Indebtedness is incurred thereafter.
Section 1008. Limitations on Preferred Stock of Subsidiaries.
The Company shall not permit any of its Subsidiaries to issue any Preferred
Stock (other than to the Company or a Wholly Owned Subsidiary of the Company).
Section 1009. Limitations on Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into any arrangement with any Person providing for the leasing by the
Company or any Subsidiary of the Company of any real or tangible personal
property (except for leases between the Company and any of its Subsidiaries or
between Subsidiaries of the Company), which property has been or is to be sold
or transferred by the Company or such Subsidiary to such Person in contemplation
of such leasing, unless (i) the Company or such Subsidiary would be permitted
under Section 1007 to incur Indebtedness in an amount equal to the Attributable
Indebtedness with respect to such arrangement and (ii) the gross proceeds of
such sale are at least equal to the fair market value of such property and the
Company or such Subsidiary applies the Net Cash Proceeds of such sale as
provided in Section 1012.
Section 1010. Limitations on Restricted Payments.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, make any Restricted Payment
unless:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Restricted
Payment;
(ii) immediately after giving effect to such Restricted Payment,
the aggregate of all Restricted Payments declared or made after the
Issue Date does not exceed the sum of (A) 50% of the
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Consolidated Net Income of the Company (or in the event such
Consolidated Net Income shall be a deficit, minus 100% of such deficit)
from December 31, 1992 through the last day of the latest full fiscal
quarter of the Company prior to the date of such Restricted Payment
(taken as one accounting period), plus (B) 100% of the aggregate net
cash proceeds of, and the fair market value of marketable securities (as
determined in good faith by the Board of Directors and evidenced by a
Board Resolution) received by the Company from, the issue or sale after
the Issue Date of Capital Stock of the Company (other than the issue or
sale of (y) Disqualified Stock or (z) Capital Stock of the Company to
any Subsidiary of the Company) or any Indebtedness (other than
Refinancing Indebtedness issued pursuant to clause (vii) of the proviso
to the definition of Restricted Payment) or other securities of the
Company convertible into or exercisable for Capital Stock (other than
Disqualified Stock) of the Company which has been so converted or
exercised, as the case may be, plus (C) $2.5 million; and
(iii) at the time of and immediately after giving effect to such
Restricted Payment, the Company or any of its Subsidiaries would be
entitled to incur (as the term is used in Section 1007) at least $1 of
additional Indebtedness (other than Permitted Indebtedness) under the
tests described in Section 1007.
(b) The provisions of clause (a) above shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would
comply with the provisions of this Indenture;
(ii) the retirement of any shares of Capital Stock of the Company
in exchange for, or out of the net proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, other
shares of Capital Stock (other than Disqualified Stock) of the Company;
(iii) the redemption or retirement of subordinated Indebtedness of
the Company in exchange for, by conversion into, or out of the net
proceeds of, a substantially concurrent (x) issue or sale of Capital
Stock (other than Disqualified Stock) of the Company or (y) incurrence
of Refinancing Indebtedness; and
(iv) the repurchase of equity securities of the Company from the
management of the Company upon such management's termination of
employment with the Company to the extent required by a plan in effect
on the Issue Date.
Section 1011. Limitations on Restrictions on Distributions from
Subsidiaries.
The Company shall not, and shall not permit any of its Subsidiaries to,
create, incur or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction (other than encumbrances or restrictions
imposed by law or by judicial or regulatory action or by provisions in leases or
other agreements that restrict the assignability thereof) if such encumbrance or
restriction would by its terms prohibit any Subsidiary of the Company from (a)
paying dividends or making any other distributions on its Capital Stock or any
other interest or participation in, or measured by, its profits, owned by the
Company or any of its other Subsidiaries, (b) making loans or advances to the
Company or any of its other Subsidiaries or (c) transferring any of its
properties or assets to the Company or any of its other Subsidiaries, except for
encumbrances or restrictions existing under or by reason of (i) applicable law;
(ii) any covenants or restrictions contained in agreements creating or
evidencing Indebtedness of the Company or any of its Subsidiaries outstanding on
the Issue Date; (iii) any restrictions contained in agreements creating or
evidencing any Acquired Indebtedness permitted to be incurred under this
Indenture; provided that such restrictions and encumbrances only apply to assets
that were subject to such restrictions and encumbrances prior to the acquisition
of such assets by the Company or its Subsidiaries; (iv) restrictions or
encumbrances replacing those permitted by clause (ii) or (iii) above which are
not more restrictive; and (v) any restrictions or encumbrances arising in
connection with Refinancing Indebtedness, provided that any restrictions and
encumbrances of the type described in this clause (v) that arise under such
Refinancing Indebtedness are not more restrictive than those under the agreement
creating or evidencing the Indebtedness being refunded or refinanced. For
purposes of this Section 1011, restrictions of the types set forth in the
following sections of the Credit Facility as in effect on
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the date of this Indenture (and all amendments, modifications or changes thereto
to the extent such amendments, modifications or changes do not alter the type of
encumbrance or restriction contained therein) shall not be deemed to be
consensual encumbrances or restrictions of the kind prohibited by this Section
1011: Section 2.4, 2.6, 2.7, 2.8, 2.9, 2.10, 2.14, 5.5, 5.6, 5.7, 5.8, 5.11,
5.13, 5.14, 5.15, 5.16, 5.18, 5.20, 5.21, 5.22, 5.23, 5.25, 8.3 and 9.17,
provided, however, that the omission of a particular section of the Credit
Facility (other than Sections 5.9 and 5.17(b)) from the foregoing list shall not
be deemed to restrict the Company from amending, modifying or changing the
encumbrance or restriction contained in such omitted section if otherwise
permitted under clause (iv).
Section 1012. Limitations on Asset Sales.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, make any Asset Sale unless:
(i) the Company or such Subsidiary receives consideration at the
time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined by the Board of
Directors and, if such fair market value shall exceed $10 million, by an
independent financial adviser);
(ii) at least 80% of the consideration received by the Company or
such Subsidiary from such Asset Sale is in the form of cash (or 50% in
the case of an Asset Sale of the Company's properties located at
Kenilworth, New Jersey, Markham, Ontario and Hillside, Illinois);
provided that the amount of (A) any liabilities of the Company or such
Subsidiary (as shown on the most recent balance sheet of the Company or
such Subsidiary or in the notes thereto) that are assumed by the
transferee in any such transaction and (B) any Cash Equivalents or notes
or other obligations received by the Company or such Subsidiary from
such transferee that are promptly converted by the Company or such
Subsidiary into cash, shall both be deemed to be cash for purposes of
this clause (ii); and
(iii) the Net Cash Proceeds received by the Company or such
Subsidiary from such Asset Sale are applied in accordance with this
Section.
(b) Within 180 days following the receipt of cash proceeds from any
Asset Sale, the Company may (subject to clause (c) below) cause the Net
Cash Proceeds received by the Company or any of its Subsidiaries from such
Asset Sale to be applied:
(i) to the repayment of Indebtedness of the Company or any of its
Subsidiaries under the Credit Facility or other Senior Indebtedness of
the Company or any of its Subsidiaries; provided that, any such
repayment shall result in a permanent reduction in any revolving credit
or other commitment relating thereto in an amount equal to the principal
amount so repaid; or
(ii) in a manner that would constitute a Related Business
Expenditure.
If at any time any non-cash consideration received by the Company or any of its
Subsidiaries from any Asset Sale is converted into or sold or otherwise disposed
of for cash, then such cash will constitute Net Cash Proceeds for purposes of
the foregoing provision.
(c) If, upon completion of the 180-day period provided for in clause
(b) above (the "Net Proceeds Offer Trigger Date"), any portion of the Net
Cash Proceeds of an Asset Sale shall not have been applied by the Company
in accordance with clause (b) above and such remaining Net Cash Proceeds,
together with the remaining Net Cash proceeds of any prior Asset Sale,
exceed $5 million, then the Company will be obligated to apply such
remaining Net Cash Proceeds to the purchase of Securities tendered to the
Company for purchase at a price equal to 100% of the principal amount
thereof, plus accrued interest, if any, to the date of purchase pursuant to
an offer to purchase made by the Company (a "Net Proceeds Offer") with
respect to the Securities. The Net Proceeds Offer shall be deemed to have
commenced upon mailing of the notice described in clause (d) below and
shall terminate 20 Business Days after its commencement, unless a longer
offering period is required by applicable law. If the date on which the Net
Proceeds Offer terminates (the "Net Proceeds Payment Date") is on or after
a Regular Record Date
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and on or before the related Interest Payment Date Date, any accrued
interest shall be paid to the Person in whose name a Security is registered
at the close of business on such Regular Record Date, and no additional
interest shall be payable to Holders who tender securities pursuant to the
Net Proceeds Offer.
(d) Within 10 days after a Net Proceeds Offer Trigger Date, the
Company (with notice to the Trustee), or the Trustee at the request and
expense of the Company, shall mail or cause to be mailed, first-class
postage prepaid, to all Holders as of the Net Proceeds Offer Trigger Date,
a notice of the Net Proceeds Offer. Such notice shall contain all
instructions and materials necessary to enable Holders to tender Securities
pursuant to the Net Proceeds Offer. Such notice, which shall govern the
terms of the Net Proceeds Offer, shall state:
(1) that the Net Proceeds Offer is being made pursuant to this
Section and the length of time that the Net Proceeds Offer will remain
open, and that all Securities or portions thereof tendered will be
accepted for payment on a pro rata basis;
(2) the purchase price (including the amount of accrued interest,
if any) and the Net Proceeds Payment Date;
(3) that any Security not tendered will continue to accrue
interest;
(4) that unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant to the Net Proceeds Offer
shall cease to accrue interest on the Net Proceeds Payment Date;
(5) that Holders electing to have a Security purchased pursuant to
a Net Proceeds Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Security completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day prior to
the Net Proceeds Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, no later than two Business Days prior to the Net
Proceeds Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a statement that such
Holder is withdrawing its election to have such Security purchased;
(7) that if Securities in a principal amount in excess of the
principal amount of the Securities to be acquired pursuant to the Net
Proceeds Offer are tendered and not withdrawn pursuant to the Net
Proceeds Offer, the Company shall purchase Securities on a pro rata
basis (with such adjustment as may be deemed appropriate by the Company
so that only Securities in denominations of $1,000 or integral multiples
thereof shall be so acquired); and
(8) that the Holder of any Security purchased only in part will be
issued a new Security or Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered.
(e) On or before a Net Proceeds Payment Date, the Company shall, to
the extent lawful, (i) accept for payment the Securities or portions
thereof tendered pursuant to the Net Proceeds Offer (on a pro rata basis if
required pursuant to clause (e) (7) above), (ii) deposit with the Paying
Agent an amount sufficient to pay the purchase price of all Securities or
portions thereof to be purchased and (iii) deliver to the Trustee
Securities so accepted together with an Officers' Certificate identifying
the Securities or portions thereof accepted for payment by the Company in
accordance with the terms of this Section. The Paying Agent shall promptly
mail or deliver to each tendering Holder an amount equal to the purchase
price of the Securities tendered by such Holder and accepted by the Company
for purchase, and the Trustee shall promptly authenticate and mail or
deliver to the Holders a new Security or Securities equal in principal
amount to any unpurchased portion of any Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the
Company to the Holder thereof, and any amounts remaining after the purchase
of Securities shall be returned by the Trustee to the Company. The Company
will publicly announce the results of the Net Proceeds Offer as promptly as
practicable following the Net Proceeds Payment Date. For purposes of this
Section, the Trustee shall act as the
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Paying Agent. Any Net Proceeds Offer shall be conducted in compliance with
Rule 14e-1 under the Exchange Act, if so required, and all applicable laws
in making any such offer to purchase Securities.
Section 1013. Limitations on Transactions with Affiliates.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, make any loan, advance, guarantee or capital contribution
to, or for the benefit of, or sell, lease, transfer or otherwise dispose of
any of its properties or assets to, or for the benefit of, or purchase or
lease any property or assets from, or enter into or amend any contract,
agreement or understanding with, or for the benefit of, (i) any Affiliate
of the Company or any Affiliate of any of the Company's Subsidiaries or
(ii) any Person (or any Affiliate of such Person) holding 10% or more of
the Common Equity of the Company or any of its Subsidiaries (each an
"Affiliate Transaction"), except in either case on terms that are no less
favorable to the Company or the relevant Subsidiary, as the case may be,
than those that could have been obtained in a comparable transaction on an
arms' length basis from a Person that is not an Affiliate; provided,
however, that items (i) through (vi) of the proviso of the definition of
Restricted Payment and item (iv) of Section 1010(b) shall not be prohibited
by this provision.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, enter into an Affiliate Transaction, or any series of
related Affiliate Transactions, involving or having a value of more than
$500,000 unless the Company has either (i) obtained the approval of a
majority of the disinterested members of the Board of Directors or (ii)
delivered to the Trustee an opinion of a qualified Independent Financial
Advisor to the effect that such transaction or transactions are fair to the
Company or the relevant Subsidiary, as the case may be, from a financial
point of view.
(c) The Company shall not, and shall not permit any of its
Subsidiaries to, enter into any Affiliate Transaction, or any series of
related Affiliate Transactions, involving or having a value of more than
$10 million unless such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors and the
Company has delivered the opinion referred to in clause (b)(ii) above.
Section 1014. Limitations on Liens.
The Company shall not, and shall not permit any of its Subsidiaries to,
create, incur or otherwise cause or suffer to exist or become effective any Lien
of any kind upon any of its property or assets, now owned or hereafter acquired,
unless all payments due under this Indenture and the Securities are secured on
an equal and ratable basis with the obligations so secured until such time as
such obligation is no longer secured by a Lien; provided that the following
Liens may be created or incurred or may exist or become effective without any
requirement that the Securities be equally and ratably secured:
(1) Liens existing on the Issue Date;
(2) Liens now or hereafter securing Indebtedness outstanding under
the Credit Facility and Liens now or hereafter securing the interest
rate hedging obligations which the Company is required to enter into
with respect to the term loans under the Credit Facility;
(3) Liens on assets of the Company securing Senior Indebtedness
permitted to be incurred under the Consolidated Fixed Charge Coverage
Ratio test described in Section 1007; provided that such Liens are
incurred within 90 days of the incurrence of such Indebtedness;
(4) Liens on assets of any Subsidiary of the Company securing
Indebtedness of such Subsidiary permitted to be incurred under the
Consolidated Fixed Charge Coverage Ratio test described in Section 1007;
provided that such Liens are incurred within 90 days of the incurrence
of such Indebtedness;
(5) Liens on assets of the Company or any Subsidiary of the Company
securing Permitted Indebtedness of the Company or such Subsidiary
described in clause (v) of the definition of Permitted Indebtedness;
provided that such Liens are incurred within 90 days of the incurrence
of such Indebtedness;
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(6) Liens securing Refinancing Indebtedness; provided that such
Liens extend to or cover only the property or assets securing the
Indebtedness being refinanced; and
(7) Permitted Liens.
Section 1015. Restriction on Additional Senior Subordinated Indebtedness.
The Company shall not incur any Indebtedness that is subordinate or junior
in right of payment to Senior Indebtedness and senior in any respect in right of
payment to the Securities.
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RELEVANT SUBORDINATED NOTE INDENTURE DEFINITIONS
"Acquired Indebtedness" means (i) with respect to any Person that becomes a
Subsidiary of the Company after the Issue Date, Indebtedness of such Person and
its Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company that was not incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary of the Company and (ii) with respect to the Company
or any or its Subsidiaries, any Indebtedness assumed by the Company or any of
its Subsidiaries in connection with the acquisition of any asset from another
Person, which Indebtedness was not incurred by such other Person in connection
with, or in contemplation of, such acquisition.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Notwithstanding the foregoing, the term "Affiliate" shall not include, (i) with
respect to the Company, any Subsidiary of the Company or (ii) with respect to
any Subsidiary of the Company, the Company or any other Subsidiary of the
Company.
"Asset Sale" for any Person means the sale, lease, conveyance or other
disposition (including, without limitation, by merger or consolidation, and
whether by operation of law or otherwise) of any of that Person's assets
(including, without limitation, (x) any sale and leaseback arrangement, (y) any
sale or other disposition of Capital Stock of any Subsidiary of such Person,
whether by such Person or by such Subsidiary and (z) any sale or other
disposition of any non-cash consideration received by such Person from any prior
transaction or series of related transactions that constituted an Asset Sale
hereunder), whether owned on the Issue Date or subsequently acquired, in one
transaction or a series of related transactions; provided that the following
shall not constitute Asset Sales: (i) a transaction or series of related
transactions (other than transactions described in clause (z) above) in which
the fair market value of the cash and/or other consideration received
(including, without limitation, the unconditional assumption of Indebtedness) is
less than $250,000; (ii) a transaction or series of related transactions that
results in a Change of Control; (iii) transactions between the Company and any
of its Wholly Owned Subsidiaries or among such Wholly Owned Subsidiaries; and
(iv) Investments in any joint venture or corporation permitted under clause
(viii) of the proviso to the definition of "Restricted Payment".
"Attributable Indebtedness", when used with respect to any sale and
leaseback arrangement, means, as at the time of determination, the greater of
(i) the fair market value of the property subject to such arrangement and (ii)
the present value (discounted at a rate equivalent to the Company's then current
weighted average cost of funds for borrowed money as at the time of
determination, compounded on a semi-annual basis) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such arrangement (including any period for which such lease has been
extended).
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board empowered to act for it with respect
to this Indenture.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
financial institutions in that Place of Payment are authorized or obligated by
law, regulation or executive order to close.
"Capital Stock" of any Person means any and all shares, rights to purchase,
warrants or options (whether or not currently exercisable), participations or
other equivalents of or interests in (however designated) the equity (which
includes, but is not limited to, common stock, preferred stock and partnership
and joint venture interests) of such Person (excluding any debt securities that
are convertible into, or exchangeable for, such equity).
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"Cash Equivalents," when used in Article X, means (i) obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof, or obligations issued by any agency or instrumentality thereof and
backed by the full faith and credit of the United States of America, in each
case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest ratings obtainable
from either Standard & Poor's Corporation or Moody's Investors Service, Inc.;
(iii) commercial paper maturing no more than one year from the date of creation
thereof and, at the time of acquisition, having a rating of at least A-1 or the
equivalent thereof from Standard & Poor's Corporation or P-1 or the equivalent
thereof from Moody's Investors Service, Inc.; (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any domestic commercial bank having combined capital and
surplus of not less than $250,000,000; and (v) repurchase agreements and reverse
repurchase agreements with any bank meeting the qualifications specified in
clause (iv) above relating to securities of the types described in clauses (i),
(ii) or (iv) above, in each case maturing within one year from the date of
acquisition thereof.
"Common Equity" of any Person means all Capital Stock of such Person that
is generally entitled to (i) vote in the election of directors of such Person or
(ii), if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument, until a successor Person shall have become such pursuant to the
applicable provisions of this instrument, and thereafter "Company" shall mean
such successor Person.
"Consolidated Fixed Charge Coverage Ratio" of the Company means, with
respect to any determination date, the ratio of (i) Consolidated Cash Flow
Available for Fixed Charges of the Company for the prior four full fiscal
quarters for which financial results have been reported immediately preceding
such determination date to (ii) Consolidated Interest Expense which the Company
shall accrue during the next succeeding four full fiscal quarters for which
financial results will be reported immediately following such determination
date, such Consolidated Interest Expense to be calculated on the basis of the
amount of the Company's Indebtedness (on a consolidated basis) outstanding on
the determination date and reasonably anticipated by the Board of Directors of
the Company to be outstanding from time to time during such period provided that
in any calculation of the Consolidated Fixed Charge Coverage Ratio of the
Company, no adjustment shall be made with respect to any Asset Sale that has not
taken place prior to the determination date.
"Consolidated Net Income" of the Company for any period means the net
income (or loss) of the Company and its Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP; provided that there shall be
excluded from such net income (to the extent otherwise included therein),
without duplication, (i) the net income (or loss) of any Person (other than a
Subsidiary of the Company) in which any Person other than the Company has an
ownership interest, except to the extent that any such income has actually been
received by the Company or any of its Subsidiaries in the form of dividends or
similar distributions during such period; (ii) to the extent includable in the
consolidated net income of the Company, the net income (or loss) of any Person
that accrued prior to the date that (A) such Person becomes a Subsidiary of the
Company or is merged into or consolidated with the Company or any of its
Subsidiaries or (B) the assets of such Person are acquired by the Company or any
of its Subsidiaries; (iii) the net income of any Subsidiary of the Company to
the extent that (but only as long as) the declaration or payment of dividends or
similar distributions by such Subsidiary of that income is not permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary during such period; (iv) any gain or loss, together with any related
provisions for taxes, realized during such period by the Company or any of its
Subsidiaries upon (A) the acquisition of any securities, or the extinguishment
of any Indebtedness, of the Company or any of its Subsidiaries or (B) any Asset
Sale by the Company or any of its Subsidiaries; (v) any extraordinary gain or
loss, together with any related provision for taxes on any such extraordinary
gain or loss, realized by the Company or any of its Subsidiaries during such
period; and (vi) in the case of a successor to the Company by
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consolidation, merger or transfer of its assets, any earnings of the successor
prior to such merger, consolidation or transfer of assets; and provided,
further, that there shall be included in such net income (to the extent not
otherwise included therein) the net income of any Subsidiary of the Company to
the extent such net income is actually received by the Company or a Subsidiary
of the Company in the form of cash dividends or other cash distributions from
such Subsidiary.
"Consolidated Tangible Net Worth" of the Company as of any date means the
stockholders' equity (including any Preferred Stock that is classified as equity
under GAAP, other than Disqualified Stock) of the Company and its Subsidiaries
on a consolidated basis at such date, as determined in accordance with GAAP,
less the book value of all Intangible Assets reflected on the consolidated
balance sheet of the Company and its Subsidiaries as of such date.
"Credit Facility" means that certain First Amended and Restated Credit
Agreement, dated December 17, 1992, among the Company and its Subsidiaries, the
banks and other financial institutions parties thereto and Wells Fargo Bank,
N.A., as Agent and Banque Paribas, Houston Agency, as Co-Agent, and the notes,
letters of credit, guarantees, pledge agreements, mortgages or other collateral
agreements, documents, certificates or instruments now or hereafter arising with
respect thereto, as the same may be amended, supplemented, extended, renewed,
restated, increased or otherwise modified from time to time prior to, on or
after the Issue Date, together with any and all the refinancings, refundings and
replacements from time to time prior to, on, or after the Issue Date.
"Default" means any event that is, or after notice or lapse of time or both
would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Securities.
"Event of Default" has the meaning specified in Article V.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"incur", when used with respect to any Indebtedness, means to, directly or
indirectly, create, incur, assume, issue, guarantee or otherwise become liable
for or with respect to such Indebtedness; and the terms "incurred", "incurrence"
and "incurring" have means correlative to the foregoing.
"Indebtedness" of any Person at any date means, without duplication, (i)
all indebtedness of such Person for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such Person or only to a portion
thereof), (ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of such Person in
respect of letters of credit or other similar instruments (or reimbursement
obligations with respect thereto), other than standby letters of credit incurred
by such Person in the ordinary course of business, (iv) all obligations of such
Person with respect to Hedging Obligations (other than foreign currency exchange
agreements entered into in the ordinary course of business of such Person that
do not relate to indebtedness for borrowed money of such Person), (v) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, except trade payables and accrued expenses incurred in the
ordinary course of business, (vi) all Capitalized Lease Obligations of such
Person, (vii) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, (viii) all
Indebtedness of others guaranteed by such Person to the extent of such guarantee
and (ix) all Attributable Indebtedness. The amount of Indebtedness of any Person
at any date shall be (a) the outstanding balance at such date of all
unconditional obligations as described above, (b) the maximum liability of such
Person for any contingent obligations under clause (v) above at such date and
(c) in the case of clause (vii) above, the lesser of (A) the fair market value
of any asset subject to a Lien securing the Indebtedness of others on the date
that the Lien attaches and (B) the amount of the Indebtedness secured. To the
extent such Person guarantees the obligation of another Person to pay interest
on indebtedness owed by such other Person, then a designated percentage of the
interest guaranteed or the
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principal amount of the underlying indebtedness, as the case may be, shall be
deemed indebtedness of the referent Person. For purposes of this definition, the
amount of such deemed indebtedness of the referent Person shall be equal to the
lesser of: (x) the aggregate principal amount of the underlying indebtedness
relating to such interest guarantee and (y) the aggregate amount of interest due
and payable over the term of such indebtedness (or the term of the Securities if
shorter) determined based upon the rate of interest in effect as of the date of
such determination, together with the maximum prepayment premium or penalty
which could become due or payable with respect to such indebtedness if such
indebtedness was prepaid prior to the maturity of the Securities.
Notwithstanding the foregoing, the term Indebtedness shall include all
indebtedness, obligations, liabilities and undertakings under the Credit
Facility.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof.
"Independent Financial Advisor" means an accounting, appraisal or
investment banking firm of nationally recognized standing that is, in the
reasonable judgment of the Board of Directors, (i) qualified to perform the task
for which it has been engaged and (ii) disinterested and independent with
respect to the Company, all of its Subsidiaries and each Affiliate of the
Company and/or its Subsidiaries that is involved in the transaction with respect
to which such firm has been engaged; provided that, notwithstanding the
foregoing, Shearson Lehman Brothers Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation shall each be deemed qualified to serve as an Independent
Financial Advisor.
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Issue Date" means the date on which the Securities are originally issued
under this Indenture.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest or other similar encumbrance of any kind in
respect of such property or asset, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, and any lease in the nature thereof, any option or other
agreement to sell, and any filing of, or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Net Cash Proceeds" means the Net Proceeds or any Asset Sale received in
the form of cash or Cash Equivalents.
"Net Proceeds" means (i) in the case of any Asset Sale by any Person, the
aggregate net proceeds received by such Person, after payment of expenses,
taxes, commissions and the like incurred in connection therewith (and the amount
of cash, if any, applied to repay any Indebtedness secured by the asset involved
in such Asset Sale), whether such proceeds are in cash or in property (valued at
the fair market value thereof at the time of receipt), and (ii) in the case of
any exchange, exercise, conversion or surrender of outstanding securities of any
kind for or into shares of Capital Stock (other than Disqualified Stock) of the
Company, the net book value of such outstanding securities on the date of such
exchange, exercise, conversion or surrender (plus any additional amount required
to be paid by the holder to the Company upon such exchange, exercise, conversion
or surrender, and less any and all payments made such holder and all expenses
incurred by the Company in connection therewith).
"Net Proceeds Offer" has the meaning specified in Section 1012.
"Net Proceeds Offer Trigger Date" has the meaning specified in Section
1012.
"Net Proceeds Payment Date" has the meaning specified in Section 1012.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President or a Vice President and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary, of the Company, and
delivered to the Trustee.
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"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company (including in-house counsel) or the Trustee, and who shall be
acceptable to the Trustee.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Permitted Indebtedness" means (i) Indebtedness of the Company and its
Subsidiaries under the Credit Facility in an amount not in excess of $170.0
million aggregate principal amount reduced by (A) any scheduled principal
payments irrevocably and indefeasibly made in cash and (B) any amounts by which
the revolving credit facilities commitment is permanently reduced and the
revolving credit loans, to the extent required, are indefeasibly and irrevocably
repaid in cash; (ii) Indebtedness of the Company and its Subsidiaries
outstanding on the Issue Date; (iii) Indebtedness of the Company to any
Subsidiary of the Company and Indebtedness of any Subsidiary of the Company to
the Company or another Subsidiary of the Company; (iv) Hedging Obligations
required by the terms of the Credit Facility; (v) Indebtedness of the Company
and its Subsidiaries in an aggregate principal amount not to exceed $20.0
million at any one time outstanding (exclusive of Indebtedness permitted by any
other clause of this paragraph or under Section 1007); (vi) additional
Indebtedness of the Company and its Subsidiaries in an aggregate principal
amount not to exceed $10.0 million at any one time outstanding exclusive of
Indebtedness permitted by any other clause of this paragraph or under Section
1007) either under the Credit Facility or under another facility approved by the
Banks under the Credit Facility; and (vii) Refinancing Indebtedness.
"Permitted Liens" means (i) Liens for taxes, assessments or governmental
charges or claims that either (A) are not yet delinquent or (B) are being
contested in good faith by appropriate proceedings and as to which appropriate
reserves have been established or other provisions have been made in accordance
with GAAP; (ii) statutory Liens of landlords and carriers', warehousemen's
mechanics', suppliers', materialmen's, repairmen's or other Liens imposed by law
and arising in the ordinary course of business and with respect to amounts that,
to the extent applicable, either (A) are not yet delinquent or (B) are being
contested in good faith by appropriate proceedings and as to which appropriate
reserves been established or other provisions have been made in accordance with
GAAP; (iii) Liens (other than any Lien imposed by the Employer Retirement Income
Security Act of 1974, as amended) incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory obligations,
surety and appeal bonds, progress payments, government contracts and other
obligations of like nature (exclusive of obligations for the payment of borrowed
money), in each case, incurred in the ordinary course of business; (v)
attachment or judgment Liens not giving rise to a Default or an Event of
Default; and (vi) easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially interfering with the ordinary conduct of
the business of the Company or any of its Subsidiaries.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" of any Person means all Capital Stock of such Person
which has a preference in liquidation or a preference with respect to the
payment of dividends.
"redemption", when used with respect to any Security, includes any purchase
of such Security by the Company pursuant to a Change of Control Offer or Net
Proceeds Offer.
"Refinancing" has the meaning specified in the second recital of this
Indenture.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness outstanding on the Issue Date or other Indebtedness
permitted to be incurred by the Company or its Subsidiaries pursuant to the
terms of this Indenture, but only to the extent that (a) the Refinancing
Indebtedness is subordinated to the Securities to the same extent as the
Indebtedness being refunded, refinanced or extended, if at all, (b) the
Refinancing Indebtedness is scheduled to mature either (i) no earlier than the
Indebtedness being refunded, refinanced or extended, or (ii) after the maturity
date of the Securities, (c) the portion, if any, of the Refinancing Indebtedness
that is scheduled to mature on or prior to the maturity date of the Securities
has a Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is
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incurred that is equal to or greater than the Weighted Average Life to Maturity
of the portion of the Indebtedness being refunded, refinanced or extended that
is scheduled to mature on or prior to the maturity date of the Securities, (d)
such Refinancing Indebtedness is in an aggregate principal amount that is equal
to or less than the sum of (i) the aggregate principal amount then outstanding
under the Indebtedness being refunded, refinanced or extended, (ii) the amount
of accrued and unpaid interest, if any, on such Indebtedness being refunded,
refinanced or extended and (iii) the amount of customary fees, expenses and
costs related to the incurrence of such Refinancing Indebtedness and (e) such
Refinancing Indebtedness is incurred by the same Person that initially incurred
the Indebtedness being refunded, refinanced or extended, except that (x) the
Company may incur Refinancing Indebtedness to refund, refinance or extend
Indebtedness of any Subsidiary of the Company and (y) any Subsidiary of the
Company may incur Refinancing Indebtedness to refund, refinance or extend
Indebtedness of a Subsidiary of the Company; provided, however, that nothing
contained in this definition shall limit or restrict the holders of the
liabilities, undertakings, indebtedness and obligations now or hereafter
evidenced by the Credit Facility from refinancing, refunding or replacing such
obligations and indebtedness from time to time.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the June 1 and December 1 (whether or not a Business Day) next preceding
such Interest Payment Date.
"Related Business Expenditure" means any capital expenditure, Investment or
operating expense reasonably related to the business of the Company and its
Subsidiaries as such business is conducted on the Issue Date.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution on Capital Stock of the
Company or any Subsidiary of the Company or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the Company
or any Subsidiary of the Company (other than (x) dividends or distributions
payable solely in Capital Stock (other than Disqualified Stock) and (y) in the
case of Subsidiaries of the Company, dividends or distributions payable to the
Company or to a Subsidiary of the Company); (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock of the Company or
any of its Subsidiaries; (iii) the making of any principal payment on, or the
purchase, defeasance, repurchase, redemption or other acquisition or retirement
for value, prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment, of any Indebtedness which is subordinated in right of
payment to the Securities (other than Indebtedness acquired in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition); and (iv) the
making of any Prohibited Investment or guarantee of any Prohibited Investment in
any Person; provided, however, that the following shall not be deemed Restricted
Payments: (i) the payment by the Company and its subsidiaries to Holdings of
their respective shares of the consolidated tax liability pursuant to the Tax
Sharing Agreement; (ii) advances to employees, officers, directors, agents and
representatives of Holdings' for travel and other reasonable and ordinary
business expenses; (iii) advances and loans to employees and officers of
Holdings' in connection with their relocation; (iv) loans to key employees to
finance the purchase of Capital Stock of the Company or Holdings' but only to
the extent the proceeds of such loans used to purchase the Capital Stock of
Holdings are concurrently contributed by Holdings to the Company; (v) the
payment to Acadia or its affiliates of consulting fees of $400,000 plus expenses
per year pursuant to the terms of the Consulting Agreement; (vi) the payment by
the Company to Holdings of management fees under or pursuant to the terms of the
Management Agreement, provided such fees represent payment at cost for customary
and ordinary expenses under leases and other contractual rights of Holdings
during the period commencing on the Issue Date and terminating on the earlier to
occur of (x) the 180th day after the Issue Date, or (y) the completion of the
transfer by Holdings to the Company of all such leases and contractual rights;
(vii) the redemption or retirement of subordinated indebtedness of the Company
in exchange for, by conversion into, or out of the net proceeds of, a
substantially concurrent incurrence of Refinancing Indebtedness; and (viii)
Prohibited Investments in any joint venture or corporation organized under the
laws of a jurisdiction other than the United States, not in excess of $5.0
million in the aggregate (net of return of capital from such joint ventures or
corporations) since December 31, 1992. In no event shall any payment or
prepayment with respect to the Credit Facility be deemed to be a Restricted
Payment.
B-13
<PAGE> 56
"Securities" has the meaning specified in the first recital of this
instrument and more particularly means any Securities authenticated and
delivered under this Indenture.
"Senior Indebtedness" means the principal and premium, if any, and interest
on (including interest at the contract rate (including a default rate) that, but
for the filing of a petition initiating any proceeding pursuant to any
bankruptcy or reorganization law with respect to the Company, would accrue on
such obligations, whether or not a claim therefor is allowed in such bankruptcy
or reorganization proceeding) and all other monetary obligations of every kind
or nature in respect of or incurred in connection with (a) Indebtedness of the
Company under the Credit Facility and the interest rate hedging arrangements
provided for therein; (b) obligations of the Company for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar credit
transaction; and (c) any other Indebtedness of the Company (other than the
Securities), whether outstanding on the Issue Date or thereafter created,
incurred or assumed, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Securities. Notwithstanding the foregoing, Senior
Indebtedness shall not include (i) Indebtedness of the Company to a Subsidiary
of the Company for money borrowed or advanced from such Subsidiary or (ii)
amounts owed (except to banks and other financing institutions) for goods,
materials or services purchased in the ordinary course of business.
"Subsidiary" of any Person means (i) any corporation of which at least a
majority of the aggregate voting power of all classes of the Common Equity is
owned by such Person directly or through one or more other Subsidiaries of such
Person and (ii) any entity other than a corporation in which such Person,
directly or indirectly, owns at least a majority of the Common Equity of such
entity.
"Successor" has the meaning specified in Section 801.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"Wholly Owned Subsidiary" of any Person means (i) a Subsidiary, of which
100% of the Common Equity (except for directors' qualifying shares or certain
minority interests owned by other persons solely due to local law requirements
that there be more than one stockholder, but which interest is not in excess of
what is required for such purpose) is owned directly by such Person or through
one or more other Wholly Owned Subsidiaries of such Person or (ii) any entity
other than a corporation in which such Person, directly or indirectly, owns all
of the Common Equity of such entity.
B-14
<PAGE> 57
CONSENT AND LETTER OF TRANSMITTAL
TO
TENDER AND TO GIVE CONSENT IN RESPECT OF
13 1/4% SENIOR DISCOUNT DEBENTURES DUE 2005
OF
IVEX PACKAGING CORPORATION
PURSUANT TO THE OFFERS TO PURCHASE
AND CONSENT SOLICITATIONS STATEMENT
DATED AUGUST 27, 1997
THE OFFER AND THE SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
SEPTEMBER 24, 1997, UNLESS EXTENDED (SUCH DATE, THE "INITIAL EXPIRATION DATE"
AND, AS THE SAME MAY BE EXTENDED, THE "EXPIRATION DATE"). TENDERS OF SENIOR
DEBENTURES (AS DESCRIBED HEREIN) MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE AND CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO THE INITIAL
EXPIRATION DATE.
The Depositary for the Offer and the Solicitation is:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<C> <C>
By Facsimile: By Mail:
(212) 780-0592 United States Trust Company of New York
Attention: Customer Service P.O. Box 843 Cooper Station
Confirm by Telephone to: (800) 548-6565 New York, New York 10276
Attention: Corporate Trust Services
By Hand before 4:30 p.m.: By Overnight Courier and By Hand after 4:30 p.m.:
United States Trust Company of New York United States Trust Company of New York
111 Broadway 770 Broadway, 13th Floor
New York, New York 10006 New York, New York 10003
Attention: Lower Level Corporate Trust Window
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE
INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE THE TENDER OFFER CONSIDERATION
PURSUANT TO THE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR SENIOR
DEBENTURES AND DELIVER (AND NOT REVOKE) THEIR CONSENTS TO THE DEPOSITARY ON OR
PRIOR TO THE EXPIRATION DATE.
This Consent and Letter of Transmittal ("Consent and Letter of
Transmittal") is to be used by Holders if: (i) certificates representing the
13 1/4% Senior Discount Debentures due 2005 (the "Senior Debentures"), issued
pursuant to an Indenture dated as of March 8, 1993 (the "Senior Debenture
Indenture") are to be physically delivered to the Depositary herewith by such
Holders; (ii) tender of Senior Debentures is to be made by book-entry transfer
to the Depositary's account at The Depository Trust Company ("DTC") or the
Philadelphia Depository Trust Company ("PHILADEP") (each, a "Book-Entry Transfer
Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to
the procedures set forth in the Statement referred to above under the caption
"The Offers and the Solicitations--Procedures for Tendering Notes and Delivering
Consents--Book-Entry Transfer" by any financial institution that is a
participant in a Book-Entry Transfer Facility and whose name appears on a
security position listing as the owner of Senior Debentures (such participants,
acting on behalf of Holders, are referred to herein, together with such Holders,
as "Acting Holders"); (iii) tender of Senior Debentures is to be made according
to the guaranteed delivery procedures set forth in the Statement under the
caption "The Offer and the Solicitation--Procedures for Tendering Notes and
Delivering Consents--Guaranteed Delivery;" or (iv) a Holder wishes to deliver a
Consent herewith. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
HOLDERS WHO TENDER SENIOR DEBENTURES WILL BE CONSENTING TO THE PROPOSED
AMENDMENTS PURSUANT TO THIS CONSENT AND LETTER OF TRANSMITTAL. THE COMPLETION,
EXECUTION AND DELIVERY OF THIS CONSENT AND LETTER OF TRANSMITTAL WILL CONSTITUTE
A CONSENT TO THE PROPOSED AMENDMENTS. A HOLDER OF SENIOR DEBENTURES MAY NOT
VALIDLY TENDER SUCH SENIOR DEBENTURES WITHOUT DELIVERING A VALID CONSENT.
1
<PAGE> 58
The undersigned has completed, executed and delivered this Consent and
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Offer and the Solicitation.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Statement referred to above.
Your bank or broker can assist you in completing this form. The
instructions included with this Consent and Letter of Transmittal must be
followed. Questions and requests for assistance or for additional copies of the
Statement, this Consent and Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Dealer Manager, whose address and telephone
number appear on the back cover of this Consent and Letter of Transmittal. See
Instruction 11 below.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CHECK HERE IF TENDERED SENIOR DEBENTURES ARE BEING DELIVERED
BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution
Name of Book-Entry Transfer Facility (check one):
[ ] DTC
[ ] PHILADEP
Account Number Transaction Code Number
</TABLE>
If Holders desire to tender Senior Debentures pursuant to the Offer and (i)
certificates representing such Senior Debentures are not lost but are not
immediately available, (ii) time will not permit this Consent and Letter of
Transmittal, certificates representing such Senior Debentures or other required
documents to reach the Depositary prior to the Expiration Date, or (iii) the
procedures for book-entry transfer cannot be completed prior to the Expiration
Date, such Holders may effect a tender of such Senior Debentures in accordance
with the guaranteed delivery procedures set forth in the Statement under the
caption "The Offer and the Solicitation--Procedures for Tendering Notes and
Delivering Consents--Guaranteed Delivery." See Instruction 1 below.
<TABLE>
<S> <C>
CHECK HERE IF TENDERED SENIOR DEBENTURES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY
DELIVERED TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):
Window Ticket No. (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Eligible Institution that Guaranteed Delivery:
If Delivered by Book-Entry Transfer:
Name of Book-Entry Transfer Facility (check one):
[ ] DTC
[ ] PHILADEP
Account Number Transaction Code Number
</TABLE>
2
<PAGE> 59
List below the Senior Debentures to which this Consent and Letter of
Transmittal relates. If the space provided below is inadequate, list the
certificate numbers and principal amounts on a separately executed schedule and
affix the schedule to this Consent and Letter of Transmittal. Tenders of Senior
Debentures will be accepted only in principal amounts equal to $1,000 or
integral multiples thereof.
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SENIOR DEBENTURES
- ------------------------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL AMOUNT
PRINCIPAL TENDERED AND AS TO
NAME(S) AND ADDRESS(ES) OF HOLDER(S) CERTIFICATE AMOUNT WHICH CONSENTS
(PLEASE FILL IN, IF BLANK) NUMBERS* REPRESENTED** ARE GIVEN
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL PRINCIPAL
AMOUNT OF
SENIOR DEBENTURES
- ------------------------------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer (see below).
** UNLESS OTHERWISE INDICATED IN THE COLUMN LABELED "PRINCIPAL AMOUNT TENDERED AND AS TO WHICH CONSENTS ARE GIVEN" AND SUBJECT
TO THE TERMS AND CONDITIONS OF THE STATEMENT, A HOLDER WILL BE DEEMED TO HAVE TENDERED AND CONSENTED WITH RESPECT TO THE
ENTIRE AGGREGATE PRINCIPAL AMOUNT REPRESENTED BY THE SENIOR DEBENTURES INDICATED IN THE COLUMN LABELED "AGGREGATE PRINCIPAL
AMOUNT REPRESENTED." SEE INSTRUCTION 3. ANY ENTRY IN THIS COLUMN WILL BE DEEMED TO BE A CONSENT WITH RESPECT TO THE
AGGREGATE PRINCIPAL AMOUNT ENTERED.
</TABLE>
If you do not wish to tender your Senior Debentures and you wish to
disapprove or abstain with respect to the matter described in the Statement for
which Consents are sought, you do not need to return this Consent and Letter of
Transmittal or take any other action. However, at your option, you may return
this Consent and Letter of Transmittal and disapprove or abstain with respect to
said matter by checking the appropriate box below. DO NOT CHECK EITHER OF THE
FOLLOWING BOXES IF YOU ARE TENDERING SENIOR DEBENTURES HEREWITH OR DELIVERING
CONSENTS WITH RESPECT TO SENIOR DEBENTURES HEREWITH. CHECKING EITHER BOX COULD
RENDER YOUR TENDER OR CONSENT INVALID.
<TABLE>
<C> <C>
[ ] [ ]
Disapprove Abstain
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
3
<PAGE> 60
LADIES AND GENTLEMEN:
By execution hereof, the undersigned acknowledges receipt of the Offers to
Purchase and Consent Solicitations Statement, dated August 27, 1997 (as the same
may be amended from time to time (the "Statement"), of Ivex Packaging
Corporation, a Delaware corporation (the "Company"), and this Consent and Letter
of Transmittal and instructions hereto, which together constitute (i) the
Company's offer to purchase for cash (the "Offer") all of its 13 1/4% Senior
Discount Debentures Due 2005 (the "Senior Debentures"), upon the terms and
subject to the conditions set forth in the Statement, and (ii) the Company's
solicitation (the "Solicitation") of consents (the "Consents") from registered
holders of Senior Debentures ("Holders") to certain proposed amendments (the
"Proposed Amendments"), as described in the Statement, to the indenture dated as
of March 8, 1993 between the Company and United States Trust Company of New
York, as trustee (the "Trustee"), pursuant to which the Senior Debentures were
issued (the "Senior Debenture Indenture").
Upon the terms and subject to the conditions of the Offer, the undersigned
hereby tenders to the Company the principal amount of Senior Debentures
indicated above and Consents to the Proposed Amendments (hereby revoking any
previously submitted disapproval or abstention).
Subject to, and effective upon, the acceptance for purchase of, and payment
for, the principal amount of Senior Debentures tendered with this Consent and
Letter of Transmittal, the undersigned hereby sells, assigns and transfers to,
or upon the order of, the Company, all right, title and interest in and to the
Senior Debentures that are being tendered hereby. The undersigned also consents
to the Proposed Amendments effective as of the date hereof. The undersigned
hereby irrevocably constitutes and appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that the
Depositary also acts as the agent of the Company) with respect to such Senior
Debentures with full power of substitution (such power-of-attorney being deemed
to be an irrevocable power coupled with an interest) to (i) present such Senior
Debentures and all evidences of transfer and authenticity to, or transfer
ownership of, such Senior Debentures on the account books maintained by any of
the Book-Entry Transfer Facilities to, or upon the order of, the Company, (ii)
present such Senior Debentures for transfer of ownership on the books of the
Company, (iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Senior Debentures and (iv) deliver to the Company
and the Trustee this Consent and Letter of Transmittal as evidence of the
undersigned's Consent to the Proposed Amendments and as certification that
Requisite Consents to the Proposed Amendments duly executed by Holders have been
received, all in accordance with the terms of and conditions to the Offer and
the Solicitation as described in the Statement.
The undersigned agrees and acknowledges that, by the execution and delivery
hereof, the undersigned makes and provides the written Consent, with respect to
the Senior Debentures tendered hereby or represented hereby, to the Proposed
Amendments as permitted by Article IX, Section 902 of the Senior Debenture
Indenture. The undersigned understands that the Consent provided hereby shall
remain in full force and effect until such Consent is revoked in accordance with
the procedure set forth in the Statement and this Consent and Letter of
Transmittal. The undersigned understands that a revocation of such Consent will
not be effective following the time and date on which a supplemental indenture
providing for the Proposed Amendments is executed. The Company intends to cause
the execution of the supplemental indenture to occur upon the Initial Expiration
Date if the Requisite Consents have been obtained or, if the Requisite Consents
have not been obtained, promptly upon obtaining the Requisite Consents.
The undersigned understands that tenders of Senior Debentures may be
withdrawn by written notice of withdrawal received by the Depositary at any time
prior to the Expiration Date, and, thereafter, if the offer is terminated
without any Senior Debentures being purchased thereunder. If a Holder who has
tendered Senior Debentures subsequently effects a valid withdrawal of a prior
tender of Senior Debentures (without a concurrent valid revocation of a Consent)
prior to the Initial Expiration Date, such action will render the Consent with
respect to such Senior Debentures defective. The undersigned understands that
Consents may be revoked by written notice of revocation received by the
Depositary at any time prior to the Initial Expiration Date. If a Holder who has
tendered Senior Debentures subsequently effects a valid revocation of such
Holder's Consent (without a concurrent valid withdrawal of Senior Debentures),
such action will render
4
<PAGE> 61
the prior tender of Senior Debentures with respect to which such Consent relates
defective, and the Company will have the right, which it may waive, to reject
such tender of Senior Debentures as invalid and ineffective. In the event of a
termination of the Offer, the Senior Debentures tendered pursuant to the Offer
will be returned to the tendering Holder promptly. If the Company or IPC makes a
material change in the terms of the Offers or the Solicitations or the
information concerning the Offers or the Solicitations, the Company or IPC, as
the case may be, will disseminate additional Offer and Solicitation materials
and extend such Offers or, if applicable, the Solicitations, to the extent
required by law.
The undersigned understands that notice of revocation of Consent, to be
effective, must: (i) contain the name of the person who delivered the Consent
and the description of the Senior Debentures to which it relates, the
certificate number or numbers of such Senior Debentures (unless such Senior
Debentures were tendered by book-entry delivery) and the aggregate principal
amount represented by such Senior Debentures, (ii) be signed by the Acting
Holder thereof in the same manner as the original signature on this Consent and
Letter of Transmittal (including the required signature guarantee(s)) or be
accompanied by evidence, satisfactory to the Company and the Depositary, that
the holder of Senior Debentures revoking the Consent has succeeded to ownership
of the Senior Debentures, (iii) if this Consent and Letter of Transmittal was
executed by a person other than the registered Holder of the related Senior
Debentures, be accompanied by a valid proxy signed by such registered Holder and
authorizing the revocation of such Consent and (iv) be received by the
Depositary at one of the addresses set forth in the Statement prior to the
Initial Expiration Date. A purported notice of revocation that lacks any of the
required information or is dispatched to any other address will not be effective
to revoke a Consent previously given.
The undersigned understands that tenders of Senior Debentures pursuant to
any of the procedures described in the Statement and in the instructions hereto
and acceptance thereof by the Company will constitute a binding agreement
between the undersigned and the Company upon the terms and subject to the
conditions of the Offer and the Solicitation.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Senior
Debentures tendered hereby and to give the Consent contained herein, and that
when such Senior Debentures are accepted for purchase and payment by the
Company, the Company will acquire good title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim or right. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Depositary or by the Company to be necessary
or desirable to complete the sale, assignment and transfer of the Senior
Debentures tendered hereby, to perfect the undersigned's Consent to the Proposed
Amendments and to complete the execution of a supplemental indenture to the
Indenture reflecting such Proposed Amendments.
For purposes of the Offer, the undersigned understands that the Company
will be deemed to have accepted for purchase validly tendered Senior Debentures
(or defectively tendered Senior Debentures with respect to which the Company has
waived such defect), if, as and when the Company gives oral (confirmed the
following day in writing) or written notice thereof to the Depositary.
The undersigned understands that, under certain circumstances and subject
to certain conditions of the Offer (each of which the Company may waive) set
forth in the Statement, the Company may not be required to accept for purchase
any of the Senior Debentures tendered (including any Senior Debentures tendered
after the Expiration Date). Any Senior Debentures not accepted for purchase will
be returned promptly to the undersigned at the address set forth above, unless
otherwise indicated herein under "Special Delivery Instructions" below.
All authority conferred or agreed to be conferred by this Consent and
Letter of Transmittal shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Consent and Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives.
The undersigned understands that the delivery and surrender of the Senior
Debentures is not effective, and the risk of loss of the Senior Debentures does
not pass to the Depositary, until receipt by the Depositary of
5
<PAGE> 62
this Consent and Letter of Transmittal, or a facsimile hereof, properly
completed and duly executed, together with all accompanying evidences of
authority and any other required documents in form satisfactory to the Company.
All questions as to form of all documents and the validity (including time of
receipt) and acceptance of tenders and withdrawals of Senior Debentures and
deliveries and revocations of Consents will be determined by the Company, in its
sole discretion, which determination shall be final and binding.
Unless otherwise indicated herein under "Special Issuance Instructions,"
the undersigned hereby requests that any Senior Debentures representing
principal amounts not tendered or not accepted for purchase be issued in the
name(s) of the undersigned (and in the case of Senior Debentures tendered by
book-entry transfer, by credit to the account at the Book-Entry Transfer
Facility designated above), and checks for payments of the Tender Offer
Consideration and Consent Payment to be made in connection with the Offer and
the Solicitation be issued to the order of the undersigned. Similarly, unless
otherwise indicated herein under "Special Delivery Instructions," the
undersigned hereby requests that any Senior Debentures representing principal
amounts not tendered or not accepted for purchase and checks for payments of the
Tender Offer Consideration and Consent Payment to be made in connection with the
Offer and the Solicitation be delivered to the undersigned at the address(es)
shown above. In the event that the "Special Issuance Instructions" box or the
"Special Delivery Instructions" box is, or both are, completed, the undersigned
hereby requests that any Senior Debentures representing principal amounts not
tendered or not accepted for purchase be issued in the name(s) of, certificates
for such Senior Debentures be delivered to, and checks for payments of the
Tender Offer Consideration and Consent Payment be issued in the name(s) of, and
be delivered to, the person(s) at the address(es) so indicated, as applicable.
The undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" box or "Special Delivery Instructions" box to
transfer any Senior Debentures from the name of the registered Holder(s) thereof
if the Company does not accept for purchase any of the principal amount of such
Senior Debentures so tendered.
6
<PAGE> 63
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING AND CONSENTING HOLDERS OF SENIOR DEBENTURES
REGARDLESS OF WHETHER SENIOR DEBENTURES ARE BEING PHYSICALLY DELIVERED HEREWITH)
The completion, execution and delivery of this Consent and Letter of
Transmittal will be deemed to constitute a Consent to the Proposed Amendments.
This Consent and Letter of Transmittal must be signed by the registered
Holder(s) of Senior Debentures exactly as their name(s) appear(s) on
certificate(s) for Senior Debentures or, if tendered by a participant in one of
the Book-Entry Transfer Facilities, exactly as such participant's name appears
on a security position listing as the owner of Senior Debentures or by person(s)
authorized to become registered Holder(s) by endorsements on certificates for
Senior Debentures or by bond powers transmitted with this Consent and Letter of
Transmittal. Endorsements on Senior Debentures and signatures on bond powers by
registered Holders not executing this Consent and Letter of Transmittal must be
guaranteed by an Eligible Institution. See Instruction 4 below. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
set forth his or her full title below under "Capacity" and submit evidence
satisfactory to the Company of such person's authority to so act. See
Instruction 4 below.
IF THE SIGNATURE APPEARING BELOW IS NOT OF THE REGISTERED HOLDER(S) OF THE
SENIOR DEBENTURES, THEN THE REGISTERED HOLDER(S) MUST SIGN A CONSENT PROXY WHICH
SIGNATURE MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. THE CONSENT PROXY
SHOULD ACCOMPANY THIS CONSENT AND LETTER OF TRANSMITTAL.
X
------------------------------------------------------------------------------
X
------------------------------------------------------------------------------
SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY
Date: , 1997
-------
Name(s):
-----------------------------------------------------------------------
------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity:
----------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone No.:
---------------------------------------------------
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTION 4 BELOW)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
- --------------------------------------------------------------------------------
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
- --------------------------------------------------------------------------------
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF
FIRM)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(PRINTED NAME)
- --------------------------------------------------------------------------------
(TITLE)
Dated: , 1997
---- 7
<PAGE> 64
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4, 5, AND 7)
To be completed ONLY if certificates for Senior Debentures in a principal amount
not tendered or not accepted for purchase are to be issued in the name of, or
checks for the Tender Offer Consideration are to be issued to the order of,
someone other than the person or persons whose signature(s) appear(s) within
this Consent and Letter of Transmittal or issued to an address different from
that shown in the box entitled "Description of Senior Debentures" within this
Consent and Letter of Transmittal, or if Senior Debentures tendered by
book-entry transfer that are not accepted for purchase are to be credited to an
account maintained at one of the Book-Entry Transfer Facilities other than the
one designated above.
Issue: [ ] Senior Debentures [ ] Checks
(check as applicable)
Name
---------------------------------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------------------
(ZIP CODE)
---------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
Credit unpurchased Senior Debentures by book-entry to the Book-Entry Transfer
Facility account set forth below:
[ ] DTC [ ] PHILADEP
---------------------------------------------------------------------------
(DTC/PHILADEP ACCOUNT NUMBER)
Name of Account Party:
---------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4, 5, AND 7)
To be completed ONLY if certificates for Senior Debentures in a principal amount
not tendered or not accepted for purchase or checks for the Tender Offer
Consideration are to be sent to someone other than the person or persons whose
signature(s) appear(s) within this Consent and Letter of Transmittal or to an
address different from that shown in the box entitled "Description of Senior
Debentures" within this Consent and Letter of Transmittal.
Deliver: [ ] Senior Debentures [ ] Checks
(check as applicable)
Name
---------------------------------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------------------
(PLEASE PRINT)
---------------------------------------------------------------------------
(ZIP CODE)
---------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
8
<PAGE> 65
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER AND THE SOLICITATION
1. DELIVERY OF THIS CONSENT AND LETTER OF TRANSMITTAL AND CERTIFICATES FOR
SENIOR DEBENTURES OR BOOK-ENTRY CONFIRMATIONS; GUARANTEED DELIVERY PROCEDURES;
WITHDRAWAL OF TENDERS. To tender Senior Debentures in the Offer and to deliver
Consents in the Solicitation, physical delivery of certificates for Senior
Debentures or a confirmation of any book-entry transfer into the Depositary's
account with a Book-Entry Transfer Facility of Senior Debentures tendered
electronically, as well as a properly completed and duly executed copy or
facsimile of this Consent and Letter of Transmittal (including, if the person
executing this Consent and Letter of Transmittal is not the registered Holder of
the Senior Debentures tendered, a Consent Proxy executed by such registered
Holder), and any other documents required by this Consent and Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date. Tenders of Senior Debentures in the
Offer will be accepted prior to the Expiration Date in the manner described in
the preceding sentence and otherwise in compliance with this Consent and Letter
of Transmittal. The method of delivery of this Consent and Letter of
Transmittal, Senior Debentures and all other required documents to the
Depositary is at the election and risk of Holders. If such delivery is by mail,
it is suggested that Holders use properly insured registered mail, return
receipt requested, and that the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Depositary prior to such date. Except
as otherwise provided below, the delivery will be deemed made when actually
received or confirmed by the Depositary. THIS CONSENT AND LETTER OF TRANSMITTAL
AND SENIOR DEBENTURES SHOULD BE SENT ONLY TO THE DEPOSITARY, NOT TO THE COMPANY,
THE TRUSTEE OR THE DEALER MANAGER.
If Holders desire to tender Senior Debentures pursuant to the Offer and
deliver Consents pursuant to the Solicitation and (i) certificates representing
such Senior Debentures are not lost but are not immediately available, (ii) time
will not permit this Consent and Letter of Transmittal, certificates
representing Senior Debentures or other required documents to reach the
Depositary prior to the Expiration Date or (iii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date such Holders may
effect a tender of Senior Debentures and delivery of a Consent in accordance
with the guaranteed delivery procedures set forth in the Statement under the
caption "The Offers and the Solicitations--Procedures for Tendering Notes and
Delivering Consents--Guaranteed Delivery."
Pursuant to the guaranteed delivery procedures:
(a) such tender and delivery must be made by or through an Eligible
Institution (which is defined to include a bank, broker, dealer, credit
union, savings association or other entity that is a member of a recognized
Medallion Program approved by the Securities Transfer Association, Inc.);
(b) prior to the Expiration Date, the Depositary must have received
from such Eligible Institution, at one of the addresses of the Depositary
set forth herein, a properly completed and duly executed Notice of
Guaranteed Delivery (by telegram, facsimile transmission, mail or hand
delivery) substantially in the form provided by the Company, setting forth
the name(s) and address(es) of the Acting Holder(s), and the principal
amount of Senior Debentures being tendered and with respect to which a
Consent is being delivered and stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange
("NYSE") trading days after the date of the Notice of Guaranteed Delivery,
a properly completed and duly executed Consent and Letter of Transmittal,
or a facsimile thereof, together with certificates representing the Senior
Debentures (or confirmation of book-entry transfer of such Senior
Debentures into the Depositary's account with a Book-Entry Transfer
Facility as described above), and any other documents required by this
Consent and Letter of Transmittal (including, if the person executing this
Consent and Letter of Transmittal is not the registered Holder of the
Senior Debentures tendered, a Consent Proxy executed by such registered
Holder) and the instructions hereto, will be deposited by such Eligible
Institution with the Depositary; and
(c) this Consent and Letter of Transmittal or a facsimile hereof,
properly completed and duly executed, certificates for all physically
delivered Senior Debentures in proper form for transfer (or confirmation of
book-entry transfer of such Senior Debentures into the Depositary's account
with a
9
<PAGE> 66
Book-Entry Transfer Facility as described above) and all other required
documents (including, if the person executing this Consent and Letter of
Transmittal is not the registered Holder of the Senior Debentures tendered,
or Consent Proxy executed by such registered Holder) must be received by
the Depositary within three NYSE trading days after the date of the Notice
of Guaranteed Delivery.
Tenders of Senior Debentures may be withdrawn by written notice of
withdrawal and revocation received by the Depositary delivered by mail, hand
delivery or facsimile transmission, which notice must be received by the
Depositary at one of its addresses set forth herein prior to the Expiration
Date. Notice of withdrawal of tendered Senior Debentures, to be effective, must
(i) be received by the Depositary at one of its addresses set forth herein, (ii)
specify the name of the person who deposited the Senior Debentures to be
withdrawn (the "Depositor"), the name in which the Senior Debentures are
registered (and, if tendered by book-entry transfer, the name of the participant
in the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of such Senior Debentures) if different from that of the
Depositor, (iii) state the principal amount of Senior Debentures to be withdrawn
and (iv) be signed by the Depositor in the same manner as the original signature
on this Consent and Letter of Transmittal (including any required signature
guarantee(s)) or be accompanied by evidence satisfactory to the Company and the
Depositary that the person withdrawing the tender has succeeded to beneficial
ownership of the Senior Debentures. If certificates have been delivered or
otherwise identified (through confirmation of book-entry transfer of such Senior
Debentures) to the Depositary, the name of the Acting Holder and the certificate
numbers relating to such Senior Debentures withdrawn must also be furnished to
the Depositary as aforesaid prior to the physical release of the certificates
for the withdrawn Senior Debentures (or, in the case of Senior Debentures
transferred by book-entry transfer, the name and number of the account at the
Book-Entry Transfer Facility to be credited with withdrawn Senior Debentures).
If a Holder who has tendered Senior Debentures subsequently effects a valid
withdrawal of a prior tender of Senior Debentures (without a concurrent valid
revocation of a Consent) prior to the Initial Expiration Date, such action will
render the Consent with respect to such Senior Debentures defective.
2. CONSENT TO PROPOSED AMENDMENTS; REVOCATION OF CONSENTS. In accordance
with the Statement, all properly completed and executed Consents and Letters of
Transmittal consenting to the Proposed Amendments that are received by the
Depositary prior to the Expiration Date will be counted as Consents with respect
to the Proposed Amendments, unless the Depositary receives, prior to the Initial
Expiration Date or at such other times as are permitted in the Offer and
Solicitation, a written notice of revocation of such Consent as described in the
Statement. Notice of revocation of Consent, to be effective, must (i) contain
the name of the person who delivered the Consent and the description of the
Senior Debentures to which it relates, the certificate number or numbers of such
Senior Debentures (unless such Senior Debentures were tendered by book-entry
delivery) and the aggregate principal amount represented by such Senior
Debentures, (ii) be signed by the Acting Holder thereof in the same manner as
the original signature on this Consent and Letter of Transmittal (including the
required signature guarantee(s)) or be accompanied by evidence satisfactory to
the Company and the Depositary that the Holder revoking the Consent has
succeeded to beneficial ownership of the Senior Debentures, (iii) if the Consent
and Letter of Transmittal was executed by a person other than the registered
Holder of the related Senior Debentures, be accompanied by a valid proxy signed
by such registered holder and authorizing the revocation of such Consent and
(iv) be received by the Depositary at one of its addresses set forth herein
prior to the Initial Expiration Date. A purported notice of revocation that
lacks any of the required information or is dispatched to any other address will
not be effective to revoke a Consent previously given. If a Holder who has
tendered Senior Debentures subsequently effects a valid revocation of such
Holder's Consent (without a concurrent valid withdrawal of Senior Debentures),
such action will render the prior tender of the Senior Debentures with respect
to which such Consent relates defective, and the Company will have the right,
which it may waive, to reject such tender as invalid and ineffective.
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<PAGE> 67
THE COMPANY INTENDS TO CAUSE THE EXECUTION OF THE SUPPLEMENTAL INDENTURE
PROVIDING FOR THE PROPOSED AMENDMENTS TO OCCUR UPON THE INITIAL EXPIRATION DATE
IF THE REQUISITE CONSENTS HAVE BEEN OBTAINED AND NOT REVOKED OR, IF THE
REQUISITE CONSENTS HAVE NOT THEN BEEN OBTAINED AND NOT REVOKED, PROMPTLY UPON
OBTAINING THE REQUISITE CONSENTS. SUCH SUPPLEMENTAL INDENTURE WILL BE BINDING
UPON EACH HOLDER OF SENIOR DEBENTURES WHETHER OR NOT SUCH HOLDER GIVES A CONSENT
WITH RESPECT THERETO.
3. PARTIAL TENDERS AND CONSENTS. Tenders of Senior Debentures pursuant to
the Offer (and the corresponding Consents thereto pursuant to the Solicitation)
will be accepted only in and in respect of principal amounts equal to $1,000 or
integral multiples thereof. If less than the entire principal amount of any
Senior Debentures evidenced by a submitted certificate is tendered, the
tendering Holder must fill in the principal amount tendered in the column of the
box entitled "Description of Senior Debentures" herein. The entire principal
amount represented by the certificates for all Senior Debentures delivered to
the Depositary will be deemed to have been tendered, and a related Consent in
respect thereof given, unless otherwise indicated. If the entire principal
amount of all Senior Debentures is not tendered or not accepted for purchase
(and the related Consent in respect thereof not given), Senior Debentures
representing such untendered amount (or in respect of which a Consent is not
given) will be sent (or, if tendered by book-entry transfer, returned by credit
to the account at the Book-Entry Transfer Facility designated herein) to the
Acting Holder unless otherwise provided in the appropriate box on this Consent
and Letter of Transmittal (see Instruction 5), promptly after the Senior
Debentures are accepted for purchase.
4. SIGNATURES ON THIS CONSENT AND LETTER OF TRANSMITTAL, BOND POWERS AND
ENDORSEMENT; CONSENT PROXIES; GUARANTEE OF SIGNATURES. If this Consent and
Letter of Transmittal is signed by the registered Holder(s) of the Senior
Debentures tendered hereby and with respect to which Consent is given, the
signature(s) must correspond with the name(s) as written on the face of the
certificate(s) without alteration, enlargement or any change whatsoever. If this
Consent and Letter of Transmittal is signed by a participant in one of the
Book-Entry Transfer Facilities whose name is shown as the owner of the Senior
Debentures tendered hereby, the signature must correspond with the name shown on
the security position listing as the owner of the Senior Debentures.
IF THIS CONSENT AND LETTER OF TRANSMITTAL IS EXECUTED BY A PERSON OR ENTITY
WHO IS NOT THE REGISTERED HOLDER, THEN THE REGISTERED HOLDER MUST SIGN A CONSENT
PROXY, WITH THE SIGNATURE OF SUCH REGISTERED HOLDER GUARANTEED BY AN ELIGIBLE
INSTITUTION.
If any of the Senior Debentures tendered hereby (and with respect to which
Consent is given) are registered in the name of two or more Holders, all such
Holders must sign this Consent and Letter of Transmittal. If any tendered Senior
Debentures are registered in different names on several certificates, it will be
necessary to complete, sign and submit as many separate copies of this Consent
and Letter of Transmittal and any necessary accompanying documents (including
Consent Proxies) as there are different names in which certificates are held.
If this Consent and Letter of Transmittal is signed by the Acting Holder,
and the certificates for any principal amount of Senior Debentures not tendered
or not accepted for purchase are to be issued (or if any principal amount of
Senior Debentures that is not tendered or not accepted for purchase is to be
reissued or returned) to or, if tendered by book-entry transfer, credited to the
account at the Book-Entry Transfer Facility of the Acting Holder, and checks for
payments of the Tender Offer Consideration to be made in connection with the
Offer and the Solicitation are to be issued to the order of the Acting Holder,
then the Acting Holder need not endorse any certificates for tendered Senior
Debentures, nor provide a separate bond power. In any other case (including if
this Consent and Letter of Transmittal is not signed by the Acting Holder), the
Acting Holder must either properly endorse the certificates for Senior
Debentures tendered or transmit a separate properly completed bond power with
this Consent and Letter of Transmittal (in either case, executed exactly as the
name(s) of the registered Holder(s) appear(s) on such Senior Debentures, and,
with respect to a participant in a Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of
11
<PAGE> 68
Senior Debentures, exactly as the name(s) of the participant(s) appear(s) on
such security position listing), with the signature on the endorsement or bond
power guaranteed by an Eligible Institution, unless such certificates or bond
powers are executed by an Eligible Institution.
If this Consent and Letter of Transmittal, Consent Proxies or any
certificates for Senior Debentures or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Company of their authority so to act must be submitted with this Consent and
Letter of Transmittal.
Endorsements on certificates for Senior Debentures, signatures on bond
powers and Consents and Consent Proxies provided in accordance with this
Instruction 4 by registered Holders not executing this Consent and Letter of
Transmittal must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Consent and Letter of
Transmittal is signed by the registered Holder(s) of the Senior Debentures
tendered herewith (or by a participant in one of the Book-Entry Transfer
Facilities whose name appears on a security position listing as the owner of
Senior Debentures) and the payment of the Tender Offer Consideration is to be
made, or any Senior Debentures for principal amounts not tendered or not
accepted for purchase are to be issued, directly to such Holder(s) (or, if
signed by a participant in one of the Book-Entry Transfer Facilities, any Senior
Debentures for principal amounts not tendered or not accepted for purchase are
to be credited to such participant's account at such Book-Entry Transfer
Facility) and neither the "Special Issuance Instructions" box nor the "Special
Delivery Instructions" box of this Consent and Letter of Transmittal has been
completed or (ii) such Senior Debentures are tendered for the account of an
Eligible Institution. In all other cases, all signatures on Consents and Letters
of Transmittal and endorsements on certificates, signatures on bond powers and
Consent Proxies (if any) accompanying Senior Debentures must be guaranteed by an
Eligible Institution.
5. SPECIAL ISSUANCE AND SPECIAL DELIVERY INSTRUCTIONS. Tendering Holders
should indicate in the applicable box or boxes the name and address to which
Senior Debentures for principal amounts not tendered or not accepted for
purchase or checks for payment of the Tender Offer Consideration to be made in
connection with the Offer and the Solicitation are to be issued or sent, if
different from the name and address of the Acting Holder signing this Consent
and Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated. If no instructions are given, Senior Debentures not tendered or
not accepted for purchase will be returned to the Acting Holder of the Senior
Debentures tendered. Any Holder tendering by book-entry transfer may request
that Senior Debentures not tendered or not accepted for purchase be credited to
such account at any of the Book-Entry Transfer Facilities as such Holder may
designate under the caption "Special Issuance Instructions." If no such
instructions are given, any such Senior Debentures not tendered or not accepted
for purchase will be returned by crediting the account at the Book-Entry
Transfer Facility designated above.
6. TAXPAYER IDENTIFICATION NUMBER. Each tendering Holder is required to
provide the Depositary with the Holder's correct taxpayer identification number
("TIN"), generally the Holder's social security or federal employer
identification number, on Substitute Form W-9, which is provided under
"Important Tax Information" below, or, alternatively, to establish another basis
for exemption from backup withholding. A Holder must cross out item (2) in the
Certification box on Substitute Form W-9 if such Holder is subject to backup
withholding. Failure to provide the information on the form may subject the
tendering Holder to 31% federal income tax backup withholding on the payments
made to the Holder or other payee with respect to Senior Debentures purchased
pursuant to the Offer. The box in Part 3 of the form should be checked if the
tendering Holder has not been issued a TIN and has applied for TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked and the
Depositary is not provided with a TIN within sixty days, thereafter the
Depositary will withhold 31% on all such payments of the Offer Consideration
until a TIN is provided to the Depositary.
12
<PAGE> 69
7. TRANSFER TAXES. The Company will pay all transfer taxes applicable to
the purchase and transfer of Senior Debentures pursuant to the Offer, except in
the case of deliveries of certificates for Senior Debentures for principal
amounts not tendered or not accepted for payment that are registered or issued
in the name of any person other than the Acting Holder of Senior Debentures
tendered thereby.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Consent and
Letter of Transmittal.
8. IRREGULARITIES. All questions as to the form of all documents and the
validity (including time of receipt) and acceptance of tenders and withdrawals
of Senior Debentures and deliveries and revocations of Consents will be
determined by the Company, in its sole discretion, which determination shall be
final and binding. ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS OR CONSENTS
WILL NOT BE CONSIDERED VALID. The Company reserves the absolute right to reject
any or all tenders and Consents in respect of Senior Debentures that are not in
proper form or the acceptance of which would, in the Company's opinion, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Senior Debentures or of
delivery as to particular Consents. The Company's interpretations of the terms
and conditions of the Offer and the Solicitation (including the instructions in
this Consent and Letter of Transmittal) will be final and binding. Any defect or
irregularity in connection with tenders of Senior Debentures or deliveries of
Consents must be cured within such time as the Company determines, unless waived
by the Company. Tenders of Senior Debentures shall not be deemed to have been
made until all defects or irregularities have been waived by the Company or
cured. A defective tender may, in the sole discretion of the Company, constitute
a valid Consent and will be counted for purposes of determining whether
Requisite Consents have been obtained even if the accompanying Senior Debentures
are not accepted for purchase by reason of such defects. All tendering Holders,
by execution of this Consent and Letter of Transmittal or a facsimile hereof,
waive any right to receive notice of the acceptance of their Senior Debentures
for purchase or of the effectiveness of the Proposed Amendments. None of the
Company, the Depositary, the Dealer Manager, or any other person will be under
any duty to give notice of any defects or irregularities in tenders of Senior
Debentures or deliveries of Consents, or will incur any liability to Holders for
failure to give any such notice.
9. WAIVER OF CONDITIONS. The Company expressly reserves the absolute right,
in its sole discretion, to amend or waive any of the conditions to the Offer or
the Solicitation in the case of any Senior Debentures tendered or Consents
delivered, in whole or in part, at any time and from time to time.
10. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES FOR SENIOR
DEBENTURES. Any Holder whose certificates for Senior Debentures have been
mutilated, lost, stolen or destroyed should write to or telephone the Trustee at
the address or telephone number set forth in the Statement under the caption
"The Offers and the Solicitations--Procedures for Tendering Notes and Delivering
Consents--Lost or Missing Certificates."
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering Senior Debentures and consenting to the Proposed
Amendments and requests for assistance or additional copies of the Statement and
this Consent and Letter of Transmittal may be directed to the Dealer Manager
whose address and telephone number appear below.
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<PAGE> 70
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Senior Debentures
are accepted for payment is required to provide the Depositary (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his social security number. If the Depositary is not provided with
the correct TIN, a $50 penalty may be imposed by the Internal Revenue Service
and payments made to such Holder with respect to Senior Debentures purchased
pursuant to the Offer may be subject to backup withholding.
Certain Holders (including, among other, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Depositary a properly completed Internal Revenue Service Form W-8, signed
under penalties of perjury, attesting to that Holder's exempt status. A Form W-8
can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the Holder or other payee. Backup withholding is not an
additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to Senior
Debentures purchased pursuant to the Offer, the Holder is required to provide
the Depositary with (i) the Holder's correct TIN by completing the Substitute
Form W-9 below, certifying that the TIN provided on such form is correct (or
that such Holder is awaiting a TIN) and that (A) such Holder is exempt from
backup withholding, (B) the Holder has not been notified by the Internal Revenue
Service that the Holder is subject to backup withholding as a result of failure
to report all interest or dividends or (C) the Internal Revenue Service has
notified the Holder that the Holder is no longer subject to backup withholding;
and (ii) if applicable, an adequate basis for exemption.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Holder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the registered Holder. If
the Senior Debentures are held in more than one name or are not held in the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
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<PAGE> 71
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK
- -------------------------------------------------------------------------------------------------------------------
PART 1 -- PLEASE PROVIDE YOUR TIN IN THE
SUBSTITUTE BOX AT RIGHT AND CERTIFY BY SIGNING AND
DATING BELOW Social Security Number
OR
Employer Identification Number
FORM W-9 ---------------------------------------------------------------------------------
PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because (i) I am exempt from backup
withholding, (ii) I have not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (iii) the IRS has notified me that I
am no longer subject to backup withholding.
---------------------------------------------------------------------------------
PAYER'S REQUEST FOR CERTIFICATION INSTRUCTIONS -- YOU MUST CROSS OUT PART 3
TAXPAYER IDENTIFICATION ITEM (2) IN PART 2 ABOVE IF YOU HAVE BEEN NOTIFIED
NUMBER ("TIN") BY THE IRS THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING BECAUSE OF UNDERREPORTING INTEREST OR Awaiting TIN [ ]
DIVIDENDS ON YOUR TAX RETURN. HOWEVER, IF AFTER
BEING NOTIFIED BY THE IRS THAT YOU WERE SUBJECT TO
BACKUP WITHHOLDING YOU RECEIVED ANOTHER
NOTIFICATION FROM THE IRS STATING THAT YOU ARE NO
LONGER SUBJECT TO BACKUP WITHHOLDING, DO NOT CROSS
OUT ITEM (2).
SIGNATURE _____________________ DATE _____________ ,
1997
_____________________________________________________________
NAME (Please Print)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER AND THE SOLICITATION.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
<TABLE>
<S> <C> <C>
- ----
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me and
either (a) I have mailed or delivered an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to
mail or deliver an application in the near future. I understand that if I have not provided a taxpayer
identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will
be withheld until I provide a number.
------------------------------------------------------------------- ------------------------------, 1997
Signature Date
-------------------------------------------------------------------
Name (Please Print)
</TABLE>
- --------------------------------------------------------------------------------
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<PAGE> 72
The Dealer Manager for the Offers and the Solicitations is:
BT SECURITIES CORPORATION
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
(212) 775-2822
16
<PAGE> 73
CONSENT AND LETTER OF TRANSMITTAL
TO
TENDER AND TO GIVE CONSENT IN RESPECT OF
12 1/2% SENIOR SUBORDINATED NOTES DUE 2002
OF
IPC, INC.
PURSUANT TO THE OFFERS TO PURCHASE
AND CONSENT SOLICITATIONS STATEMENT
DATED AUGUST 27, 1997
THE OFFER AND THE SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
SEPTEMBER 24, 1997, UNLESS EXTENDED (SUCH DATE, THE "INITIAL EXPIRATION DATE"
AND, AS THE SAME MAY BE EXTENDED, THE "EXPIRATION DATE"). TENDERS OF
SUBORDINATED NOTES (AS DEFINED HEREIN) MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE AND CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO THE INITIAL
EXPIRATION DATE.
The Depositary for the Offer and the Solicitation is:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<C> <C>
By Facsimile: By Mail:
(212) 780-0592 United States Trust Company of New York
Attention: Customer Service P.O. Box 843 Cooper Station
Confirm by Telephone to: (800) 548-6565 New York, New York 10276
By Hand before 4:30 p.m.: Attention: Corporate Trust Services
United States Trust Company of New York By Overnight Courier and By Hand after 4:30 p.m.:
111 Broadway United States Trust Company of New York
New York, New York 10006 770 Broadway, 13th Floor
Attention: Lower Level Corporate Trust Window New York, New York 10003
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE
INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE THE TENDER OFFER CONSIDERATION
PURSUANT TO THE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR SUBORDINATED
NOTES AND DELIVER (AND NOT REVOKE) THEIR CONSENTS TO THE DEPOSITARY ON OR PRIOR
TO THE EXPIRATION DATE.
This Consent and Letter of Transmittal ("Consent and Letter of
Transmittal") is to be used by Holders if: (i) certificates representing the
12 1/2% Senior Subordinated Notes due 2002 (the "Subordinated Notes"), issued
pursuant to an Indenture dated as of December 15, 1992 (the "Subordinated Notes
Indenture") are to be physically delivered to the Depositary herewith by such
Holders; (ii) tender of Subordinated Notes is to be made by book-entry transfer
to the Depositary's account at The Depository Trust Company ("DTC") or the
Philadelphia Depository Trust Company ("PHILADEP") (each, a "Book-Entry Transfer
Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to
the procedures set forth in the Statement referred to above under the caption
"The Offers and the Solicitations--Procedures for Tendering Notes and Delivering
Consents--Book-Entry Transfer" by any financial institution that is a
participant in a Book-Entry Transfer Facility and whose name appears on a
security position listing as the owner of Subordinated Notes (such participants,
acting on behalf of Holders, are referred to herein, together with such Holders,
as "Acting Holders"); (iii) tender of Subordinated Notes is to be made according
to the guaranteed delivery procedures set forth in the Statement under the
caption "The Offer and the Solicitation--Procedures for Tendering Notes and
Delivering Consents--Guaranteed Delivery;" or (iv) a Holder wishes to deliver a
Consent herewith. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
HOLDERS WHO TENDER SUBORDINATED NOTES WILL BE CONSENTING TO THE PROPOSED
AMENDMENTS PURSUANT TO THIS CONSENT AND LETTER OF TRANSMITTAL. THE COMPLETION,
EXECUTION AND DELIVERY OF THIS CONSENT AND LETTER OF TRANSMITTAL WILL
1
<PAGE> 74
CONSTITUTE A CONSENT TO THE PROPOSED AMENDMENTS. A HOLDER OF SUBORDINATED NOTES
MAY NOT VALIDLY TENDER SUCH SUBORDINATED NOTES WITHOUT DELIVERING A VALID
CONSENT.
The undersigned has completed, executed and delivered this Consent and
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Offer and the Solicitation.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Statement referred to above.
Your bank or broker can assist you in completing this form. The
instructions included with this Consent and Letter of Transmittal must be
followed. Questions and requests for assistance or for additional copies of the
Statement, this Consent and Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Dealer Manager, whose address and telephone
number appear on the back cover of this Consent and Letter of Transmittal. See
Instruction 11 below.
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SUBORDINATED NOTES ARE BEING
DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT
MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ___________________________________
Name of Book-Entry Transfer Facility (check one):
[ ] DTC
[ ] PHILADEP
Account Number______________ Transaction Code Number _____________
If Holders desire to tender Subordinated Notes pursuant to the Offer and
(i) certificates representing such Subordinated Notes are not lost but are not
immediately available, (ii) time will not permit this Consent and Letter of
Transmittal, certificates representing such Subordinated Notes or other required
documents to reach the Depositary prior to the Expiration Date, or (iii) the
procedures for book-entry transfer cannot be completed prior to the Expiration
Date, such Holders may effect a tender of such Subordinated Notes in accordance
with the guaranteed delivery procedures set forth in the Statement under the
caption "The Offer and the Solicitation--Procedures for Tendering Notes and
Delivering Consents--Guaranteed Delivery." See Instruction 1 below.
[ ] CHECK HERE IF TENDERED SUBORDINATED NOTES ARE BEING
DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY
PREVIOUSLY DELIVERED TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name of Registered Holder(s): ____________________________________
Window Ticket No. (if any): ______________________________________
Date of Execution of Notice of Guaranteed Delivery: ______________
Name of Eligible Institution that Guaranteed Delivery: ___________
If Delivered by Book-Entry Transfer: _____________________________
Name of Book-Entry Transfer Facility (check one):
[ ] DTC
[ ] PHILADEP
Account Number _______________ Transaction Code Number __________
2
<PAGE> 75
List below the Subordinated Notes to which this Consent and Letter of
Transmittal relates. If the space provided below is inadequate, list the
certificate numbers and principal amounts on a separately executed schedule and
affix the schedule to this Consent and Letter of Transmittal. Tenders of
Subordinated Notes will be accepted only in principal amounts equal to $1,000 or
integral multiples thereof.
<TABLE>
<CAPTION>
DESCRIPTION OF SUBORDINATED NOTES
- ------------------------------------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL AMOUNT
PRINCIPAL TENDERED AND AS TO
NAME(S) AND ADDRESS(ES) OF HOLDER(S) CERTIFICATE AMOUNT WHICH CONSENTS
(PLEASE FILL IN, IF BLANK) NUMBERS* REPRESENTED** ARE GIVEN
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL PRINCIPAL
AMOUNT OF
SUBORDINATED NOTES
- ------------------------------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer (see below).
** UNLESS OTHERWISE INDICATED IN THE COLUMN LABELED "PRINCIPAL AMOUNT TENDERED AND AS TO WHICH CONSENTS ARE GIVEN" AND SUBJECT
TO THE TERMS AND CONDITIONS OF THE STATEMENT, A HOLDER WILL BE DEEMED TO HAVE TENDERED AND CONSENTED WITH RESPECT TO THE
ENTIRE AGGREGATE PRINCIPAL AMOUNT REPRESENTED BY THE SUBORDINATED NOTES INDICATED IN THE COLUMN LABELED "AGGREGATE PRINCIPAL
AMOUNT REPRESENTED." SEE INSTRUCTION 3. ANY ENTRY IN THIS COLUMN WILL BE DEEMED TO BE A CONSENT WITH RESPECT TO THE
AGGREGATE PRINCIPAL AMOUNT ENTERED.
</TABLE>
If you do not wish to tender your Subordinated Notes and you wish to
disapprove or abstain with respect to the matter described in the Statement for
which Consents are sought, you do not need to return this Consent and Letter of
Transmittal or take any other action. However, at your option, you may return
this Consent and Letter of Transmittal and disapprove or abstain with respect to
said matter by checking the appropriate box below. DO NOT CHECK EITHER OF THE
FOLLOWING BOXES IF YOU ARE TENDERING SUBORDINATED NOTES HEREWITH OR DELIVERING
CONSENTS WITH RESPECT TO SUBORDINATED NOTES HEREWITH. CHECKING EITHER BOX COULD
RENDER YOUR TENDER OR CONSENT INVALID.
[ ] [ ]
Disapprove Abstain
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
3
<PAGE> 76
LADIES AND GENTLEMEN:
By execution hereof, the undersigned acknowledges receipt of the Offers to
Purchase and Consent Solicitations Statement, dated August 27, 1997 (as the same
may be amended from time to time (the "Statement"), of IPC, Inc., a Delaware
corporation ("IPC"), and this Consent and Letter of Transmittal and instructions
hereto, which together constitute (i) IPC's offer to purchase for cash (the
"Offer") all of its 12 1/2% Senior Subordinated Notes Due 2002 (the
"Subordinated Notes"), upon the terms and subject to the conditions set forth in
the Statement, and (ii) IPC's solicitation (the "Solicitation") of consents (the
"Consents") from registered holders of Subordinated Notes ("Holders") to certain
proposed amendments (the "Proposed Amendments"), as described in the Statement,
to the indenture dated as of December 15, 1992 between IPC and United States
Trust Company of New York, as trustee (the "Trustee"), pursuant to which the
Subordinated Notes were issued (the "Subordinated Note Indenture").
Upon the terms and subject to the conditions of the Offer, the undersigned
hereby tenders to IPC the principal amount of Subordinated Notes indicated above
and Consents to the Proposed Amendments (hereby revoking any previously
submitted disapproval or abstention).
Subject to, and effective upon, the acceptance for purchase of, and payment
for, the principal amount of Subordinated Notes tendered with this Consent and
Letter of Transmittal, the undersigned hereby sells, assigns and transfers to,
or upon the order of, IPC, all right, title and interest in and to the
Subordinated Notes that are being tendered hereby. The undersigned also consents
to the Proposed Amendments effective as of the date hereof. The undersigned
hereby irrevocably constitutes and appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that the
Depositary also acts as the agent of IPC) with respect to such Subordinated
Notes with full power of substitution (such power-of-attorney being deemed to be
an irrevocable power coupled with an interest) to (i) present such Subordinated
Notes and all evidences of transfer and authenticity to, or transfer ownership
of, such Subordinated Notes on the account books maintained by any of the
Book-Entry Transfer Facilities to, or upon the order of, IPC, (ii) present such
Subordinated Notes for transfer of ownership on the books of IPC, (iii) receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Subordinated Notes and (iv) deliver to IPC and the Trustee this Consent and
Letter of Transmittal as evidence of the undersigned's Consent to the Proposed
Amendments and as certification that Requisite Consents to the Proposed
Amendments duly executed by Holders have been received, all in accordance with
the terms of and conditions to the Offer and the Solicitation as described in
the Statement.
The undersigned agrees and acknowledges that, by the execution and delivery
hereof, the undersigned makes and provides the written Consent, with respect to
the Subordinated Notes tendered hereby or represented hereby, to the Proposed
Amendments as permitted by Article IX, Section 902 of the Subordinated Note
Indenture. The undersigned understands that the Consent provided hereby shall
remain in full force and effect until such Consent is revoked in accordance with
the procedure set forth in the Statement and this Consent and Letter of
Transmittal. The undersigned understands that a revocation of such Consent will
not be effective following the time and date on which a supplemental indenture
providing for the Proposed Amendments is executed. IPC intends to cause the
execution of the supplemental indenture to occur upon the Initial Expiration
Date if the Requisite Consents have been obtained or, if the Requisite Consents
have not been obtained, promptly upon obtaining the Requisite Consents.
The undersigned understands that tenders of Subordinated Notes may be
withdrawn by written notice of withdrawal received by the Depositary at any time
prior to the Expiration Date, and, thereafter, if the offer is terminated
without any Subordinated Notes being purchased thereunder. If a Holder who has
tendered Subordinated Notes subsequently effects a valid withdrawal of a prior
tender of Subordinated Notes (without a concurrent valid revocation of a
Consent) prior to the Initial Expiration Date, such action will render the
Consent with respect to such Subordinated Notes defective. The undersigned
understands that Consents may be revoked by written notice of revocation
received by the Depositary at any time prior to the Initial Expiration Date. If
a Holder who has tendered Subordinated Notes subsequently effects a valid
revocation of such Holder's Consent (without a concurrent valid withdrawal of
Subordinated Notes), such action will render the prior tender of Subordinated
Notes with respect to which such Consent relates defective, and IPC
4
<PAGE> 77
will have the right, which it may waive, to reject such tender of Subordinated
Notes as invalid and ineffective. In the event of a termination of the Offer,
the Subordinated Notes tendered pursuant to the Offer will be returned to the
tendering Holder promptly. If the Company or IPC makes a material change in the
terms of the Offers or the Solicitations or the information concerning the
Offers or the Solicitations, the Company or IPC, as the case may be, will
disseminate additional Offer and Solicitation materials and extend such Offers
or, if applicable, the Solicitations, to the extent required by law.
The undersigned understands that notice of revocation of Consent, to be
effective, must: (i) contain the name of the person who delivered the Consent
and the description of the Subordinated Notes to which it relates, the
certificate number or numbers of such Subordinated Notes (unless such
Subordinated Notes were tendered by book-entry delivery) and the aggregate
principal amount represented by such Subordinated Notes, (ii) be signed by the
Acting Holder thereof in the same manner as the original signature on this
Consent and Letter of Transmittal (including the required signature
guarantee(s)) or be accompanied by evidence, satisfactory to IPC and the
Depositary, that the holder of Subordinated Notes revoking the Consent has
succeeded to ownership of the Subordinated Notes, (iii) if this Consent and
Letter of Transmittal was executed by a person other than the registered Holder
of the related Subordinated Notes, be accompanied by a valid proxy signed by
such registered Holder and authorizing the revocation of such Consent and (iv)
be received by the Depositary at one of the addresses set forth in the Statement
prior to the Initial Expiration Date. A purported notice of revocation that
lacks any of the required information or is dispatched to any other address will
not be effective to revoke a Consent previously given.
The undersigned understands that tenders of Subordinated Notes pursuant to
any of the procedures described in the Statement and in the instructions hereto
and acceptance thereof by IPC will constitute a binding agreement between the
undersigned and IPC upon the terms and subject to the conditions of the Offer
and the Solicitation.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Subordinated
Notes tendered hereby and to give the Consent contained herein, and that when
such Subordinated Notes are accepted for purchase and payment by IPC, IPC will
acquire good title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim or right. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Depositary or by IPC to be necessary or desirable to complete the sale,
assignment and transfer of the Subordinated Notes tendered hereby, to perfect
the undersigned's Consent to the Proposed Amendments and to complete the
execution of a supplemental indenture to the Subordinated Note Indenture
reflecting such Proposed Amendments.
For purposes of the Offer, the undersigned understands that IPC will be
deemed to have accepted for purchase validly tendered Subordinated Notes (or
defectively tendered Subordinated Notes with respect to which IPC has waived
such defect), if, as and when IPC gives oral (confirmed the following day in
writing) or written notice thereof to the Depositary.
The undersigned understands that, under certain circumstances and subject
to certain conditions of the Offer (each of which IPC may waive) set forth in
the Statement, IPC may not be required to accept for purchase any of the
Subordinated Notes tendered (including any Subordinated Notes tendered after the
Expiration Date). Any Subordinated Notes not accepted for purchase will be
returned promptly to the undersigned at the address set forth above, unless
otherwise indicated herein under "Special Delivery Instructions" below.
All authority conferred or agreed to be conferred by this Consent and
Letter of Transmittal shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Consent and Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives.
The undersigned understands that the delivery and surrender of the
Subordinated Notes is not effective, and the risk of loss of the Subordinated
Notes does not pass to the Depositary, until receipt by the Depositary of this
Consent and Letter of Transmittal, or a facsimile hereof, properly completed and
duly executed,
5
<PAGE> 78
together with all accompanying evidences of authority and any other required
documents in form satisfactory to IPC. All questions as to form of all documents
and the validity (including time of receipt) and acceptance of tenders and
withdrawals of Subordinated Notes and deliveries and revocations of Consents
will be determined by IPC, in its sole discretion, which determination shall be
final and binding.
Unless otherwise indicated herein under "Special Issuance Instructions,"
the undersigned hereby requests that any Subordinated Notes representing
principal amounts not tendered or not accepted for purchase be issued in the
name(s) of the undersigned (and in the case of Subordinated Notes tendered by
book-entry transfer, by credit to the account at the Book-Entry Transfer
Facility designated above), and checks for payments of the Tender Offer
Consideration and Consent Payment to be made in connection with the Offer and
the Solicitation be issued to the order of the undersigned. Similarly, unless
otherwise indicated herein under "Special Delivery Instructions," the
undersigned hereby requests that any Subordinated Notes representing principal
amounts not tendered or not accepted for purchase and checks for payments of the
Tender Offer Consideration and Consent Payment to be made in connection with the
Offer and the Solicitation be delivered to the undersigned at the address(es)
shown above. In the event that the "Special Issuance Instructions" box or the
"Special Delivery Instructions" box is, or both are, completed, the undersigned
hereby requests that any Subordinated Notes representing principal amounts not
tendered or not accepted for purchase be issued in the name(s) of, certificates
for such Subordinated Notes be delivered to, and checks for payments of the
Tender Offer Consideration and Consent Payment be issued in the name(s) of, and
be delivered to, the person(s) at the address(es) so indicated, as applicable.
The undersigned recognizes that IPC has no obligation pursuant to the "Special
Issuance Instructions" box or "Special Delivery Instructions" box to transfer
any Subordinated Notes from the name of the registered Holder(s) thereof if IPC
does not accept for purchase any of the principal amount of such Subordinated
Notes so tendered.
6
<PAGE> 79
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING AND CONSENTING HOLDERS OF SUBORDINATED NOTES
REGARDLESS OF WHETHER SUBORDINATED NOTES ARE BEING PHYSICALLY DELIVERED
HEREWITH)
The completion, execution and delivery of this Consent and Letter of
Transmittal will be deemed to constitute a Consent to the Proposed Amendments.
This Consent and Letter of Transmittal must be signed by the registered
Holder(s) of Subordinated Notes exactly as their name(s) appear(s) on
certificate(s) for Subordinated Notes or, if tendered by a participant in one of
the Book-Entry Transfer Facilities, exactly as such participant's name appears
on a security position listing as the owner of Subordinated Notes or by
person(s) authorized to become registered Holder(s) by endorsements on
certificates for Subordinated Notes or by bond powers transmitted with this
Consent and Letter of Transmittal. Endorsements on Subordinated Notes and
signatures on bond powers by registered Holders not executing this Consent and
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 4 below. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below
under "Capacity" and submit evidence satisfactory to IPC of such person's
authority to so act. See Instruction 4 below.
IF THE SIGNATURE APPEARING BELOW IS NOT OF THE REGISTERED HOLDER(S) OF THE
SUBORDINATED NOTES, THEN THE REGISTERED HOLDER(S) MUST SIGN A CONSENT PROXY
WHICH SIGNATURE MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. THE CONSENT PROXY
SHOULD ACCOMPANY THIS CONSENT AND LETTER OF TRANSMITTAL.
X
------------------------------------------------------------------------
X
------------------------------------------------------------------------
SIGNATURE(S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY
Date:________, 1997
Name(s):
------------------------------------------------------------------------
------------------------------------------------------------------------
(PLEASE PRINT)
Capacity:
------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone No.:
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTION 4 BELOW)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
- --------------------------------------------------------------------------------
(NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES)
- --------------------------------------------------------------------------------
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF
FIRM)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(PRINTED NAME)
- --------------------------------------------------------------------------------
(TITLE)
Dated: , 1997
7
<PAGE> 80
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4, 5, AND 7)
To be completed ONLY if certificates for Subordinated Notes in a principal
amount not tendered or not accepted for purchase are to be issued in the name
of, or checks for the Tender Offer Consideration are to be issued to the order
of, someone other than the person or persons whose signature(s) appear(s) within
this Consent and Letter of Transmittal or issued to an address different from
that shown in the box entitled "Description of Subordinated Notes" within this
Consent and Letter of Transmittal, or if Subordinated Notes tendered by
book-entry transfer that are not accepted for purchase are to be credited to an
account maintained at one of the Book-Entry Transfer Facilities other than the
one designated above.
Issue: [ ] Subordinated Notes [ ] Checks
(check as applicable)
Name
---------------------------------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------------------
------------------------------------------------------------------------
(ZIP CODE)
---------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
Credit unpurchased Subordinated Notes by book-entry to the Book-Entry Transfer
Facility account set forth below:
[ ] DTC [ ] PHILADEP
---------------------------------------------------------------------------
(DTC/PHILADEP ACCOUNT NUMBER)
Name of Account Party:
---------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4, 5, AND 7)
To be completed ONLY if certificates for Subordinated Notes in a principal
amount not tendered or not accepted for purchase or checks for the Tender Offer
Consideration are to be sent to someone other than the person or persons whose
signature(s) appear(s) within this Consent and Letter of Transmittal or to an
address different from that shown in the box entitled "Description of
Subordinated Notes" within this Consent and Letter of Transmittal.
Deliver: [ ] Subordinated Notes [ ] Checks
(check as applicable)
Name
---------------------------------------------------------------------------
(PLEASE PRINT)
Address
---------------------------------------------------------------------------
(PLEASE PRINT)
---------------------------------------------------------------------------
(ZIP CODE)
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
8
<PAGE> 81
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER AND THE SOLICITATION
1. DELIVERY OF THIS CONSENT AND LETTER OF TRANSMITTAL AND CERTIFICATES FOR
SUBORDINATED NOTES OR BOOK-ENTRY CONFIRMATIONS; GUARANTEED DELIVERY PROCEDURES;
WITHDRAWAL OF TENDERS. To tender Subordinated Notes in the Offer and to deliver
Consents in the Solicitation, physical delivery of certificates for Subordinated
Notes or a confirmation of any book-entry transfer into the Depositary's account
with a Book-Entry Transfer Facility of Subordinated Notes tendered
electronically, as well as a properly completed and duly executed copy or
facsimile of this Consent and Letter of Transmittal (including, if the person
executing this Consent and Letter of Transmittal is not the registered Holder of
the Subordinated Notes tendered, a Consent Proxy executed by such registered
Holder), and any other documents required by this Consent and Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date. Tenders of Subordinated Notes in the
Offer will be accepted prior to the Expiration Date in the manner described in
the preceding sentence and otherwise in compliance with this Consent and Letter
of Transmittal. The method of delivery of this Consent and Letter of
Transmittal, Subordinated Notes and all other required documents to the
Depositary is at the election and risk of Holders. If such delivery is by mail,
it is suggested that Holders use properly insured registered mail, return
receipt requested, and that the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Depositary prior to such date. Except
as otherwise provided below, the delivery will be deemed made when actually
received or confirmed by the Depositary. THIS CONSENT AND LETTER OF TRANSMITTAL
AND SUBORDINATED NOTES SHOULD BE SENT ONLY TO THE DEPOSITARY, NOT TO IPC, THE
TRUSTEE OR THE DEALER MANAGER.
If Holders desire to tender Subordinated Notes pursuant to the Offer and
deliver Consents pursuant to the Solicitation and (i) certificates representing
such Subordinated Notes are not lost but are not immediately available, (ii)
time will not permit this Consent and Letter of Transmittal, certificates
representing Subordinated Notes or other required documents to reach the
Depositary prior to the Expiration Date or (iii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date such Holders may
effect a tender of Subordinated Notes and delivery of a Consent in accordance
with the guaranteed delivery procedures set forth in the Statement under the
caption "The Offers and the Solicitations--Procedures for Tendering Notes and
Delivering Consents--Guaranteed Delivery."
Pursuant to the guaranteed delivery procedures:
(a) such tender and delivery must be made by or through an Eligible
Institution (which is defined to include a bank, broker, dealer, credit
union, savings association or other entity that is a member of a recognized
Medallion Program approved by the Securities Transfer Association, Inc.);
(b) prior to the Expiration Date, the Depositary must have received
from such Eligible Institution, at one of the addresses of the Depositary
set forth herein, a properly completed and duly executed Notice of
Guaranteed Delivery (by telegram, facsimile transmission, mail or hand
delivery) substantially in the form provided by IPC, setting forth the
name(s) and address(es) of the Acting Holder(s), and the principal amount
of Subordinated Notes being tendered and with respect to which a Consent is
being delivered and stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange ("NYSE") trading
days after the date of the Notice of Guaranteed Delivery, a properly
completed and duly executed Consent and Letter of Transmittal, or a
facsimile thereof, together with certificates representing the Subordinated
Notes (or confirmation of book-entry transfer of such Subordinated Notes
into the Depositary's account with a Book-Entry Transfer Facility as
described above), and any other documents required by this Consent and
Letter of Transmittal (including, if the person executing this Consent and
Letter of Transmittal is not the registered Holder of the Subordinated
Notes tendered, a Consent Proxy executed by such registered Holder) and the
instructions hereto, will be deposited by such Eligible Institution with
the Depositary; and
(c) this Consent and Letter of Transmittal or a facsimile hereof,
properly completed and duly executed, certificates for all physically
delivered Subordinated Notes in proper form for transfer (or confirmation
of book-entry transfer of such Subordinated Notes into the Depositary's
account with a
9
<PAGE> 82
Book-Entry Transfer Facility as described above) and all other required
documents (including, if the person executing this Consent and Letter of
Transmittal is not the registered Holder of the Subordinated Notes
tendered, or Consent Proxy executed by such registered Holder) must be
received by the Depositary within three NYSE trading days after the date of
the Notice of Guaranteed Delivery.
Tenders of Subordinated Notes may be withdrawn by written notice of
withdrawal and revocation received by the Depositary delivered by mail, hand
delivery or facsimile transmission, which notice must be received by the
Depositary at one of its addresses set forth herein prior to the Expiration
Date. Notice of withdrawal of tendered Subordinated Notes, to be effective, must
(i) be received by the Depositary at one of its addresses set forth herein, (ii)
specify the name of the person who deposited the Subordinated Notes to be
withdrawn (the "Depositor"), the name in which the Subordinated Notes are
registered (and, if tendered by book-entry transfer, the name of the participant
in the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of such Subordinated Notes) if different from that of the
Depositor, (iii) state the principal amount of Subordinated Notes to be
withdrawn and (iv) be signed by the Depositor in the same manner as the original
signature on this Consent and Letter of Transmittal (including any required
signature guarantee(s)) or be accompanied by evidence satisfactory to IPC and
the Depositary that the person withdrawing the tender has succeeded to
beneficial ownership of the Subordinated Notes. If certificates have been
delivered or otherwise identified (through confirmation of book-entry transfer
of such Subordinated Notes) to the Depositary, the name of the Acting Holder and
the certificate numbers relating to such Subordinated Notes withdrawn must also
be furnished to the Depositary as aforesaid prior to the physical release of the
certificates for the withdrawn Subordinated Notes (or, in the case of
Subordinated Notes transferred by book-entry transfer, the name and number of
the account at the Book-Entry Transfer Facility to be credited with withdrawn
Subordinated Notes). If a Holder who has tendered Subordinated Notes
subsequently effects a valid withdrawal of a prior tender of Subordinated Notes
(without a concurrent valid revocation of a Consent) prior to the Initial
Expiration Date, such action will render the Consent with respect to such
Subordinated Notes defective.
2. CONSENT TO PROPOSED AMENDMENTS; REVOCATION OF CONSENTS. In accordance
with the Statement, all properly completed and executed Consents and Letters of
Transmittal consenting to the Proposed Amendments that are received by the
Depositary prior to the Expiration Date will be counted as Consents with respect
to the Proposed Amendments, unless the Depositary receives, prior to the Initial
Expiration Date or at such other times as are permitted in the Offer and
Solicitation, a written notice of revocation of such Consent as described in the
Statement. Notice of revocation of Consent, to be effective, must (i) contain
the name of the person who delivered the Consent and the description of the
Subordinated Notes to which it relates, the certificate number or numbers of
such Subordinated Notes (unless such Subordinated Notes were tendered by
book-entry delivery) and the aggregate principal amount represented by such
Subordinated Notes, (ii) be signed by the Acting Holder thereof in the same
manner as the original signature on this Consent and Letter of Transmittal
(including the required signature guarantee(s)) or be accompanied by evidence
satisfactory to IPC and the Depositary that the Holder revoking the Consent has
succeeded to beneficial ownership of the Subordinated Notes, (iii) if the
Consent and Letter of Transmittal was executed by a person other than the
registered Holder of the related Subordinated Notes, be accompanied by a valid
proxy signed by such registered holder and authorizing the revocation of such
Consent and (iv) be received by the Depositary at one of its addresses set forth
herein prior to the Initial Expiration Date. A purported notice of revocation
that lacks any of the required information or is dispatched to any other address
will not be effective to revoke a Consent previously given. If a Holder who has
tendered Subordinated Notes subsequently effects a valid revocation of such
Holder's Consent (without a concurrent valid withdrawal of Subordinated Notes),
such action will render the prior tender of the Subordinated Notes with respect
to which such Consent relates defective, and IPC will have the right, which it
may waive, to reject such tender as invalid and ineffective.
10
<PAGE> 83
IPC INTENDS TO CAUSE THE EXECUTION OF THE SUPPLEMENTAL INDENTURE PROVIDING
FOR THE PROPOSED AMENDMENTS TO OCCUR UPON THE INITIAL EXPIRATION DATE IF THE
REQUISITE CONSENTS HAVE BEEN OBTAINED AND NOT REVOKED OR, IF THE REQUISITE
CONSENTS HAVE NOT THEN BEEN OBTAINED AND NOT REVOKED, PROMPTLY UPON OBTAINING
THE REQUISITE CONSENTS. SUCH SUPPLEMENTAL INDENTURE WILL BE BINDING UPON EACH
HOLDER OF SUBORDINATED NOTES WHETHER OR NOT SUCH HOLDER GIVES A CONSENT WITH
RESPECT THERETO.
3. PARTIAL TENDERS AND CONSENTS. Tenders of Subordinated Notes pursuant to
the Offer (and the corresponding Consents thereto pursuant to the Solicitation)
will be accepted only in and in respect of principal amounts equal to $1,000 or
integral multiples thereof. If less than the entire principal amount of any
Subordinated Notes evidenced by a submitted certificate is tendered, the
tendering Holder must fill in the principal amount tendered in the column of the
box entitled "Description of Subordinated Notes" herein. The entire principal
amount represented by the certificates for all Subordinated Notes delivered to
the Depositary will be deemed to have been tendered, and a related Consent in
respect thereof given, unless otherwise indicated. If the entire principal
amount of all Subordinated Notes is not tendered or not accepted for purchase
(and the related Consent in respect thereof not given), Subordinated Notes
representing such untendered amount (or in respect of which a Consent is not
given) will be sent (or, if tendered by book-entry transfer, returned by credit
to the account at the Book-Entry Transfer Facility designated herein) to the
Acting Holder unless otherwise provided in the appropriate box on this Consent
and Letter of Transmittal (see Instruction 5), promptly after the Subordinated
Notes are accepted for purchase.
4. SIGNATURES ON THIS CONSENT AND LETTER OF TRANSMITTAL, BOND POWERS AND
ENDORSEMENT; CONSENT PROXIES; GUARANTEE OF SIGNATURES. If this Consent and
Letter of Transmittal is signed by the registered Holder(s) of the Subordinated
Notes tendered hereby and with respect to which Consent is given, the
signature(s) must correspond with the name(s) as written on the face of the
certificate(s) without alteration, enlargement or any change whatsoever. If this
Consent and Letter of Transmittal is signed by a participant in one of the
Book-Entry Transfer Facilities whose name is shown as the owner of the
Subordinated Notes tendered hereby, the signature must correspond with the name
shown on the security position listing as the owner of the Subordinated Notes.
IF THIS CONSENT AND LETTER OF TRANSMITTAL IS EXECUTED BY A PERSON OR ENTITY
WHO IS NOT THE REGISTERED HOLDER, THEN THE REGISTERED HOLDER MUST SIGN A CONSENT
PROXY, WITH THE SIGNATURE OF SUCH REGISTERED HOLDER GUARANTEED BY AN ELIGIBLE
INSTITUTION.
If any of the Subordinated Notes tendered hereby (and with respect to which
Consent is given) are registered in the name of two or more Holders, all such
Holders must sign this Consent and Letter of Transmittal. If any tendered
Subordinated Notes are registered in different names on several certificates, it
will be necessary to complete, sign and submit as many separate copies of this
Consent and Letter of Transmittal and any necessary accompanying documents
(including Consent Proxies) as there are different names in which certificates
are held.
If this Consent and Letter of Transmittal is signed by the Acting Holder,
and the certificates for any principal amount of Subordinated Notes not tendered
or not accepted for purchase are to be issued (or if any principal amount of
Subordinated Notes that is not tendered or not accepted for purchase is to be
reissued or returned) to or, if tendered by book-entry transfer, credited to the
account at the Book-Entry Transfer Facility of the Acting Holder, and checks for
payments of the Tender Offer Consideration to be made in connection with the
Offer and the Solicitation are to be issued to the order of the Acting Holder,
then the Acting Holder need not endorse any certificates for tendered
Subordinated Notes, nor provide a separate bond power. In any other case
(including if this Consent and Letter of Transmittal is not signed by the Acting
Holder), the Acting Holder must either properly endorse the certificates for
Subordinated Notes tendered or transmit a separate properly completed bond power
with this Consent and Letter of Transmittal (in either case, executed exactly as
the name(s) of the registered Holder(s) appear(s) on such Subordinated Notes,
and, with respect to a participant in a Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of
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Subordinated Notes, exactly as the name(s) of the participant(s) appear(s) on
such security position listing), with the signature on the endorsement or bond
power guaranteed by an Eligible Institution, unless such certificates or bond
powers are executed by an Eligible Institution.
If this Consent and Letter of Transmittal, Consent Proxies or any
certificates for Subordinated Notes or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to IPC
of their authority so to act must be submitted with this Consent and Letter of
Transmittal.
Endorsements on certificates for Subordinated Notes, signatures on bond
powers and Consents and Consent Proxies provided in accordance with this
Instruction 4 by registered Holders not executing this Consent and Letter of
Transmittal must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Consent and Letter of
Transmittal is signed by the registered Holder(s) of the Subordinated Notes
tendered herewith (or by a participant in one of the Book-Entry Transfer
Facilities whose name appears on a security position listing as the owner of
Subordinated Notes) and the payment of the Tender Offer Consideration is to be
made, or any Subordinated Notes for principal amounts not tendered or not
accepted for purchase are to be issued, directly to such Holder(s) (or, if
signed by a participant in one of the Book-Entry Transfer Facilities, any
Subordinated Notes for principal amounts not tendered or not accepted for
purchase are to be credited to such participant's account at such Book-Entry
Transfer Facility) and neither the "Special Issuance Instructions" box nor the
"Special Delivery Instructions" box of this Consent and Letter of Transmittal
has been completed or (ii) such Subordinated Notes are tendered for the account
of an Eligible Institution. In all other cases, all signatures on Consents and
Letters of Transmittal and endorsements on certificates, signatures on bond
powers and Consent Proxies (if any) accompanying Subordinated Notes must be
guaranteed by an Eligible Institution.
5. SPECIAL ISSUANCE AND SPECIAL DELIVERY INSTRUCTIONS. Tendering Holders
should indicate in the applicable box or boxes the name and address to which
Subordinated Notes for principal amounts not tendered or not accepted for
purchase or checks for payment of the Tender Offer Consideration to be made in
connection with the Offer and the Solicitation are to be issued or sent, if
different from the name and address of the Acting Holder signing this Consent
and Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated. If no instructions are given, Subordinated Notes not tendered or
not accepted for purchase will be returned to the Acting Holder of the
Subordinated Notes tendered. Any Holder tendering by book-entry transfer may
request that Subordinated Notes not tendered or not accepted for purchase be
credited to such account at any of the Book-Entry Transfer Facilities as such
Holder may designate under the caption "Special Issuance Instructions." If no
such instructions are given, any such Subordinated Notes not tendered or not
accepted for purchase will be returned by crediting the account at the
Book-Entry Transfer Facility designated above.
6. TAXPAYER IDENTIFICATION NUMBER. Each tendering Holder is required to
provide the Depositary with the Holder's correct taxpayer identification number
("TIN"), generally the Holder's social security or federal employer
identification number, on Substitute Form W-9, which is provided under
"Important Tax Information" below, or, alternatively, to establish another basis
for exemption from backup withholding. A Holder must cross out item (2) in the
Certification box on Substitute Form W-9 if such Holder is subject to backup
withholding. Failure to provide the information on the form may subject the
tendering Holder to 31% federal income tax backup withholding on the payments
made to the Holder or other payee with respect to Subordinated Notes purchased
pursuant to the Offer. The box in Part 3 of the form should be checked if the
tendering Holder has not been issued a TIN and has applied for TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked and the
Depositary is not provided with a TIN within sixty days, thereafter the
Depositary will withhold 31% on all such payments of the Offer Consideration
until a TIN is provided to the Depositary.
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<PAGE> 85
7. TRANSFER TAXES. IPC will pay all transfer taxes applicable to the
purchase and transfer of Subordinated Notes pursuant to the Offer, except in the
case of deliveries of certificates for Subordinated Notes for principal amounts
not tendered or not accepted for payment that are registered or issued in the
name of any person other than the Acting Holder of Subordinated Notes tendered
thereby.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Consent and
Letter of Transmittal.
8. IRREGULARITIES. All questions as to the form of all documents and the
validity (including time of receipt) and acceptance of tenders and withdrawals
of Subordinated Notes and deliveries and revocations of Consents will be
determined by IPC, in its sole discretion, which determination shall be final
and binding. ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS OR CONSENTS WILL NOT
BE CONSIDERED VALID. IPC reserves the absolute right to reject any or all
tenders and Consents in respect of Subordinated Notes that are not in proper
form or the acceptance of which would, in IPC's opinion, be unlawful. IPC also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Subordinated Notes or of delivery as to particular Consents.
IPC's interpretations of the terms and conditions of the Offer and the
Solicitation (including the instructions in this Consent and Letter of
Transmittal) will be final and binding. Any defect or irregularity in connection
with tenders of Subordinated Notes or deliveries of Consents must be cured
within such time as IPC determines, unless waived by IPC. Tenders of
Subordinated Notes shall not be deemed to have been made until all defects or
irregularities have been waived by IPC or cured. A defective tender may, in the
sole discretion of IPC, constitute a valid Consent and will be counted for
purposes of determining whether Requisite Consents have been obtained even if
the accompanying Subordinated Notes are not accepted for purchase by reason of
such defects. All tendering Holders, by execution of this Consent and Letter of
Transmittal or a facsimile hereof, waive any right to receive notice of the
acceptance of their Subordinated Notes for purchase or of the effectiveness of
the Proposed Amendments. None of IPC, the Depositary, the Dealer Manager, or any
other person will be under any duty to give notice of any defects or
irregularities in tenders of Subordinated Notes or deliveries of Consents, or
will incur any liability to Holders for failure to give any such notice.
9. WAIVER OF CONDITIONS. IPC expressly reserves the absolute right, in its
sole discretion, to amend or waive any of the conditions to the Offer or the
Solicitation in the case of any Subordinated Notes tendered or Consents
delivered, in whole or in part, at any time and from time to time.
10. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES FOR SUBORDINATED
NOTES. Any Holder whose certificates for Subordinated Notes have been mutilated,
lost, stolen or destroyed should write to or telephone the Trustee at the
address or telephone number set forth in the Statement under the caption "The
Offers and the Solicitations--Procedures for Tendering Notes and Delivering
Consents--Lost or Missing Certificates."
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering Subordinated Notes and consenting to the Proposed
Amendments and requests for assistance or additional copies of the Statement and
this Consent and Letter of Transmittal may be directed to the Dealer Manager
whose address and telephone number appear below.
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<PAGE> 86
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Subordinated Notes
are accepted for payment is required to provide the Depositary (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his social security number. If the Depositary is not provided with
the correct TIN, a $50 penalty may be imposed by the Internal Revenue Service
and payments made to such Holder with respect to Subordinated Notes purchased
pursuant to the Offer may be subject to backup withholding.
Certain Holders (including, among other, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Depositary a properly completed Internal Revenue Service Form W-8, signed
under penalties of perjury, attesting to that Holder's exempt status. A Form W-8
can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the Holder or other payee. Backup withholding is not an
additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to Subordinated
Notes purchased pursuant to the Offer, the Holder is required to provide the
Depositary with (i) the Holder's correct TIN by completing the Substitute Form
W-9 below, certifying that the TIN provided on such form is correct (or that
such Holder is awaiting a TIN) and that (A) such Holder is exempt from backup
withholding, (B) the Holder has not been notified by the Internal Revenue
Service that the Holder is subject to backup withholding as a result of failure
to report all interest or dividends or (C) the Internal Revenue Service has
notified the Holder that the Holder is no longer subject to backup withholding;
and (ii) if applicable, an adequate basis for exemption.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Holder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the registered Holder. If
the Subordinated Notes are held in more than one name or are not held in the
name of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
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<PAGE> 87
<TABLE>
<S><C><C>
- ---------------------------------
PAYER'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK
- ---------------------------------
PART 1 -- PLEASE PROVIDE YOUR TIN IN THE
SUBSTITUTE BOX AT RIGHT AND CERTIFY BY SIGNING AND
DATING BELOW Social Security Number
OR
Employer Identification Number
FORM W-9 ---------------------------------------------------------------------------------
PART 2 -- CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because (i) I am exempt from backup
withholding, (ii) I have not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (iii) the IRS has notified me that I
am no longer subject to backup withholding.
---------------------------------------------
PAYER'S REQUEST FOR CERTIFICATION INSTRUCTIONS -- YOU MUST CROSS OUT PART 3
TAXPAYER IDENTIFICATION ITEM (2) IN PART 2 ABOVE IF YOU HAVE BEEN NOTIFIED
NUMBER ("TIN") BY THE IRS THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING BECAUSE OF UNDERREPORTING INTEREST OR Awaiting TIN [ ]
DIVIDENDS ON YOUR TAX RETURN. HOWEVER, IF AFTER
BEING NOTIFIED BY THE IRS THAT YOU WERE SUBJECT TO
BACKUP WITHHOLDING YOU RECEIVED ANOTHER
NOTIFICATION FROM THE IRS STATING THAT YOU ARE NO
LONGER SUBJECT TO BACKUP WITHHOLDING, DO NOT CROSS
OUT ITEM (2).
SIGNATURE _____________________ DATE _____________ ,
1997
_____________________________________________________________
NAME (Please Print)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER AND THE SOLICITATION.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
<TABLE>
<S><C>
- ----
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me and
either (a) I have mailed or delivered an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to
mail or deliver an application in the near future. I understand that if I have not provided a taxpayer
identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will
be withheld until I provide a number.
------------------------------------------------------------------- ------------------------------,
1997
Signature Date
-------------------------------------------------------------------
Name (Please Print)
</TABLE>
- --------------------------------------------------------------------------------
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<PAGE> 88
The Dealer Manager for the Offers and the Solicitations is:
BT SECURITIES CORPORATION
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
(212) 775-2822
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated January 21, 1997, except
as to Notes 5 and 14, which are as of March 24, 1997, relating to the
consolidated financial statements of Ivex Packaging Corporation and its
subsidiaries, which appears in such Prospectus. We also consent to the
application of such report to the Financial Statement Schedules for the three
years ended December 31, 1996 listed under Item 16(b) of this Registration
Statement when such schedules are read in conjunction with the consolidated
financial statements referred to in our report. The audits referred to in such
report also included these schedules. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Chicago, Illinois
September 4, 1997
