-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OQYzOCcWH1mkBEkkR+Ge7bw8gaekbwqpS406fIvLV0fKLPQTwSzu1x5GAy308Su6 5QCygri71yO9CwTl8Jhp9g== /in/edgar/work/20000721/0000950123-00-006733/0000950123-00-006733.txt : 20000921 0000950123-00-006733.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950123-00-006733 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 42 FILED AS OF DATE: 20000721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNTSMAN PACKAGING CORP CENTRAL INDEX KEY: 0001049442 STANDARD INDUSTRIAL CLASSIFICATION: [2673 ] IRS NUMBER: 870496065 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-42008 FILM NUMBER: 676955 BUSINESS ADDRESS: STREET 1: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 BUSINESS PHONE: 8015325200 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNTSMAN PACKAGING GEORGIA INC CENTRAL INDEX KEY: 0001049616 STANDARD INDUSTRIAL CLASSIFICATION: [2673 ] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-42008-01 FILM NUMBER: 676956 BUSINESS ADDRESS: STREET 1: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 BUSINESS PHONE: 8015845700 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNTSMAN FILM PRODUCTS OF MEXICO INC CENTRAL INDEX KEY: 0001049618 STANDARD INDUSTRIAL CLASSIFICATION: [2673 ] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-42008-02 FILM NUMBER: 676957 BUSINESS ADDRESS: STREET 1: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 BUSINESS PHONE: 8015845700 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNTSMAN CONTAINER CORP INTERNATIONAL CENTRAL INDEX KEY: 0001049620 STANDARD INDUSTRIAL CLASSIFICATION: [2673 ] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-42008-03 FILM NUMBER: 676958 BUSINESS ADDRESS: STREET 1: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 BUSINESS PHONE: 8015845700 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNTSMAN BULK PACKAGING CORP CENTRAL INDEX KEY: 0001049621 STANDARD INDUSTRIAL CLASSIFICATION: [2673 ] IRS NUMBER: 870529726 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-42008-04 FILM NUMBER: 676959 BUSINESS ADDRESS: STREET 1: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 BUSINESS PHONE: 8015845700 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNTSMAN KCL CORP CENTRAL INDEX KEY: 0001117919 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 870563872 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-42008-05 FILM NUMBER: 676960 BUSINESS ADDRESS: STREET 1: C/O HUNTSMAN PACKAGING CORP STREET 2: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 BUSINESS PHONE: 8015325200 MAIL ADDRESS: STREET 1: C/O HUNTSMAN PACKAGING CORP STREET 2: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDISON PLASTICS INTERNATIONAL INC CENTRAL INDEX KEY: 0001117920 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 980068474 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-42008-06 FILM NUMBER: 676961 BUSINESS ADDRESS: STREET 1: C/O HUNTSMAN PACKAGING CORP STREET 2: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 BUSINESS PHONE: 8015325200 MAIL ADDRESS: STREET 1: C/O HUNTSMAN PACKAGING CORP STREET 2: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNTSMAN EDISON FILMS CORP CENTRAL INDEX KEY: 0001117921 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 135566477 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-42008-07 FILM NUMBER: 676962 BUSINESS ADDRESS: STREET 1: C/O HUNTSMAN PACKAGING CORP STREET 2: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 BUSINESS PHONE: 8015325200 MAIL ADDRESS: STREET 1: C/O HUNTSMAN PACKAGING CORP STREET 2: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNTSMAN PACKAGING OF CANADA LLC CENTRAL INDEX KEY: 0001117922 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 850680929 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-42008-08 FILM NUMBER: 676963 BUSINESS ADDRESS: STREET 1: C/O HUNTSMAN PACKAGING CORP STREET 2: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 BUSINESS PHONE: 8015325200 MAIL ADDRESS: STREET 1: C/O HUNTSMAN PACKAGING CORP STREET 2: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 S-4 1 s-4.txt FORM S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 2000 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ HUNTSMAN PACKAGING CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) UTAH 2673 87-0496065 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
EDISON PLASTICS INTERNATIONAL, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 2673 98-0068474 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
HUNTSMAN BULK PACKAGING CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) UTAH 2673 87-0529726 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
HUNTSMAN CONTAINER CORPORATION INTERNATIONAL (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) UTAH 2673 87-0473075 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
HUNTSMAN EDISON FILMS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 2673 13-5566477 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
HUNTSMAN FILM PRODUCTS OF MEXICO, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) UTAH 2673 87-0500805 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
HUNTSMAN KCL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) UTAH 2673 87-0563872 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
HUNTSMAN PACKAGING GEORGIA, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) GEORGIA 2673 87-0558537 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
HUNTSMAN PACKAGING OF CANADA, LLC (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) UTAH 2673 85-0580929 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ 500 HUNTSMAN WAY SALT LAKE CITY, UTAH 84108 (801) 532-5200 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES) ------------------------ RONALD G. MOFFITT EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL, SECRETARY 500 HUNTSMAN WAY SALT LAKE CITY, UTAH 84108 (801) 532-5200 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS) ------------------------ WITH A COPY TO: ROSA A. TESTANI, ESQ. O'SULLIVAN GRAEV & KARABELL, LLP 30 ROCKEFELLER PLAZA NEW YORK, NEW YORK 10112 (212) 408-2400 (continued on next page) 2 ------------------------ CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE PRICE(1) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------- 13% Senior Subordinated Notes due 2010 of Huntsman Packaging Corporation..................... $220,000,000 100% $220,000,000 $58,080 - ------------------------------------------------------------------------------------------------------------------------------- Guarantees of 13% Senior Subordinated Notes due 2010..... (2) (2) (2) (2) - ------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee. (2) Each of Edison Plastics International, Inc., Huntsman Bulk Packaging Corporation, Huntsman Container Corporation International, Huntsman Edison Films Corporation, Huntsman Film Products of Mexico, Inc., Huntsman KCL Corporation, Huntsman Packaging Georgia, Inc. and Huntsman Packaging of Canada LLC, will guarantee the obligations of Huntsman Packaging Corporation under the 13% Senior Subordinated Notes due 2010. Pursuant to Rule 457(n), no additional registration fee is being paid in respect of the guarantees. ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, 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, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] - --------------------- If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] - --------------------- ------------------------ THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS 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 THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3 EXPLANATORY NOTE This Registration Statement covers the registration of $220,000,000 aggregate principal amount of 13% Senior Subordinated Notes due 2010 (the "New Notes") of Huntsman Packaging Corporation, guaranteed by the Note Guarantors (as defined herein), that may be exchanged for an equal aggregate principal amount of Huntsman Packaging Corporation's outstanding 13% Senior Subordinated Notes due 2010 (the "Old Notes" and, together with the New Notes, the "Notes"), also guaranteed by the Note Guarantors. This Registration Statement also covers the registration of New Notes for resale by Chase Securities Inc. in market-making transactions. The complete prospectus relating to the exchange offer (the "Exchange Offer Prospectus") follows this explanatory note. Following the Exchange Offer Prospectus are certain pages of the prospectus relating solely to such market-making transactions (the "Market-Making Prospectus"), including alternate front and back cover pages, a section entitled "Risk Factors -- Trading Market for the New Notes" to be used in lieu of the section entitled "Risk Factors -- No Prior Market for the New Notes" and alternate sections entitled "Use of Proceeds" and "Plan of Distribution." In addition, the Market-Making Prospectus will not include the following captions (or the information set forth under those captions) in the Exchange Offer Prospectus: "Prospectus Summary -- Summary of the Terms of The Exchange Offer," "Risk Factors -- Failure to Exchange Old Notes," "The Exchange Offer," "Exchange and Registration Rights Agreement" and "Certain Federal Income Tax Considerations." All other sections of the Exchange Offer Prospectus will be included in the Market-Making Prospectus. 4 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED JULY 21, 2000 PROSPECTUS [HUNTSMAN PACKAGING LOGO] HUNTSMAN PACKAGING CORPORATION OFFER TO EXCHANGE ALL OUTSTANDING 13% SENIOR SUBORDINATED NOTES DUE 2010 FOR 13% SENIOR SUBORDINATED NOTES DUE 2010 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 THE EXCHANGE OFFER - - We will exchange all Old Notes that are validly tendered and not validly withdrawn for an equal principal amount of New Notes that are freely tradeable. - - You may withdraw tenders of Old Notes at any time prior to the expiration of the exchange offer. - - The exchange offer expires at 5:00 p.m., New York City time, on , 2000, unless we extend the offer. THE NEW NOTES - - The terms of the New Notes to be issued in the exchange offer are substantially identical to the Old Notes, except that the New Notes will be freely tradeable by persons who are not affiliated with us. - - No public market currently exists for the Old Notes. We do not intend to list the New Notes on any securities exchange and, therefore, no active public market is anticipated. ------------------------------------------------------------------------------ YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 17 OF THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER. ------------------------------------------------------------------------------ NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------------------------------------------------ The date of this prospectus is , 2000 5 TABLE OF CONTENTS
PAGE ---- Where You Can Find More Information... i Disclosure Regarding Forward-Looking Statements.......................... ii Market and Industry Data.............. iii Summary............................... 1 Risk Factors.......................... 17 Use of Proceeds....................... 25 Capitalization........................ 25 The Transactions...................... 26 The Exchange Offer.................... 28 Unaudited Pro Forma Financial Data.... 38 Selected Financial Data............... 47 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 48 Business.............................. 59 Management............................ 66
PAGE ---- Security Ownership of Certain Beneficial Owners and Management.... 72 Certain Relationships and Related Transactions........................ 74 Description of Credit Facilities...... 78 Description of Capital Stock.......... 81 Description of the Notes.............. 85 Description of the Note Warrants...... 129 Exchange and Registration Rights Agreement........................... 134 Book-Entry; Delivery and Form......... 136 Certain Federal Income Tax Considerations...................... 138 Plan of Distribution.................. 139 Legal Matters......................... 139 Experts............................... 139 Index to Consolidated Financial Statements.......................... F-1
------------------------ WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and current reports and other information with the Securities and Exchange Commission (the "SEC" or the "Commission"). You may read and copy any reports, documents and other information we file at the Commission's public reference rooms in Washington, D.C., New York, New York, and Chicago, Illinois. You may request copies of the documents, upon payment of a duplicating fee, by writing the Public Reference Section of the Commission. Please call 1-800-SEC-0330 for further information on the public reference rooms. Our filings will also be available to the public from commercial document retrieval services and at the web site maintained by the Commission at http://www.sec.gov. We have filed a Registration Statement on Form S-4 to register with the Commission the New Notes to be issued in exchange for the Old Notes. This prospectus is part of that Registration Statement. As allowed by the Commission's rules, this prospectus does not contain all of the information you can find in the Registration Statement or the exhibits to the Registration Statement. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS ABOUT US OR THE TRANSACTIONS WE DISCUSS IN THIS PROSPECTUS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF YOU ARE GIVEN ANY INFORMATION OR REPRESENTATIONS ABOUT THESE MATTERS THAT IS NOT DISCUSSED IN THIS PROSPECTUS, YOU MUST NOT RELY ON THAT INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES ANYWHERE OR TO ANYONE WHERE OR TO WHOM WE ARE NOT PERMITTED TO OFFER OR SELL SECURITIES UNDER APPLICABLE LAW. THE DELIVERY OF THIS PROSPECTUS DOES NOT, UNDER ANY CIRCUMSTANCES, MEAN THAT THERE HAS NOT BEEN A CHANGE IN OUR AFFAIRS SINCE THE DATE OF THIS PROSPECTUS. IT ALSO DOES NOT MEAN THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AFTER THIS DATE. i 6 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This prospectus includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions and other information that is not historical information and, in particular, appear under the headings "Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." When used in this prospectus, the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes" and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, management's examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them. But, there can be no assurance that management's expectations, beliefs and projections will result or be achieved. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this prospectus. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this prospectus are set forth in this prospectus, including under the heading "Risk Factors." As stated elsewhere in this prospectus, such risks, uncertainties and other important factors include, among others: - general economic and business conditions; - industry trends; - increases in our leverage; - changes in our ownership structure; - raw material costs and availability, particularly resin; - competition; - the loss of any of our significant customers; - changes in distribution channels or competitive conditions in the markets or countries where we operate; - loss of our intellectual property rights; - costs of integrating any future acquisitions; - foreign currency fluctuations and devaluations and political instability in our foreign markets; - changes in demand for our products; - new technologies; - changes in our business strategy or development plans; - availability, terms and deployment of capital; - availability of qualified personnel; and - increases in the cost of compliance with laws and regulations, including environmental laws and regulations. There may be other factors that may cause our actual results to differ materially from the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this prospectus and are expressly qualified in their entirety by the cautionary statements included in this prospectus. We undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events. ii 7 MARKET AND INDUSTRY DATA Unless otherwise indicated, the market share and industry data used throughout this prospectus were obtained primarily from internal company surveys and management estimates based on these surveys and our management's knowledge of the industry. Although third party industry and market data exist for the flexible packaging industry, third party industry and market data on the film industry in which we participate are not readily available. Where we have relied on third party market and industry data, we have so noted. The Flexible Packaging Association and Mastio & Company were the primary sources for third party industry data. The flexible packaging market, as defined by the Flexible Packaging Association in compiling such data, does not include certain of the products we sell, including many of our industrial films, and includes certain products we do not sell, such as wax papers and aluminum foils. We believe, however, that trends affecting the flexible packaging industry, as defined by the Flexible Packaging Association, also affect many of the markets into which we sell. Industry surveys and publications generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy and completeness of such information. We have not independently verified any of the data from third party sources. Similarly, internal company surveys and management estimates, while we believe them to be reliable, have not been verified by any independent sources. While we are not aware of any misstatements regarding our industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the caption "Risk Factors" in this prospectus. ------------------------ "Huntsman Packaging," "Winwrap" and "Yieldmaster" are trademarks of Huntsman Packaging. All other trademarks, service marks or trade names referred to in this prospectus are the property of their respective owners. iii 8 SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this prospectus. Unless the context otherwise requires, "Huntsman Packaging," "we," "us," "our" and similar terms refer to Huntsman Packaging Corporation, its subsidiaries and their respective operations. Each subsidiary of Huntsman Packaging is wholly owned. All market share data presented herein are based on management's estimates for 1999. THE COMPANY We are one of North America's leading manufacturers of value-added films and flexible packaging for food, personal care, medical, agricultural and industrial applications. We offer one of the most diverse product lines in the film industry and have achieved leading market positions in each of our major product lines. We believe our market leadership is primarily attributable to our strategy of building strong relationships with market-leading customers, by offering a broad line of innovative products and by providing technological leadership through our modern and low-cost manufacturing facilities. Our products are frequently highly engineered and are important components of, or provide critical attributes to, our customers' end-products. We operate 24 manufacturing and research and development facilities worldwide and we currently have approximately one billion pounds of annual production capacity. For the twelve months ended March 31, 2000, we generated pro forma net sales of $834.3 million, pro forma EBITDA of $124.6 million and pro forma Adjusted EBITDA of $128.0 million, which we compute in our summary historical and pro forma financial data. Our products are sold into numerous markets for a wide variety of end uses and are offered through three operating segments: Specialty Films, Design Products and Industrial Films. SPECIALTY FILMS. Our Specialty Films segment accounted for 56.6% of our pro forma net sales, 66.9% of our total pro forma EBITDA of our operating segments and 66.0% of our total pro forma Adjusted EBITDA of our operating segments for the twelve months ended March 31, 2000. Our Specialty Films include: - Personal Care: These highly engineered films are used in disposable diapers, feminine care products and adult incontinence products. We are the leading provider of personal care films in North America, with an estimated market share of approximately 45%. - Medical: Manufactured in "clean room" environments, these films are used for sterile packaging for medical supplies and as components in disposable surgical drapes and gowns. We are a leading provider of medical films in North America, in a highly fragmented market. - Converter: These films are sold to converters of flexible packaging who may laminate them to foil, paper or other films, print them, and may ultimately fabricate them into final flexible packaging products. These films are a key component in a wide variety of flexible packaging products, such as fresh-cut produce packages, toothpaste tubes and stand-up pouches. We are North America's leading manufacturer of films sold to converters, with an estimated market share of approximately 30%. - Barrier and Custom: We are a leading manufacturer of barrier films for cookie, cracker and cereal box liners. We are North America's second largest producer in this market, with an estimated market share of approximately 20%. We are also a leading producer of films for several other custom film niche markets, such as films for photoresist coatings for the electronics industry and films for the protection and transportation of the sheet molding compound used in the manufacture of boats and automotive parts. - Agricultural: We are a leading supplier of polyethylene agricultural films that are sold to fruit and vegetable growers and to nursery operators. We are one of North America's two largest producers of mulch films used to cover fruit and vegetable beds, with an estimated market share of approximately 40%. 1 9 Our Specialty Films customers include Baxter, Becton-Dickinson, General Mills, Johnson & Johnson, Kendall Healthcare, Kimberly-Clark, Lawson Mardon, Nabisco, Pechiney, Printpack, Ralston Foods and Sonoco. DESIGN PRODUCTS. Our Design Products segment accounted for 24.4% of our pro forma net sales, 17.3% of our total pro forma EBITDA of our operating segments and 18.4% of our total pro forma Adjusted EBITDA of our operating segments for the twelve months ended March 31, 2000. Our Design Products include printed bags and rollstock used to package bread and baked goods, frozen foods, personal care products and fresh-cut produce. The personal care films produced by our Mexican subsidiary are also included in this segment for financial reporting purposes. We are the leading producer of films for the frozen foods market in North America, with an estimated market share of approximately 30%. In addition, we are the second largest producer of films for the bakery goods market in North America, with an estimated market share of approximately 20%. Our Design Products customers include IGA Fleming, Interstate Bakeries, Kimberly-Clark de Mexico, Mission Foods, Ore-Ida, Pictsweet and Schmidt Baking. INDUSTRIAL FILMS. Our Industrial Films segment accounted for 19.0% of our pro forma net sales, 15.8% of our total pro forma EBITDA of our operating segments and 15.6% of our total pro forma Adjusted EBITDA of our operating segments for the twelve months ended March 31, 2000. The Industrial Films segment manufactures stretch and PVC films. - Stretch Films: Stretch films are used to bundle, unitize and protect palletized loads during shipping and storage. These films are replacing more traditional packaging, such as corrugated boxes and metal strapping, because of their lower cost, greater strength and ease of use. We are the fourth largest producer of stretch films in North America, with an estimated market share of approximately 10%. - PVC Films: PVC films are used by supermarkets, delicatessens and restaurants to wrap meat, cheese and produce. PVC films are preferred in these applications because of their clarity, elasticity and cling. We are the second largest producer of PVC films in North America, with an estimated market share of approximately 25%. In addition, we are the leading producer of PVC films in Australia and the third largest producer in Europe, with estimated market shares of approximately 60% and 15%, respectively. Our Industrial Films customers include national distributors, such as Bunzl, Unisource, and xpedx, grocery chains, such as Albertson's, Kroger, Publix, and Safeway, and end-users, such as General Mills and Wal-Mart. INDUSTRY OVERVIEW According to the Flexible Packaging Association, the North American market for flexible packaging was approximately $18.1 billion in 1999 and has grown at a CAGR of 5.0% from 1987 to 1999. The flexible packaging industry consists of plastic films, wax papers and aluminum foils. The plastic film industry serves a variety of flexible packaging markets, as well as secondary packaging and non-packaging end markets, including food, pharmaceutical and medical, personal care, household, industrial and agricultural markets. We estimate that North American plastic film manufacturers produced approximately 12.5 billion pounds of film in 1999. Flexible packaging is the largest end market for plastic films, and food packaging is by far the largest market for flexible packaging. Plastic films are also used in secondary packaging such as pallet wrap, shrink wrap and grocery and garbage bags, and as components in many non-packaging products, such as moisture barriers for disposable diapers, feminine care products and surgical drapes and gowns. Finally, plastic films are used in a variety of agricultural applications, such as greenhouse films and mulch films. 2 10 Recent advancements in film extrusion and resin technology have produced new, sophisticated films that are thinner and stronger and have better barrier and sealant properties than other materials or predecessor films. These technological advances have allowed flexible packaging to replace many traditional forms of rigid packaging with film-based, flexible packaging that is lighter, lower in cost and has enhanced performance characteristics, such as oxygen and moisture barriers, printability and durability. For example, in consumer applications, stand-up pouches that use plastic films are replacing paperboard boxes, glass jars and metal cans. In industrial markets, stretch and shrink films continue to replace corrugated boxes and metal strapping to unitize, bundle and protect items during shipping and storage. OUR COMPETITIVE STRENGTHS STRONG MARKET POSITIONS. We have leading market positions in each of our major product lines and hold the number one or two market positions in product lines that account for approximately 85% of our 1999 pro forma net sales. We are North America's leading supplier of personal care, converter and frozen food films and its second largest supplier of PVC films, cookie, cracker and cereal box liners and bread and bakery bags. We also maintain significant market shares in stretch films in North America. We attribute our market leadership primarily to our broad and innovative product lines, low-cost manufacturing capabilities, technological capabilities and well-established customer relationships. SUPERIOR MANUFACTURING CAPABILITY. We have modern and efficient manufacturing facilities. During 1998 and 1999, we invested $87.8 million to expand, upgrade and maintain our asset base. Since our split-off from Huntsman Corporation in September 1997, we have closed or sold seven manufacturing facilities, thereby eliminating approximately $10.8 million in annual fixed manufacturing costs. During that period, we have also relocated and upgraded 15 production lines from closed facilities to more efficient, existing facilities, purchased several new printing presses and extrusion lines, and significantly upgraded and improved the manufacturing efficiency and productivity of our existing assets. With 23 plants and over 180 extrusion lines, we are able to allocate lines to specific products, resulting in fewer change-overs and more efficient use of production capacity. Our combination of manufacturing flexibility and efficiency enhances our ability to bring new technologies to the marketplace and meet the ever-increasing performance needs of our customers in a cost-effective manner. LOW-COST PRODUCTION. We believe that our manufacturing costs are among the lowest in the industry because of: (i) economies of scale provided by our high volume production; (ii) high plant utilization, attained through the continual consolidation of less efficient operations; (iii) favorable resin and other raw material prices, based on our significant purchasing requirements; (iv) modern manufacturing equipment that minimizes resin requirements and waste; and (v) capital investment that has resulted in improved technical capabilities and operating efficiencies. INDUSTRY LEADING TECHNOLOGY AND PRODUCT DEVELOPMENT CAPABILITIES. We have dedicated technical facilities to test and develop new films and new extrusion technologies. Our primary research and development facility is located in Newport News, Virginia and contains a pilot plant with a 17 million pound annual capacity. The pilot plant allows us to run commercial "scale-ups" for new products. We believe this commercial "scale-up" capability is a significant competitive advantage, as it enables us to reduce the time needed to introduce new products. WELL-ESTABLISHED CUSTOMER RELATIONSHIPS. Our films are components of flexible packaging for some of the largest food companies in the world, including household names such as General Mills, Interstate Bakeries (Wonder Bread), Kroger, Nabisco and Safeway. Our customers also include many of North America's largest flexible packaging converters, such as Lawson Mardon, Pechiney and Printpack, and the largest national distributors of industrial films, Bunzl, Unisource, and xpedx. In addition, we manufacture and supply film to some of the largest non-food film consumers in North 3 11 America, including 3M, Baxter, Becton-Dickinson, Goodyear, Johnson & Johnson and Kimberly-Clark. PROVEN AND COMMITTED MANAGEMENT TEAM. We have assembled an outstanding management team at both our corporate and operating levels. At the corporate level, our senior management has extensive and varied experience in identifying, acquiring and integrating strategic businesses and in allocating capital, developing corporate strategy and bringing financial discipline to such businesses. At the operating level, our senior vice presidents have an average of more than 20 years of film and flexible packaging industry experience, gained from managing not just Huntsman Packaging, but other major film and flexible packaging companies as well. From 1996 to 1999, our management has successfully enhanced productivity, diversified our product lines, and strengthened our customer relationships. As a result, during this period, we have increased our EBITDA from $26.3 million to $114.7 million and increased our EBITDA margins from 8.9% to 14.7%. At July 20, 2000, our key managers owned, directly or indirectly, approximately 9% of our total common equity on a fully diluted basis after giving effect to the issuance of shares of common stock underlying our warrants and the vesting on January 1, 2001 of some of our restricted stock and options. STRATEGY Since our formation, and particularly since our "split-off" from Huntsman Corporation, our management team has successfully expanded and improved our business through strategic acquisitions and increased our profitability by offering a broad line of innovative products, providing technological leadership and assembling modern and cost-efficient manufacturing assets. In order to continue to expand our business and increase our profitability, we will continue to pursue the following strategies: DEVELOP NEW PRODUCTS AND NEW MARKETS. We continue to focus on bringing innovative technological advances to the marketplace, through acquisitions, internal product development and purchasing or licensing technology from other film companies. We have introduced new products that have contributed significantly to our growth and profitability, including: - Microporous films that "breathe" for use in disposable infant diapers. These films help prevent diaper rash. - Embossed "quiet" films and ultra-thin films for adult incontinence products. These films make adult incontinence products feel more like cloth undergarments. - Yieldmaster(R), an agricultural mulch film that reflects or absorbs sunlight and helps control heat transmission. In independent tests, Yieldmaster(R) has been proven to increase crop yields. - Winwrap(R), a prestretched film that reduces cost and, due to its light weight, can reduce injuries in high-frequency, hand wrap applications. - Fresh-cut produce and salad films that are engineered to provide superior package clarity and specific moisture and gas transmission control for different kinds of produce. These films maintain freshness, increase shelf life and are less expensive than competing laminated products. CONTINUE COST REDUCTIONS AND PRODUCTIVITY ENHANCEMENTS. We continue to seek opportunities to reduce our operating costs and enhance our manufacturing productivity. In March 2000, we began implementing a major initiative we developed with the assistance of A.T. Kearney, a management consulting firm, known as "SCORE", which stands for "Supply Chain and Operations Requirements for Excellence." We estimate this supply chain initiative will enable us to generate significant EBITDA and working capital improvements over the next three years by standardizing 4 12 and improving operating and manufacturing procedures throughout our organization. The SCORE initiative focuses on the following four areas: - Procurement. Reducing the number of different grades of resins purchased, consolidating non-resin raw material purchasing, reducing the number of energy suppliers and the amount of energy used, and redeploying equipment. - Logistics. Reducing raw materials and finished goods inventory levels and shipping costs. - Planning. Enhancing customer service, consolidating product lines and developing integrated sales processes. - Operations. Improving line utilization and product quality, standardizing maintenance programs, and developing and implementing company-wide plant production scheduling processes. ENHANCE AND LEVERAGE CUSTOMER RELATIONSHIPS. We continue to focus on meeting the increasingly complex packaging needs of our customers with our wide array of film and flexible packaging products and product development capabilities. We also continue to cultivate our long-standing customer relationships. These customers value product innovation and reliable supply and, consequently, exercise great care in establishing and maintaining their supplier relationships. We believe that our reputation for innovation and reliability is well-recognized in the marketplace. We recently signed two customer contracts for new products that we expect will add significantly to net sales and EBITDA. THE TRANSACTIONS The Recapitalization. On May 31, 2000, we consummated a recapitalization pursuant to an agreement dated March 31, 2000, among us, our then existing stockholders and Chase Domestic Investments, L.L.C., an affiliate of Chase Capital Partners, whereby Chase Domestic Investments, L.L.C. acquired approximately 58% of our total common stock. The recapitalization was valued at $1.065 billion, including transaction costs, and is subject to post-closing purchase price adjustments. Pursuant to the recapitalization agreement: - we redeemed all of the shares of our common stock held by Jon M. Huntsman, our founder, former majority stockholder and former Chairman of the Board (the "Equity Redemption"); - Chase Domestic Investments, L.L.C. purchased (the "Investor Share Purchase") approximately one-half of the shares of our common stock formerly held collectively by The Christena Karen H. Durham Trust (the "Trust") and by members of our senior management (the "Management Investors"); - Chase Domestic Investments, L.L.C. and certain other institutional investors purchased (the "Investor Common Equity Contribution") shares of common stock directly from us; - the Trust and the Management Investors retained or "rolled-over" approximately one-half of the shares of our common stock collectively owned by them prior to the recapitalization; and - we issued to Chase Domestic Investments, L.L.C. and certain other institutional investors a new series of senior cumulative exchangeable redeemable preferred stock ("Preferred Stock") and detachable warrants for our common stock (the "Preferred Stock Warrants"). The foregoing transactions are collectively referred to as the "Recapitalization." As a result of the Recapitalization, approximately 57.8% of our total common stock is owned by Chase Domestic Investments, L.L.C., approximately 4.5% of our total common stock is owned by certain other institutional investors and approximately 37.7% of our total common stock is owned collectively by the Trust and the Management Investors. The Tender Offer and Consent Solicitation. In connection with the Recapitalization, we offered to purchase in a tender offer all of our $125.0 million principal amount of 9 1/8% senior subordinated notes due 2007. We also solicited and received the requisite consents from tendering holders of the 5 13 9 1/8% senior subordinated notes to amend the related indenture to eliminate many of its restrictive covenants, which permitted us to effect the Recapitalization, the offering of the Old Notes and the incurrence of borrowings under the credit facilities. On May 31, 2000, we purchased all of the $125.0 million of 9 1/8% senior subordinated notes tendered and discharged our obligations under the related indenture. The Credit Facilities. On May 31, 2000, we refinanced all amounts outstanding under our then existing credit facility and replaced them with amended and restated senior secured credit facilities. The credit facilities consist of the following: - a $200.0 million senior secured tranche A facility, $40.0 million of which is available to our principal Mexican subsidiary; - a $280.0 million senior secured tranche B facility; and - a $100.0 million revolving credit facility. The Recapitalization, the tender offer and consent solicitation for our 9 1/8% senior subordinated notes, the entering into the credit facilities and the offering of 220,000 units consisting of the Old Notes and warrants to purchase 18,532 shares of our common stock (the "Note Warrants"), are collectively referred to as the "Transactions." The sources and uses of funds for the Transactions are presented in the following table:
AMOUNT --------------------- (DOLLARS IN MILLIONS) SOURCES: Credit facilities(1)........................................ $ 485.9 Old Notes and Note Warrants (net of discount of $5.9)....... 214.1 Preferred Stock and Preferred Stock Warrants................ 100.0 Common equity investment(2)................................. 165.3 Trust equity rollover....................................... 76.8 Management equity rollover.................................. 22.9 -------- Total.................................................. $1,065.0 ======== USES: Equity Redemption........................................... $ 314.0 Investor Share Purchase..................................... 101.8 Refinance the prior credit facility and other debt.......... 379.5 Repay the 9 1/8% senior subordinated notes.................. 125.0 Tender and consent consideration............................ 11.9 Trust equity rollover....................................... 76.8 Management equity rollover.................................. 22.9 Transaction fees and expenses(3)............................ 33.1 -------- Total.................................................. $1,065.0 ========
- --------------- (1) Represents borrowings under the credit facilities as of May 31, 2000 of $200.0 million under the tranche A facility, $280.0 million under the tranche B facility and $5.9 million under the revolving credit facility. As of May 31, 2000, we had $92.8 million of borrowing capacity under the revolving credit facility and $1.3 million reserved for letters of credit outstanding under the revolving credit facility. See "Description of Credit Facilities." (2) Consists of the Investor Share Purchase of $101.8 million and the Investor Common Equity Contribution of $63.5 million. (3) Consists of debt issuance costs of approximately $18.6 million, compensation expense related to the long-term incentive plan triggered by the Transactions of approximately $5.0 million, estimated issuance costs for the Preferred Stock of $1.5 million and other fees and expenses directly related to the Transactions of approximately $8.0 million. 6 14 THE SPONSOR Chase Domestic Investments, L.L.C. is a limited liability company owned by Chase Capital Partners. Chase Capital Partners is the private equity group of The Chase Manhattan Corporation, one of the largest bank holding companies in the U.S., and is one of the largest private equity organizations in the U.S., with over $16 billion under management. Through its affiliates, Chase Capital Partners invests in leveraged buyouts, recapitalizations and venture capital opportunities by providing equity and mezzanine capital. Since its inception in 1984, Chase Capital Partners has made over 1,000 direct investments in numerous industries. HISTORY We were founded in 1992 to acquire the assets of Goodyear Tire & Rubber Company's Film Products Division. Since that time, we have successfully combined strategic acquisitions, internal growth, product innovation and operational improvements to grow our business and increase its profitability. Net sales have grown from $295.7 million in 1996 to $781.4 million in 1999. We have successfully acquired and integrated 13 strategic film and flexible packaging operations since 1992, including, most recently, the 1996 acquisition of Deerfield Plastics, the 1997 acquisition of CT Film, and the 1998 acquisition of Blessings Corporation -- each a leading producer of personal care, converter or medical films. In October 1999, we acquired KCL Corporation, a leader in closure technology for flexible packaging. In September 1997, we were split-off from Huntsman Corporation. The separation from Huntsman Corporation has allowed us to independently pursue our value-added films business, implement our strategy of growing our market position through superior products, technology and synergistic acquisitions, and improve our financial and operating performance. On December 1, 1999, we announced that we had begun the process of evaluating a variety of financial alternatives to monetize the approximately 61% interest of our founder, former majority stockholder and former Chairman of the Board, Jon M. Huntsman. As a result of the Recapitalization, Mr. Huntsman no longer owns any of our stock, and is not involved in our management. 7 15 SUMMARY OF THE TERMS OF THE EXCHANGE OFFER On May 25, 2000, we completed the private offering of our 13% senior subordinated notes due 2010. We and those of our subsidiaries that guaranteed the Old Notes entered into an exchange and registration rights agreement with the initial purchasers in the private placement offering of the Old Notes under that agreement. We and the Note Guarantors agreed to deliver to you this prospectus and to complete the exchange offer within 225 days after the date of original issuance of the Old Notes. You are entitled to exchange in this exchange offer your Old Notes for New Notes which are identical in all material respects to the Old Notes except that: - the New Notes have been registered under the Securities Act and will be freely tradeable by persons who are not affiliated with us; - the New Notes are not entitled to certain rights which are applicable to the Old Notes under the exchange and registration rights agreement; and - certain liquidated damages provisions are no longer applicable. The Exchange Offer............ We are offering to exchange up to $220.0 million aggregate principal amount of 13% senior subordinated notes which have been registered under the Securities Act for up to $220.0 million aggregate principal amount of 13% senior subordinated notes which were issued on May 31, 2000 in the private offering. Old Notes may be exchanged only in integral multiples of $1,000. Resales....................... Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, we believe that the New Notes issued pursuant to the exchange offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by you (unless you are our "affiliate" within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that you - are acquiring the New Notes in the ordinary course of business, and - have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the New Notes. Each participating broker-dealer that receives New Notes for its own account pursuant to the exchange offer in exchange for the Old Notes that were acquired as a result of market- making or other trading activity must acknowledge that it will deliver a prospectus in connection with any resale of the New Notes. See "Plan of Distribution." Any holder of the Old Notes who - is our affiliate, - does not acquire the New Notes in the ordinary course of its business, or 8 16 - tenders in the exchange offer with the intention to participate, or for the purpose of participating, in a distribution of New Notes, cannot rely on the position of the staff of the SEC expressed in Exxon Capital Holdings Corporation, Morgan Stanley & Co. Incorporated or similar no-action letters and, in the absence of an exemption, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale of the New Notes. Expiration Date; Withdrawal of Tenders..................... The exchange offer will expire at 5:00 p.m., New York City time, on , 2000 or such later date and time to which we extend it. We do not currently intend to extend the expiration date. A tender of Old Notes pursuant to the exchange offer may be withdrawn at any time prior to the expiration date. Any Old Notes not accepted for exchange for any reason will be returned without expense to the tendering holder promptly after the expiration or termination of the exchange offer. Conditions to the Exchange Offer......................... The exchange offer is subject to customary conditions, some of which we may waive. See "The Exchange Offer -- Conditions to Exchange Offer." Procedures for Tendering Old Notes....................... If you wish to accept the exchange offer, you must complete, sign and date the accompanying letter of transmittal, or a copy of the letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must also mail or otherwise deliver the letter of transmittal, or the copy, together with the Old Notes and any other required documents, to the exchange agent at the address set forth on the cover of the letter of transmittal. If you hold Old Notes through The Depository Trust Company and wish to participate in the exchange offer, you must comply with the Automated Tender Offer Program procedures of DTC, by which you will agree to be bound by the letter of transmittal. By signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things: - any New Notes that you receive will be acquired in the ordinary course of your business; - you have no arrangement or understanding with any person or entity to participate in the distribution of the New Notes; - if you are a broker-dealer that will receive New Notes for your own account in exchange for Old Notes that were acquired as a result of market-making activities, that you will deliver a prospectus, as required by law, in connection with any resale of such New Notes; and 9 17 - you are not our "affiliate" as defined in Rule 405 under the Securities Act, or, if you are an affiliate, you will comply with any applicable registration and prospectus delivery requirements of the Securities Act. Guaranteed Delivery Procedures.................... If you wish to tender your Old Notes and your Old Notes are not immediately available or you cannot deliver your Old Notes, the letter of transmittal or any other documents required by the letter of transmittal or comply with the applicable procedures under DTC's Automated Tender Offer Program prior to the expiration date, you must tender your Old Notes according to the guaranteed delivery procedures set forth in this prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures." Effect on Holders of Old Notes......................... As a result of the making of, and upon acceptance for exchange of all validly tendered Old Notes pursuant to the terms of, the exchange offer, we will have fulfilled a covenant contained in the exchange and registration rights agreement and, accordingly, we will not be obligated to pay liquidated damages as described in the exchange and registration rights agreement. If you are a holder of Old Notes and do not tender your Old Notes in the exchange offer, you will continue to hold such Old Notes and you will be entitled to all the rights and limitations applicable to the Old Notes in the Indenture, except for any rights under the exchange and registration rights agreement that by their terms terminate upon the consummation of the exchange offer. Consequences of Failure to Exchange.................... All untendered Old Notes will continue to be subject to the restrictions on transfer provided for in the Old Notes and in the Indenture. In general, the Old Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with this exchange offer, we do not currently anticipate that we will register the Old Notes under the Securities Act. Certain Federal Income Tax Considerations.............. The exchange of Old Notes for New Notes in this exchange offer should not be a taxable event for U.S. federal income tax purposes. See "Certain Federal Income Tax Considerations." Use of Proceeds............... We will not receive any cash proceeds from the issuance of the New Notes in this exchange offer. Exchange Agent................ The Bank of New York is the exchange agent for this exchange offer. The address and telephone number of the exchange agent are set forth in the section captioned "The Exchange Offer -- Exchange Agent." 10 18 SUMMARY OF THE TERMS OF THE NEW NOTES Issuer........................ Huntsman Packaging Corporation. New Notes Offered............. $220.0 million aggregate principal amount of 13% senior subordinated notes due 2010. Maturity...................... June 1, 2010. Interest...................... Annual rate: 13%. Payment frequency: every six months on June 1 and December 1. First payment: December 1, 2000. Holders of Old Notes whose Old Notes are accepted for exchange in this exchange offer will be deemed to have waived the right to receive any payment in respect of interest on the Old Notes accrued from May 31, 2000, the original issue date of the Old Notes, to the date of issuance of the New Notes. Consequently, holders who exchange their Old Notes for New Notes will receive the same interest payment on December 1, 2000, the first interest payment date for the Old Notes and the New Notes after the consummation of this exchange offer, that they would have received if they did not accept this exchange offer. Optional Redemption........... On or after June 1, 2005, we may redeem some or all of the New Notes at the redemption prices listed in the section entitled "Description of the New Notes -- Optional Redemption." Prior to such date, we may not redeem the New Notes, except as described in the following paragraph. At any time prior to June 1, 2003, we may redeem up to 35% of the original aggregate principal amount of the New Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 113% of the principal amount thereof, plus accrued interest, so long as (a) at least 65% of the original aggregate amount of the New Notes remains outstanding after each such redemption and (b) any such redemption by us is made within 120 days of such equity offering. Change of Control............. Upon the occurrence of a change of control, unless we have exercised our right to redeem all of the New Notes as described above, you will have the right to require us to repurchase all or a portion of your New Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued interest to the date of repurchase. See "Description of the Notes -- Change of Control." Guarantees.................... The New Notes will be fully and unconditionally guaranteed on an unsecured senior subordinated basis by each of our existing and future domestic restricted subsidiaries and, to the extent that they also guarantee any senior debt (other than a foreign subsidiary that guarantees senior debt of another foreign subsidiary), by each of our existing and future foreign restricted subsidiaries. If we fail to make 11 19 payments on the New Notes, our subsidiaries that are guarantors must make them instead. Guarantees of the New Notes will be subordinated to the guarantees of our senior debt under the credit facilities. Ranking....................... The New Notes will be unsecured and: - will be subordinated to all of our existing and future senior debt; - will rank equally with all of our future senior subordinated debt; - will rank senior to any future subordinated debt; - will be effectively subordinated to our secured debt to the extent of the value of the assets securing such indebtedness; and - will be effectively subordinated to all liabilities of our subsidiaries that do not guarantee the New Notes. Similarly, the guarantees of the New Notes by our subsidiaries that are also guaranteeing the credit facilities will be unsecured and: - will be subordinated to all of the applicable guarantors' existing and future senior debt; - will rank equally with all of the applicable guarantors' future senior subordinated debt; - will rank senior to any of the applicable guarantors' future subordinated debt; and - will be effectively subordinated to any secured debt of such guarantor to the extent of the value of the assets securing such debt. Assuming we had completed the Transactions on March 31, 2000 and that all of the Old Notes are exchanged for New Notes in this exchange offer, on a pro forma basis: - we would have had approximately $487.2 million of senior debt to which the New Notes would be subordinated (which amount does not include the remaining availability of $92.8 million under the revolving credit facility); - we would not have had any senior subordinated debt other than the New Notes; - we would not have had any subordinated debt; and - our subsidiaries that are not guarantors of the New Notes would have had $59.3 million of liabilities, excluding liabilities owed to us. The Indenture permits us to incur a significant amount of additional senior debt. 12 20 Certain Covenants............. The Indenture will, among other things, restrict our ability and the ability of our subsidiaries to: - borrow money; - make distributions, redeem equity interests or redeem subordinated debt; - make investments; - use assets as security in other transactions; - sell assets; - guarantee other debt; - enter into agreements that restrict dividends from subsidiaries; - sell capital stock of subsidiaries; - merge or consolidate; and - enter into transactions with affiliates. These covenants will be subject to a number of important exceptions. For more details, see "Description of the Notes -- Certain Covenants." RISK FACTORS You should carefully consider all of the information in this prospectus and, in particular, should evaluate the specific factors set forth under the caption "Risk Factors" before participating in this exchange offer. ------------------------ We are incorporated in Utah, with principal executive offices located at 500 Huntsman Way, Salt Lake City, Utah 84108. Our telephone number is (801) 584-5700. 13 21 SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA The following table presents summary financial data for Huntsman Packaging and its subsidiaries. The summary historical financial data for the years ended December 31, 1999, 1998 and 1997 have been derived from Huntsman Packaging's audited consolidated financial statements. The summary financial data for the three months ended March 31, 2000 and 1999 have been derived from our unaudited interim condensed consolidated financial statements, which in our opinion include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for the fair presentation of the financial position and results of operations of Huntsman Packaging for these periods. Operating results for the three months ended March 31, 2000 are not necessarily indicative of results that may be expected for the entire year or any future period. The summary unaudited condensed pro forma financial data are derived from the unaudited pro forma statements of operations and balance sheet contained in "Unaudited Pro Forma Financial Data." The unaudited pro forma statement of operations data for the twelve months ended March 31, 2000 give effect to the Transactions and the acquisition of KCL Corporation as if they had occurred on April 1, 1999. The unaudited pro forma balance sheet data at March 31, 2000 give effect to the Transactions as if they had occurred on March 31, 2000. The unaudited pro forma financial data are presented for informational purposes only and are not necessarily indicative of the operating results or financial position that would have occurred had the Transactions or the KCL Corporation acquisition been consummated on or as of the dates indicated nor are such data necessarily indicative of future operating results or financial position. You should read the following summary historical and pro forma financial data together with "Capitalization," "Selected Financial Data," "Unaudited Pro Forma Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of Huntsman Packaging and the notes thereto included elsewhere in this prospectus. 14 22
THREE MONTHS ENDED PRO FORMA YEARS ENDED DECEMBER 31, MARCH 31, TWELVE MONTHS ---------------------------- ----------------- ENDED 1997 1998 1999 1999 2000 MARCH 31, 2000 ------- -------- ------- ------- ------- -------------- (DOLLARS IN MILLIONS) STATEMENT OF OPERATIONS DATA: Net sales.......................... $ 447.7 $ 651.9 $ 781.4 $ 174.4 $ 212.5 $834.3 Cost of sales...................... 389.6 532.4 623.4 137.6 169.5 669.5 ------- -------- ------- ------- ------- ------ Gross profit....................... 58.1 119.5 158.0 36.8 43.0 164.8 Total operating expenses........... 45.0 70.1 82.0 18.6 28.2 85.4 ------- -------- ------- ------- ------- ------ Operating income................... 13.1 49.4 76.0 18.2 14.8 79.4 Interest expense................... (17.0) (37.5) (44.0) (10.2) (11.6) (77.6) Other income (expense), net........ 0.7 (0.8) 0.4 (2.0) 0.5 4.0 ------- -------- ------- ------- ------- ------ Income (loss) before income taxes and discontinued operations...... (3.2) 11.1 32.4 6.0 3.7 5.8 Income tax expense (benefit)....... (0.5) 8.6 14.1 3.7 2.3 2.9 ------- -------- ------- ------- ------- ------ Income (loss) before discontinued operations....................... (2.7) 2.5 18.3 2.3 1.4 2.9 Income from discontinued operations....................... 3.1 0.6 Gain on sale of discontinued operations....................... 5.2 ------- -------- ------- ------- ------- ------ Net income......................... $ 0.4 $ 8.3 $ 18.3 $ 2.3 $ 1.4 $ 2.9 ======= ======== ======= ======= ======= ====== OTHER FINANCIAL DATA: Cash flows from operating activities....................... $28,648 $ 45,490 $51,453 $(7,811) $17,908 Cash flows from investing activities....................... (87,227) (314,840) (46,030) (8,120) (10,093) Cash flows from financing activities....................... 63,191 275,892 (16,729) 6,802 (3,858) EBITDA(1).......................... 39.5 80.6 114.7 24.6 26.0 $124.6 Adjusted EBITDA(2)................. 128.0 Depreciation and amortization...... 16.4 27.1 35.0 8.4 9.5 36.7 Plant closing costs................ 9.3 4.9 2.5 2.5 Noncash stock-based compensation expense.......................... 0.8 1.2 2.0 Capital expenditures............... 17.9 52.1 35.7 8.1 10.1 37.7 Cash interest expense................................................................ 74.9 Ratio of Adjusted EBITDA to cash interest expense.................................... 1.7x Ratio of total net debt to Adjusted EBITDA(3)........................................ 5.4x Ratio of earnings to fixed charges(4)....................... -- 1.3x 1.7x 1.6x 1.3x 1.1x
AS OF MARCH 31, 2000 --------------------- ACTUAL PRO FORMA ------- ---------- BALANCE SHEET DATA: Cash and cash equivalents................................... $ 12.2 $ 5.2 Working capital............................................. 102.6 131.3 Total assets................................................ 780.1 790.9 Total debt.................................................. 506.6 694.1 Preferred Stock(5).......................................... 80.0 Stockholders' equity (deficit).............................. 91.7 (148.9)
- --------------- (1) EBITDA is defined as income before discontinued operations, extraordinary items, interest expense, income taxes, depreciation, amortization, plant closing costs and noncash stock-based compensation expense. We believe EBITDA information enhances an investor's understanding of a company's ability to satisfy principal and interest obligations with respect to its indebtedness and to utilize cash for other purposes. In addition, EBITDA is used as a measure in the Indenture in determining our compliance with certain covenants. However, there may be contractual, legal, economic or other reasons which may prevent us from satisfying principal and interest obligations with respect to our indebtedness and may require us to allocate funds for other purposes. EBITDA does not represent and should not be considered as an alternative to net income or cash flows from operating activities as determined by U.S. generally accepted accounting principles and may not be comparable to other similarly titled measures of other companies. 15 23 (2) Adjusted EBITDA is EBITDA adjusted for the following non-recurring items:
PRO FORMA TWELVE MONTHS ENDED MARCH 31, 2000 -------------------- EBITDA...................................................... $124.6 Adjustments: Losses on exited businesses(a)............................ 1.7 Reduction in raw material costs(b)........................ 0.6 Federal grand jury subpoena costs(c)...................... 0.7 Transaction costs(d)...................................... 0.4 ------ Adjusted EBITDA............................................. $128.0 ======
- --------------- (a) Reflects operating losses and write-offs incurred in exiting a non-core laminating business and the write-off of a receivable from an exited joint venture. (b) Reflects the net reduction in KCL Corporation's raw material costs calculated by comparing resin unit prices under our existing raw material contractual arrangements for the twelve month period ended March 31, 2000, with KCL Corporation's resin unit prices and volume for the same period. (c) Non-recurring costs incurred in responding to a federal grand jury subpoena. (d) Non-recurring costs incurred in connection with the Transactions. (3) Total net debt is defined as total debt less cash and cash equivalents. (4) Earnings consist of income before income taxes plus fixed charges. Fixed charges consist of (i) interest, whether expensed or capitalized, (ii) amortization of debt issuance costs and (iii) an allocation of one-third of the rental expense from operating leases, which management considers to be a reasonable approximation of the interest factor of operating lease payments. In 1996, earnings were insufficient to cover fixed charges by approximately $10.2 million. (5) Includes proceeds of $100.0 million less estimated issuance costs of $1.5 million for the Preferred Stock and estimated value of the Preferred Stock Warrants of $18.5 million. 16 24 RISK FACTORS In addition to the other matters described in this prospectus, you should carefully consider the specific factors set forth below before participating in this exchange offer. SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR ABILITY TO OPERATE OUR BUSINESS AND TO MEET OUR OBLIGATIONS UNDER THE NOTES. As a result of the Transactions, we are highly leveraged, which means that we have a large amount of indebtedness relative to our stockholders' deficit. The following chart shows certain important credit statistics and is presented assuming we had completed the Transactions as of March 31, 2000, in the case of the first three statistics, and as of January 1, 1999, in the case of the ratios of earnings to fixed charges:
PRO FORMA AS OF MARCH 31, 2000 --------------------- (DOLLARS IN MILLIONS) Total debt.................................................. $ 694.1 Preferred Stock............................................. 80.0 Stockholders' deficit....................................... (148.9)
PRO FORMA FOR THE ---------------------------------------- YEAR ENDED TWELVE MONTHS ENDED DECEMBER 31, 1999 MARCH 31, 2000 ----------------- ------------------- Ratio of earnings to fixed charges............ 1.0x 1.1x
Our relatively high degree of leverage could have important consequences to us and to you, including, but not limited to, the following: - Our ability to obtain additional financing in the future for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes may be materially limited or impaired; - A substantial portion of our cash flows from operating activities must be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes, including our operations and future business opportunities; - Certain of our borrowings, including borrowings under the credit facilities, are at variable rates of interest, exposing us to the risk of increased interest rates; - The indebtedness under the credit facilities is secured by a lien on substantially all of our assets and the assets of our domestic subsidiaries and matures prior to the maturity of the Notes; - Our flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited by our leveraged position and the covenants contained in our debt instruments, thus putting us at a competitive disadvantage; and - We may be vulnerable in a downturn in general economic conditions or in our business or be unable to carry out capital spending that is important to our growth and productivity improvement programs. ABILITY TO SERVICE INDEBTEDNESS -- TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH AND OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL. Cash Flow Limitations -- If our cash flows are not sufficient, we may try to take other actions to satisfy our obligations under our indebtedness, but these other actions may not be successful. We are required to make scheduled principal payments under the credit facilities commencing in 2001. Our ability to make scheduled payments or to refinance our obligations with respect to our 17 25 indebtedness, including the Notes, will depend on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control, including interest rates, unscheduled plant shutdowns, increased operating costs, raw material and product prices and regulatory developments. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the Notes. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness, including the Notes. We cannot assure you that any such alternative measures would be successful or would permit us to meet our scheduled debt service obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. The credit facilities and the Indenture restrict our ability to dispose of assets and use the proceeds therefrom. We cannot assure you that we will be able to consummate such dispositions or to obtain the proceeds which we could realize therefrom or that such proceeds would be adequate to meet any debt service obligations then due. See "Description of Credit Facilities" and "Description of the Notes." Default Under Agreements Governing Indebtedness -- If we default on our obligations to pay our indebtedness we may be forced into bankruptcy or would be otherwise unable to pay the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness (including covenants in the Indenture and the credit facilities), we could be in default under the terms of the agreements governing such indebtedness, including the credit facilities and the Notes. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the credit facilities could elect to terminate their commitments thereunder and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. Any default under the agreements governing our indebtedness could have a significant adverse effect on our ability to pay principal, premium, if any, and interest on the Notes and on the market value of the Notes. See "Description of Credit Facilities" and "Description of the Notes." Change of Control -- We may not be able to repurchase the Notes upon a change of control. The Indenture provides that upon a change in control under the Indenture of our company, we will be required to offer to repurchase all of the outstanding Notes at 101% of the principal amount thereof, plus accrued interest to the date of repurchase. This provision will not necessarily provide protection to holders of the Notes in a highly leveraged transaction or certain other transactions involving us or our subsidiaries. In addition, our ability to repurchase the Notes may be limited by our then existing financial resources, including a similar obligation to repay amounts outstanding under the credit facilities. We cannot assure you that in the event of a change of control, we will have, or will have access to, sufficient funds, or will be contractually permitted under the terms of our outstanding indebtedness, to purchase all of the Notes tendered by holders upon a change of control. See "Description of Credit Facilities" and "Description of the Notes -- Change of Control." 18 26 SUBORDINATION OF THE NOTES AND GUARANTEES -- THE NOTES AND THE GUARANTEES BY OUR SUBSIDIARIES ARE SUBORDINATED IN RIGHT OF PAYMENT TO OUR AND THEIR SENIOR INDEBTEDNESS, INCLUDING THE CREDIT FACILITIES. The payment of principal, premium, if any, and interest on, and any other amounts owing in respect of, the Notes is subordinated in right of payment to the prior payment in full of all of our existing and future senior indebtedness, including all amounts owing under the credit facilities. As of March 31, 2000, on a pro forma basis after giving effect to the Transactions, the aggregate principal amount of our senior indebtedness would have been $485.9 million (excluding unused commitments and outstanding letters of credit totaling $94.1 million under the credit facilities). Therefore, in the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding, our assets will be available to pay obligations on the Notes only after all of our senior indebtedness has been paid in full, and we cannot assure you that there will be sufficient assets remaining to pay amounts due on all or any of the Notes. The guarantees by our subsidiaries will be unsecured senior subordinated obligations of theirs and will be subordinated in right of payment to all of their existing and future senior indebtedness, including all amounts owing under the credit facilities. As of March 31, 2000, on a pro forma basis after giving effect to the Transactions, there would have been no senior indebtedness of our subsidiary guarantors (other than the guarantees under the credit facilities). STRUCTURAL SUBORDINATION -- THE NOTES ARE STRUCTURALLY SUBORDINATED IN RIGHT OF PAYMENT TO INDEBTEDNESS OF THOSE OF OUR SUBSIDIARIES THAT ARE NOT GUARANTEEING THE NOTES AND, IF THE GUARANTEES ARE DEEMED UNENFORCEABLE, TO THOSE OF OUR GUARANTOR SUBSIDIARIES. Although we are an operating company, 41.7% of our pro forma EBITDA and 41.1% of our pro forma Adjusted EBITDA for the twelve months ended March 31, 2000 was generated by our subsidiaries. As a result, our ability to pay interest on the Notes and to satisfy our other debt service obligations will depend significantly on our receipt of dividends or other intercompany transfers of funds from our operating subsidiaries. Claims of creditors of our subsidiaries will generally have priority as to the assets of such subsidiaries over our claims. Although the guarantees provide the holders of the Notes with a direct claim against the assets of the subsidiary guarantors, enforcement of the guarantees against any guarantor may be subject to legal challenge in a bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of such guarantor, and would be subject to certain defenses available to guarantors generally. See "-- Fraudulent Transfer Considerations." To the extent the guarantees are not enforceable, the Notes would be effectively subordinated to all liabilities of the guarantors, including trade payables of the guarantors, whether or not such liabilities constitute Senior Indebtedness under the Indenture. In any event, the Notes will be effectively subordinated to all liabilities of our subsidiaries which are not guarantors. On a pro forma basis, our subsidiaries that are not guarantors would have generated 13.0% of our net sales, 16.7% of our pro forma EBITDA and 16.3% of our Adjusted EBITDA for the twelve months ended March 31, 2000 and would have accounted for 12.6% of our total assets as of March 31, 2000. As of March 31, 2000, on a pro forma basis after giving effect to the Transactions, our subsidiaries that are not guarantors would have had total liabilities (excluding liabilities owed to us) of $59.3 million and our subsidiaries that are guarantors would have had total liabilities (excluding liabilities owed to us and guarantees of the credit facilities and the Notes) of $35.0 million. Accordingly, in the event of our dissolution, bankruptcy, liquidation or reorganization, the holders of the Notes may not receive any amounts with respect to the Notes until after the payment in full of the claims of creditors of our subsidiaries. In addition, the payment of dividends to us by our subsidiaries is contingent upon the earnings of those subsidiaries and subject to various business considerations. The Indenture will permit restrictive loan covenants to be contained in the instruments governing certain indebtedness of our subsidiaries, including covenants which restrict in certain circumstances the payment of dividends and distributions and the transfer of assets to us. 19 27 See "Description of Credit Facilities" and "Description of the Notes -- Certain Covenants -- Limitation on Restrictions on Distributions from Restricted Subsidiaries." ASSET ENCUMBRANCES -- IF WE DEFAULT UNDER OUR SENIOR SECURED CREDIT FACILITIES, THE LENDERS COULD FORECLOSE ON THE ASSETS WE HAVE PLEDGED TO THEM, TO THE EXCLUSION OF YOU AS THE HOLDERS OF THE NOTES. In addition to being contractually subordinated to all existing and future senior indebtedness, our obligations under the Notes are unsecured, while our obligations under the credit facilities and each guarantor's obligations under their guarantees are secured by a security interest in substantially all of our assets and each of our existing and subsequently acquired or organized domestic and, subject to certain limitations, foreign subsidiaries, including a pledge of all of the issued and outstanding equity interests in our existing or subsequently acquired or organized domestic subsidiaries and 65% of the equity interests in each of our existing and subsequently acquired or organized foreign subsidiaries. If we are declared bankrupt or insolvent, or if we default under the credit facilities, the lenders could declare all of the funds borrowed thereunder, together with accrued interest, immediately due and payable. If we were unable to repay such indebtedness, the lenders could foreclose on the pledged equity interests of our subsidiaries and on the assets in which they have been granted a security interest, in each case to the exclusion of holders of the Notes, even if an event of default exists under the Indenture at such time. Furthermore, if all equity interests in any future subsidiary of ours that becomes a guarantor are sold to persons pursuant to an enforcement of the pledge of equity interests in such guarantor for the benefit of the senior lenders, then that guarantor will be released from its guarantee automatically and immediately upon such sale. See "Description of Credit Facilities." EXPOSURE TO FLUCTUATIONS IN RESIN PRICES AND DEPENDENCE ON RESIN SUPPLIES -- IF RESIN PRICES INCREASE SUDDENLY OR IF WE LOSE A KEY RESIN SUPPLIER, OUR FINANCIAL RESULTS COULD BE ADVERSELY AFFECTED. We use large quantities of polyethylene, PVC and other resins in manufacturing our products. For the year ended December 31, 1999, resin costs comprised approximately 65% of our total manufacturing costs. Significant increases in the price of resins could adversely affect our operating margins. The price of resins is a function of, among other things, manufacturing capacity, demand, and the price of crude oil and natural gas feedstocks. Since the resins used by us are produced from petroleum and natural gas, the instability in the world markets for petroleum and natural gas could adversely affect the prices of our raw materials and their general availability, and this could have an adverse effect on our profitability if the increased costs could not be passed on to customers. We cannot assure you that a significant increase in resin prices would not have an adverse effect on our business, results of operations and debt service capabilities. In addition, we rely on certain key suppliers of resin for most of our resin supply, some of which resin has characteristics proprietary to the supplier. Although we believe that our key suppliers will continue to supply us with adequate amounts of resin on a timely basis and that alternatives are available for resin with proprietary characteristics, the loss of a key source of supply, our inability to obtain resin with desired proprietary characteristics, or a delay in shipments could have an adverse effect on our business. We also obtain resin on favorable terms under certain contracts with suppliers. Should any of our resin suppliers fail to deliver resin or should any such contract be canceled, we would be forced to purchase resin in the open market, and no assurances can be given that we would be able to make such purchases at prices that would allow us to remain competitive. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business -- Raw Materials." 20 28 COMPETITION -- WE OPERATE IN HIGHLY COMPETITIVE MARKETS AND WE CANNOT ASSURE YOU THAT OUR CUSTOMERS WILL CONTINUE TO PURCHASE OUR PRODUCTS. The markets in which we operate are highly competitive on the basis of service, product quality, product innovation and price. In addition to competition from many smaller competitors, we face strong competition from a number of large film and flexible packaging companies, including AEP, Bemis, Pactiv (formerly Tenneco), Pechiney and Printpack. Some of our competitors are substantially larger, more diversified and have greater financial, personnel and marketing resources than we have and therefore may have certain competitive advantages. Although we have broad product lines and are continually developing our products and graphics, we can give you no assurance that our current customers will continue to purchase our products. CUSTOMER RELATIONSHIPS -- WE DEPEND ON A FEW MAJOR CUSTOMERS AND THE LOSS OF ONE OR MORE OF THESE CUSTOMERS WOULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS. We are dependent upon a limited number of large customers with substantial purchasing power for a majority of our sales, many of which are reducing their number of suppliers. Our top ten customers accounted for approximately 36% of our net sales in 1999. In particular, we are currently the sole outside supplier to Kimberly-Clark of its personal care films and other film components. Kimberly-Clark accounted for approximately 13% of our net sales in 1999. The loss of Kimberly-Clark or one or more other major customers, or a material reduction in sales to Kimberly-Clark or these other customers, would have a material adverse effect on our results of operations and on our ability to service our indebtedness. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business -- Products, Markets and Customers." RISKS ASSOCIATED WITH INTELLECTUAL PROPERTY RIGHTS -- WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY AGAINST OUR COMPETITORS OR MAINTAIN ITS VALUE. Patents, trademarks and licenses are significant to our business. We also rely on unpatented proprietary know-how, continuing technological innovation and other trade secrets to develop and maintain our competitive position. In addition to our own patents, trade secrets and proprietary know-how, we license from third parties the right to use some of their intellectual property. Although we constantly seek to protect our patents, trademarks and other intellectual property, there can be no assurance that our precautions will provide meaningful protection against competitors or that the value of our trademarks will not be diluted. We routinely enter into confidentiality agreements to protect our trade secrets and proprietary know-how. We cannot assure you, however, that such agreements will not be breached, that they will provide meaningful protection or that adequate remedies will be available to us if these confidentiality agreements are breached. RISKS ASSOCIATED WITH FUTURE ACQUISITIONS -- WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE FUTURE ACQUISITIONS. We have completed a number of recent acquisitions, and as part of our strategy, we expect to continue to make acquisitions as opportunities arise. There can be no assurance that our efforts to integrate any businesses acquired in the future will result in increased sales or profits. Difficulties encountered in any transition and integration process for newly acquired companies could have a material adverse effect on our financial condition, results of operations or cash flows. RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS -- OUR OPERATIONS OUTSIDE OF THE UNITED STATES ARE SUBJECT TO ADDITIONAL CURRENCY EXCHANGE, POLITICAL, INVESTMENT AND OTHER RISKS THAT MAY ADVERSELY AFFECT OUR BUSINESS. We operate facilities and sell products in several countries outside the U.S. Operations outside the U.S. include plants and sales offices in Mexico, Canada, Germany and Australia. As a result, we are subject to risks associated with selling and operating in foreign countries. These risks include 21 29 devaluations and fluctuations in currency exchange rates, unstable political conditions, imposition of limitations on conversion of foreign currencies into U.S. dollars and remittance of dividends and other payments by foreign subsidiaries. The imposition or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries, hyperinflation in certain foreign countries, and imposition or increase of investment and other restrictions by foreign governments could also have a negative effect on our business. CONCENTRATION OF OWNERSHIP AND CONTROL -- WE ARE CONTROLLED BY CHASE DOMESTIC INVESTMENTS, LLC AND ITS INTERESTS MAY NOT BE ALIGNED WITH YOURS. At June 1, 2000, Chase Domestic Investments, L.L.C. owned approximately 58% of our total outstanding common stock. Subject to certain limitations contained in the stockholders' agreement among us, Chase Domestic Investments, L.L.C., our other stockholders, and holders of our Preferred Stock Warrants, Chase Domestic Investments, L.L.C. controls us. There can be no assurance that the interests of Chase Domestic Investments, L.L.C. coincide with the interests of the holders of the Notes. RISKS ASSOCIATED WITH LABOR RELATIONS -- IF WE DO NOT MAINTAIN GOOD RELATIONSHIPS WITH OUR EMPLOYEES, OUR BUSINESS COULD BE ADVERSELY AFFECTED. As of March 31, 2000, we had approximately 3,600 employees, of which approximately 1,500 employees were subject to a total of 11 collective bargaining agreements that expire on various dates between October 2000 and November 2002. On March 7, 2000, approximately 130 employees at our Chippewa Falls, Wisconsin manufacturing plant went on strike, the first strike in our history. Our operations at the facility and our ability to serve our customers were not materially affected during this strike, and the striking employees returned to work on March 20, 2000. Although we consider our current relations with our employees to be good, if we do not maintain these good relations, or if major work disruptions were to occur, our business could be adversely affected. FRAUDULENT TRANSFER CONSIDERATIONS -- FEDERAL AND STATE FRAUDULENT TRANSFER LAWS PERMIT A COURT TO VOID THE NOTES AND THE GUARANTEES, AND IF THAT OCCURS, YOU MAY NOT RECEIVE ANY PAYMENTS ON THE NOTES. If, under relevant federal and state fraudulent transfer and conveyance statutes, in a bankruptcy, reorganization or liquidation case or similar proceeding or a lawsuit by or on behalf of our unpaid creditors or a guarantor, a court were to find that, at the time we issued the Notes, (a) we issued the Notes with the intent of hindering, delaying or defrauding current or future creditors or (b) (i) we or such guarantor, as applicable, received less than reasonably equivalent value or fair consideration for issuing the Notes or a guarantee, respectively, and (ii) after applying the proceeds, we or such guarantor (A) was or were insolvent or was or were rendered insolvent by reason of such transactions, (B) was or were engaged, or about to engage, in a business or transaction for which our or its assets constituted unreasonably small capital to carry on our or its business, or (C) intended to incur, or believed or reasonably should have believed that we or it would incur, debts beyond our or its ability to pay such debts as they matured or became due (as all of the foregoing terms are defined in or interpreted under the relevant fraudulent transfer or conveyance statutes), the court could avoid the obligations under the Notes or such guarantee or further subordinate the Notes or such guarantee to our presently existing and future indebtedness or that of such guarantor, or take other action detrimental to the holders of the Notes, including, under certain circumstances, invalidating the Notes or such guarantee. In that event, we cannot assure you that any repayment on the Notes would ever be received by holders of the Notes. The avoidance of such Notes could result in an event of default with respect to our other debt and that of our subsidiaries, which could result in acceleration of such debt. The measure of insolvency for purposes of the foregoing considerations will vary depending upon the law of the jurisdiction that is to be applied. Generally, however, a company would be 22 30 considered insolvent if, at the time it incurred indebtedness, either (i) the sum of its debts, including contingent liabilities, was greater than all its assets at a fair valuation or (ii) the present fair saleable value of its assets is less than the amount required to pay the probable liability on its total existing debts and liabilities (including contingent liabilities), as they become absolute and matured. There can be no assurance as to what standards a court would use to determine whether we or a guarantor was or were solvent at the relevant time, or whether the Notes or the guarantees would be avoided on any of the other grounds set forth above. The holders of the Notes will have the benefit of the full and unconditional guarantees of the guarantors. However, the guarantees will be limited to the maximum amount which the guarantors are permitted to guarantee under applicable law. As a result, a guarantor's liability under its guarantee could be reduced to zero, depending upon the amount of other obligations of the guarantors. Notwithstanding such provision, such guarantee may be subject to review by a court under relevant federal and state fraudulent conveyance and transfer statutes and, if a court makes certain findings, it could take certain actions detrimental to the holders of the Notes. The guarantees may also be released under certain circumstances. See "Description of the Notes -- The Note Guarantees." FAILURE TO EXCHANGE OLD NOTES -- IF YOU DO NOT PROPERLY TENDER YOUR OLD NOTES, YOU WILL CONTINUE TO HOLD UNREGISTERED OLD NOTES AND YOUR ABILITY TO TRANSFER YOUR OLD NOTES WILL BE ADVERSELY AFFECTED. We will only issue New Notes in exchange for Old Notes that are timely received by the exchange agent together with all required documents, including a properly completed and signed letter of transmittal. Therefore, you should allow sufficient time to ensure timely delivery of the Old Notes and you should carefully follow the instructions on how to tender your Old Notes. Neither we nor the exchange agent are required to tell you of any defects or irregularities with respect to your tender of the Old Notes. If you do not tender your Old Notes or if we do not accept your Old Notes because you did not tender your Old Notes properly, then, after we consummate the exchange offer, you will continue to hold Old Notes that are subject to the existing transfer restrictions and, except in certain limited circumstances, you will no longer have any registration rights or be entitled to any liquidated damages with respect to the Old Notes. In addition: - if you tender your Old Notes for the purpose of participating in a distribution of the New Notes, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the New Notes, and - if you are a broker-dealer that receives New Notes for your own account in exchange for Old Notes that you acquired as a result of market-making activities or any other trading activities, you will be required to acknowledge that you will deliver a prospectus in connection with any resale of those New Notes. We have agreed that, for a period of 180 days after the exchange offer is consummated, we will make this prospectus available to any broker-dealer for use in connection with any such resale. After the exchange offer is consummated, if you continue to hold any Old Notes, you may have difficulty selling them because there will be less Old Notes outstanding. In addition, if a large amount of Old Notes are not tendered or are tendered improperly, the limited amount of New Notes that would be issued and outstanding after we consummate the exchange offer could lower the market price of such New Notes. NO PRIOR MARKET FOR THE NEW NOTES -- YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NEW NOTES. The New Notes are a new issue of securities with no established trading market and will not be listed on any securities exchange or automated dealer quotation system. The liquidity of the trading 23 31 market in the New Notes, and the market price quoted for the New Notes, may be adversely affected by changes in the overall market for high yield securities and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a result, you cannot be sure that an active trading market will develop for the New Notes. ENVIRONMENTAL MATTERS -- WE ARE SUBJECT TO NUMEROUS FEDERAL AND STATE ENVIRONMENTAL LAWS AND THE FAILURE TO COMPLY WITH OR ANY INCREASED COMPLIANCE COSTS ASSOCIATED WITH THESE ENVIRONMENTAL LAWS COULD ADVERSELY AFFECT OUR BUSINESS. Our operations are subject to certain federal, state, local and foreign laws and regulations relating to pollution, the protection of the environment, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. We could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as a result of violations of or liabilities under environmental laws or the non-compliance with environmental permits required at our production facilities. From time to time, contaminants from current or historical operations have been detected at some of our present and former sites, principally in connection with the removal or closure of underground storage tanks. While we are not currently aware that any material outstanding claims or obligations exist with regard to such sites, the detection of additional contaminants or the imposition of cleanup obligations at these or other sites could result in significant liability. In addition, the ultimate costs under environmental laws and the timing of such costs are difficult to predict. Liability under certain environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis, meaning one liable party could be held liable for all costs at a site. Potentially significant expenditures could be required in order to comply with environmental laws that may be adopted or imposed in the future. 24 32 USE OF PROCEEDS We will not receive any cash proceeds from the issuance of the New Notes. In consideration for issuing the New Notes as contemplated in this prospectus, we will receive in exchange Old Notes in like principal amount, which will be canceled and as such will not result in any increase in our indebtedness. CAPITALIZATION The following table sets forth our capitalization as of March 31, 2000 on a pro forma basis after giving effect to the Transactions, including the application of the net proceeds from the offering of the Old Notes as described under "The Transactions."
PRO FORMA AS OF MARCH 31, 2000 --------------------- (DOLLARS IN MILLIONS) Cash and cash equivalents................................... $ 5.2 ======= Total debt: Credit facilities Revolving credit facility(1)........................... $ 5.9 Tranche A facility..................................... 200.0 Tranche B facility..................................... 280.0 Old Notes(2).............................................. 206.1 Insurance premium financing............................... 2.1 ------- Total debt........................................ 694.1 Preferred Stock(3).......................................... 80.0 Stockholders' deficit....................................... (148.9) ------- Total capitalization.............................. $ 625.2 =======
- --------------- (1) As of May 31, 2000, we had $92.8 million of borrowing capacity under the revolving credit facility and letters of credit of $1.3 million outstanding under the revolving credit facility. (2) Includes proceeds of $214.1 million less estimated value of the Note Warrants of $8.0 million. (3) Includes proceeds of $100.0 million less estimated issuance costs of $1.5 million for the Preferred Stock and estimated value of the Preferred Stock Warrants of $18.5 million. 25 33 THE TRANSACTIONS THE RECAPITALIZATION On May 31, 2000, we consummated the Recapitalization. The total consideration paid in the Recapitalization was approximately $1.065 billion, including transaction costs, and is subject to post-closing purchase price adjustments. As a result of the Recapitalization, approximately 57.8% of our total common stock outstanding is owned by Chase Domestic Investments, L.L.C., approximately 4.5% of our total common stock is owned by certain other institutional investors and approximately 37.7% of total common stock is owned collectively by the Trust and the Management Investors. The following transactions occurred in the Recapitalization: - Chase Domestic Investments, L.L.C. and certain other institutional investors made an equity investment of $165.3 million, consisting of the Investor Common Equity Contribution of approximately $63.5 million and the acquisition from the Trust and the Management Investors of common stock having a value of approximately $101.8 million in the Investor Share Purchase; - Chase Domestic Investments, L.L.C. and certain other institutional investors purchased $100.0 million of our Preferred Stock and Preferred Stock Warrants; - we made the Equity Redemption for approximately $314.0 million; - the Trust rolled-over its ownership of our common stock in an amount equal to approximately $76.8 million; and - the Management Investors rolled-over their ownership of our common stock in an amount equal to approximately $22.9 million. Under the recapitalization agreement, a purchase price adjustment in cash will be made after closing of the Transactions to the extent that our financial net worth at closing (consolidated assets minus consolidated liabilities) is at least $10.0 million more or less than a targeted financial net worth. Pursuant to the recapitalization agreement, we entered into agreements with Chase Domestic Investments, L.L.C. and our other stockholders. See "Certain Relationships and Related Transactions." We are required by the recapitalization agreement to change our name and the name of our subsidiaries to eliminate the use of "Huntsman" by December 31, 2000. In addition, after December 31, 2000, we will no longer be able to use "Huntsman" as or in our trademarks or tradenames. See "Business -- Intellectual Property Rights." Following the Transactions, we adopted a stock-based compensation plan entitling certain of our management employees to acquire, subject to certain conditions, restricted stock or options for up to 51,010 shares of our common stock. See "Management -- Stock Options and Restricted Stock." THE TENDER OFFER AND CONSENT SOLICITATION In connection with the Recapitalization, we offered to purchase in a tender offer all of our $125.0 million principal amount of 9 1/8% senior subordinated notes due 2007. We also solicited and obtained the requisite consents from tendering holders to amend the related indenture to eliminate many of the restrictive covenants, which permitted us to effect the Recapitalization and also the offering of the Old Notes and the incurrence of borrowings under the credit facilities. On May 31, 2000, we purchased all of the $125.0 million of 9 1/8% senior subordinated notes tendered for approximately $134.4 million, paid the consent fee of $2.5 million and discharged our obligations under the related indenture. 26 34 THE NEW CREDIT FACILITIES On May 31, 2000, we refinanced all amounts outstanding under our then existing credit facility and replaced it with our current credit facilities. The credit facilities consist of a $200.0 million tranche A facility, a $280.0 million tranche B facility and a $100.0 million revolving credit facility. For a description of the terms of the credit facilities, see "Description of Credit Facilities." The sources and uses of funds for the Transactions are presented in the following table:
AMOUNT --------------------- (DOLLARS IN MILLIONS) SOURCES: Credit facilities(1)........................................ $ 485.9 Old Notes and Note Warrants (net of discount of $5.9)....... 214.1 Preferred Stock and Preferred Stock Warrants................ 100.0 Common equity investment(2)................................. 165.3 Trust equity rollover....................................... 76.8 Management equity rollover.................................. 22.9 -------- Total................................................ $1,065.0 ======== USES: Equity Redemption........................................... $ 314.0 Investor Share Purchase..................................... 101.8 Refinance the prior credit facility and other debt.......... 379.5 Repay the 9 1/8% senior subordinated notes.................. 125.0 Tender and consent consideration............................ 11.9 Trust equity rollover....................................... 76.8 Management equity rollover.................................. 22.9 Transaction fees and expenses(3)............................ 33.1 -------- Total................................................ $1,065.0 ========
- --------------- (1) Represents borrowings under the credit facilities, consisting of $200.0 million under the tranche A facility, $280.0 million under the tranche B facility and $5.9 million under the revolving credit facility. As of May 31, 2000, we had $92.8 million of borrowing capacity under the revolving credit facility and $1.3 million reserved for letters of credit outstanding under the revolving credit facility. See "Description of Credit Facilities." (2) Consists of the Investor Share Purchase of $101.8 million and the Investor Common Equity Contribution of $63.5 million. (3) Consists of debt issuance costs of approximately $18.6 million, compensation expense related to the long-term incentive plan triggered by the Transactions of approximately $5.0 million, estimated issuance costs for the Preferred Stock of $1.5 million and other fees and expenses directly related to the Transactions of approximately $8.0 million. 27 35 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER We and the Note Guarantors have entered into an exchange and registration rights agreement with the initial purchasers in the private placement offering of the Old Notes in which we and the Note Guarantors agreed, under certain circumstances, to file a registration statement relating to an offer to exchange the Old Notes for New Notes. The registration statement of which this prospectus forms a part was filed in compliance with this obligation. We also agreed to use our reasonable best efforts to cause the exchange offer to be consummated within 225 days following the original issuance of the Old Notes. The New Notes will have terms substantially identical to the Old Notes except that the New Notes will not contain terms with respect to transfer restrictions, registration rights and liquidated damages for failure to observe certain obligations in the exchange and registration rights agreement. The Old Notes were issued on May 31, 2000. Under the circumstances set forth below, we will use our reasonable best efforts to cause the SEC to declare effective a shelf registration statement with respect to the resale of the Old Notes and keep the shelf registration statement effective for up to two years after the effective date of the shelf registration statement. These circumstances include: - if pursuant to any changes in law, SEC rules or regulations or applicable interpretations thereof by the staff of the SEC do not permit us to effect the exchange offer as contemplated by the exchange and registration rights agreement; - if any Old Notes validly tendered in the exchange offer are not exchanged for New Notes within 225 days after the original issue of the Old Notes; - if the initial purchasers of the Old Notes so request (but only with respect to any Old Notes not eligible to be exchanged for New Notes in the exchange offer); - if any holder of the Old Notes is not permitted to participate in the exchange offer; or - If any holder of New Notes received in the exchange offer notifies us that it must deliver a prospectus in connection with any resale of the New Notes and this prospectus is not legally available for delivery. Each holder of Old Notes that wishes to exchange Old Notes for transferable New Notes in the exchange offer will be required to make the following representations: - any New Notes will be acquired in the ordinary course of its business; - such holder has no arrangement or understanding with any person to participate in the distribution of the New Notes; and - such holder is not our "affiliate," as defined in Rule 405 of the Securities Act, or, if it is an affiliate, that it will comply with applicable registration and prospectus delivery requirements of the Securities Act. RESALE OF NEW NOTES Based on interpretations of the SEC staff set forth in no action letters issued to unrelated third parties, we believe that New Notes issued in the exchange offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any New Note holder without compliance with the registration and prospectus delivery provisions of the Securities Act, if: - such holder is not an "affiliate" of ours within the meaning of Rule 405 under the Securities Act; - such New Notes are acquired in the ordinary course of the holder's business; and - the holder does not intend to participate in the distribution of such New Notes. 28 36 Any holder who tenders in the exchange offer with the intention of participating in any manner in a distribution of the New Notes: - cannot rely on the position of the staff of the SEC set forth in "Exxon Capital Holdings Corporation" or similar interpretive letters; and - must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. This prospectus may be used for an offer to resell, for the resale or for other retransfer of New Notes only as specifically set forth in this prospectus. With regard to broker-dealers, only broker-dealers that acquired the Old Notes as a result of market-making activities or other trading activities may participate in the exchange offer. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the New Notes. Please read the section captioned "Plan of Distribution" for more details regarding the transfer of New Notes. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, we will accept for exchange any Old Notes properly tendered and not withdrawn prior to the expiration date. We will issue $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of Old Notes surrendered under the exchange offer. Old Notes may be tendered only in integral multiples of $1,000. The form and terms of the New Notes will be substantially identical to the form and terms of the Old Notes except the New Notes will be registered under the Securities Act, will not bear legends restricting their transfer and will not provide for any liquidated damages upon our failure to fulfill our obligations under the exchange and registration rights agreement to file, and cause to be effective, a registration statement. The New Notes will evidence the same debt as the Old Notes. The New Notes will be issued under and entitled to the benefits of the same Indenture that authorized the issuance of the Old Notes. Consequently, both series will be treated as a single class of debt securities under that Indenture. The exchange offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered for exchange. As of the date of this prospectus, $220.0 million aggregate principal amount of the Old Notes are outstanding. This prospectus and the letter of transmittal are being sent to all registered holders of Old Notes. There will be no fixed record date for determining registered holders of Old Notes entitled to participate in the exchange offer. We intend to conduct the exchange offer in accordance with the provisions of the exchange and registration rights agreement, the applicable requirements of the Securities Act and the Securities Exchange Act of 1934 and the rules and regulations of the SEC. Old Notes that are not tendered for exchange in the exchange offer will remain outstanding and continue to accrue interest and will be entitled to the rights and benefits such holders have under the Indenture relating to the Old Notes. We will be deemed to have accepted for exchange properly tendered Old Notes when we have given oral or written notice of the acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders for the purposes of receiving the New Notes from us and delivering exchange notes to such holders. Subject to the terms of the exchange and registration rights agreement, we expressly reserve the right to amend or terminate the exchange offer, and not to accept for exchange any Old Notes not previously accepted for exchange, upon the occurrence of any of the conditions specified below under the caption "-- Certain Conditions to the Exchange Offer." 29 37 Holders who tender Old Notes in the exchange offer will not be required to pay brokerage commissions or fees, or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of Old Notes. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the exchange offer. It is important that you read the section labeled "-- Fees and Expenses" below for more details regarding fees and expenses incurred in the exchange offer. EXPIRATION DATE; EXTENSIONS; AMENDMENTS The exchange offer will expire at 5:00 p.m., New York City time on , 2000, unless we extend it in our sole discretion. In order to extend the exchange offer, we will notify the exchange agent orally or in writing of any extension. We will notify, in writing or by public announcement, the registered holders of Old Notes of the extension no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date. We reserve the right, in our sole discretion: - to delay accepting for exchange any Old Notes; - to extend the exchange offer or to terminate the exchange offer and to refuse to accept Old Notes not previously accepted if any of the conditions set forth below under "-- Certain Conditions to the Exchange Offer" have not been satisfied, by giving oral or written notice of such delay, extension or termination to the exchange agent; or - subject to the terms of the exchange and registration rights agreement, to amend the terms of the exchange offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice or public announcement thereof to the registered holders of Old Notes. If we amend the exchange offer in a manner that we determine to constitute a material change, we will promptly disclose such amendment in a manner reasonably calculated to inform the holders of Old Notes of such amendment. Without limiting the manner in which we may choose to make public announcements of any delay in acceptance, extension, termination or amendment of the exchange offer, we shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by issuing a timely press release to a financial news service. CERTAIN CONDITIONS TO THE EXCHANGE OFFER Despite any other term of the exchange offer, we will not be required to accept for exchange, or exchange any New Notes for, any Old Notes, and we may terminate the exchange offer as provided in this prospectus before accepting any Old Notes for exchange if in our reasonable judgment: - the New Notes to be received will not be tradable by the holder without restriction under the Securities Act or the Exchange Act and without material restrictions under the blue sky or securities laws of substantially all of the states of the U.S.; - the exchange offer, or the making of any exchange by a holder of Old Notes, would violate applicable law or any applicable interpretation of the staff of the SEC; or - any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer. 30 38 In addition, we will not be obligated to accept for exchange the Old Notes of any holder that has not made: - the representations described under "-- Purpose and Effect of the Exchange Offer", "-- Procedures for Tendering" and "Plan of Distribution", and - such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to make available to us an appropriate form for registration of the New Notes under the Securities Act. We expressly reserve the right, at any time or at various times, to extend the period of time during which the exchange offer is open. Consequently, we may delay acceptance of any Old Notes by giving oral or written notice of such extension to the registered holders of the Old Notes. During any such extensions, all Old Notes previously tendered will remain subject to the exchange offer, and we may accept them for exchange unless they have been previously withdrawn. We will return any Old Notes that we do not accept for exchange for any reason without expense to their tendering holder as promptly as practicable after the expiration or termination of the exchange offer. We expressly reserve the right to amend or terminate the exchange offer, and to reject for exchange any Old Notes not previously accepted for exchange, upon the occurrence of any of the conditions of the exchange offer specified above. We will give oral or written notice or public announcement of any extension, amendment, non-acceptance or termination to the registered holders of the Old Notes as promptly as practicable. In the case of any extension, such oral or written notice or public announcement will be issued no later than 9:00 a.m., New York City time, on the business day after the previously scheduled expiration date. These conditions are for our sole benefit and we may assert them regardless of the circumstances that may give rise to them or waive them in whole or in part at any or at various times in our sole discretion. If we fail at any time to exercise any of the foregoing rights, that failure will not constitute a waiver of such right. Each such right will be deemed an ongoing right that we may assert at any time or at various times. In addition, we will not accept for exchange any Old Notes tendered, and will not issue New Notes in exchange for any such Old Notes, if at such time any stop order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939. PROCEDURES FOR TENDERING Only a holder of Old Notes may tender such Old Notes in the exchange offer. To tender in the exchange offer, a holder must: - complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal; have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires; and mail or deliver such letter of transmittal or facsimile to the exchange agent prior to the expiration date; or - comply with DTC's Automated Tender Offer Program procedures described below. In addition, either: - the exchange agent must receive Old Notes along with the letter of transmittal; or - the exchange agent must receive, prior to the expiration date, a timely confirmation of book-entry transfer of such Old Notes into the exchange agent's account at DTC according to the procedures for book-entry transfer described below or a properly transmitted agent's message; or - the holder must comply with the guaranteed delivery procedures described below. 31 39 To be tendered effectively, the exchange agent must receive any physical delivery of the letter of transmittal and other required documents at the address set forth below under "-- Exchange Agent" prior to the expiration date. The tender by a holder that is not withdrawn prior to the expiration date will constitute an agreement between such holder and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal. The method of delivery of Old Notes, the letter of transmittal and all other required documents to the exchange agent is at the holder's election and risk. Rather than mail these items, we recommend that holders use an overnight or hand delivery service. In all cases, holders should allow sufficient time to assure delivery to the exchange agent before the expiration date. Holders should not send the letter of transmittal or Old Notes to the Issuer. Holders may request their respective brokers, dealers, commercial banks, trust companies or other nominees to effect the above transactions for them. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct it to tender on the owners' behalf. If such beneficial owner wishes to tender on its own behalf, it must, prior to completing and executing the letter of transmittal and delivering its Old Notes; either: - make appropriate arrangements to register ownership of the Old Notes in such owner's name; or - obtain a properly completed bond power from the registered holder of Old Notes. The transfer of registered ownership may take considerable time and may not be completed prior to the expiration date. Signatures on a letter of transmittal or a notice of withdrawal described below must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the U.S. or another "eligible institution" within the meaning of Rule 17Ad-15 under the Exchange Act, unless the Old Note tendered pursuant thereto is tendered: - by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal; or - for the account of an eligible institution. If the letter of transmittal is signed by a person other than the registered holder of any Old Notes listed on the Old Notes, such Old Notes must be endorsed or accompanied by a properly completed bond power. The bond power must be signed by the registered holder as the registered holder's name appears on the Old Notes and an eligible institution must guarantee the signature on the bond power. If the letter of transmittal or any Old 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. Unless waived by us, they should also submit evidence satisfactory to us of their authority to deliver the letter of transmittal. The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC's system may use DTC's Automated Tender Offer program to tender. Participants in the program may, instead of physically completing and signing the letter of transmittal and delivering it to the exchange agent, transmit their acceptance of the exchange offer electronically. They may do so by causing DTC to transfer the Old Notes to the exchange agent in accordance with its procedures for transfer. DTC will then send an agent's message to the exchange agent. The term 32 40 "agent's message" means a message transmitted by DTC, received by the exchange agent and forming part of the book-entry confirmation, to the effect that: - DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering Old Notes that are the subject of such book-entry confirmation; - such participant has received and agrees to be bound by the terms of the letter of transmittal (or, in the case of an agent's message relating to guaranteed delivery, that such participant has received and agrees to be bound by the applicable notice of guaranteed delivery); and - the agreement may be enforced against such participant. We will determine in our sole discretion all questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes. Our determination will be final and binding. We reserve the absolute right to reject any Old Notes not properly tendered or any Old Notes the acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular Old Notes. Our interpretation of the terms and conditions of the exchange offer (including the instructions in the letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities with respect to tenders of Old Notes, neither we, the exchange agent nor any other person will incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed made until such defects or irregularities have been cured or waived. Any Old Notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned to the exchange agent without cost to the tendering holder, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. In all cases, we will issue New Notes for Old Notes that we have accepted for exchange under the exchange offer only after the exchange agent timely receives: - Old Notes or a timely book-entry confirmation of such Old Notes into the exchange agent's account at DTC; and - a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent's message. By signing the letter of transmittal or transmitting the agent's message, each tendering holder of Old Notes will represent to us that, among other things: - any New Notes that the holder receives will be acquired in the ordinary course of its business; - the holder has no arrangement or understanding with any person or entity to participate in the distribution of the New Notes; - if the holder is not a broker-dealer, that it is not engaged in and does not intend to engage in the distribution of the New Notes; - if the holder is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities, that it will deliver a prospectus, as required by law, in connection with any resale of such New Notes; and - the holder is not an "affiliate", as defined in Rule 405 of the Securities Act, of ours or, if the holder is an affiliate, it will comply with any applicable registration and prospectus delivery requirements of the Securities Act. 33 41 BOOK-ENTRY TRANSFER The exchange agent will make a request to establish an account with respect to the Old Notes at DTC for purposes of the exchange offer promptly after the date of this prospectus; and any financial institution participant in DTC's system may make book-entry delivery of Old Notes by causing DTC to transfer such Old Notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. Holders of Old Notes who are unable to deliver confirmation of the book-entry tender of their Old Notes into the exchange agent's account at DTC or all other documents of transmittal to the exchange agent on or prior to the expiration date must tender their Old Notes according to the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES Holders wishing to tender their Old Notes but whose Old Notes are not immediately available or who cannot deliver their Old Notes, the letter of transmittal or any other required documents to the exchange agent or comply with the applicable procedures under DTC's Automated Tender Offer Program prior to the expiration date may tender if: - the tender is made through an eligible institution; - prior to the expiration date, the exchange agent receives from such eligible institution either a properly completed and duly executed notice of guaranteed delivery (by facsimile transmission, mail or hand delivery) or a properly transmitted agent's message and notice of guaranteed delivery: -- setting forth the name and address of the holder, the registered number(s) of such Old Notes and the principal amount of Old Notes tendered; -- stating that the tender is being made thereby; and -- guaranteeing that, within three (3) New York Stock Exchange trading days after the expiration date, the letter of transmittal (or facsimile thereof) together with the Old Notes or a book-entry confirmation, and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent; and - the exchange agent receives such properly completed and executed letter of transmittal (or facsimile thereof), as well as all tendered Old Notes in proper form for transfer or a book-entry confirmation, and all other documents required by the letter of transmittal, within three (3) New York State Exchange trading days after the expiration date. Upon request to the exchange agent, a notice of guaranteed delivery will be sent to holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided in this prospectus, holders of Old Notes may withdraw their tenders at any time prior to the expiration date. For a withdrawal to be effective: - the exchange agent must receive a written notice (which may be by telegram, telex, facsimile transmission or letter) of withdrawal at one of the addresses set forth below under "-- Exchange Agent," or - holders must comply with the appropriate procedures of DTC's Automated Tender Offer Program system. 34 42 Any such notice of withdrawal must: - specify the name of the person who tendered the Old Notes to be withdrawn; - identify the Old Notes to be withdrawn (including the principal amount of such Old Notes); and - where certificates for Old Notes have been transmitted, specify the name in which such Old Notes were registered, if different from that of the withdrawing holder. If certificates for Old Notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates, the withdrawing holder must also submit: - the serial numbers of the particular certificates to be withdrawn; and - a signed notice of withdrawal with signatures guaranteed by an eligible institution unless such holder is an eligible institution. If Old Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such facility. We will determine all questions as to the validity, form and eligibility (including time of receipt) of such notices, and our determination shall be final and binding on all parties. We will deem any Old Notes so withdrawn not to have validity tendered for exchange for purposes of the exchange offer. Any Old Notes that have been tendered for exchange but that are not exchanged for any reason will be returned to their holder without cost to the holder (or, in the case of Old Notes tendered by book-entry transfer into the exchange agent's account at DTC according to the procedures described above, such Old Notes will be credited to an account maintained with DTC for Old Notes) as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described under "Procedures for Tendering" above at any time on or prior to the expiration date. EXCHANGE AGENT The Bank of New York has been appointed as exchange agent for the exchange offer. You should direct questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for the notice of guaranteed delivery to the exchange agent addressed as follows: For Overnight Delivery, Delivery by Hand or Delivery by Registered or Certified Mail: The Bank of New York 101 Barclay Street New York, NY 10286 Attn: By Facsimile Transmission (for eligible institutions only): (212) Confirm facsimile by telephone only: (212) 35 43 DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL. FEES AND EXPENSES We will bear the expenses of soliciting tenders. The principal solicitation is being made by mail; however, we may make additional solicitations by telegraph, telephone or in person by our officers and regular employees and those of our affiliates. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to broker-dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and reimburse it for its related reasonable out-of-pocket expenses. Our expenses in connection with the exchange offer include: - SEC registration fees; - fees and expenses of the exchange agent and trustee; - accounting and legal fees and printing costs; and - related fees and expenses. TRANSFER TAXES We will pay all transfer taxes, if any, applicable to the exchange of Old Notes under the exchange offer. The tendering holder, however, will be required to pay any transfer taxes (whether imposed on the registered holder or any other person) if: - certificates representing Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of Old Notes tendered; - tendered Old Notes are registered in the name of any person other than the person signing the letter of transmittal; or - a transfer tax is imposed for any reason other than the exchange of Old Notes under the exchange offer. If satisfactory evidence of payment of such taxes is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed to that tendering holder. Holders who tender their Old Notes for exchange will not be required to pay any transfer taxes. However, holders who instruct us to register New Notes in the name of, or request that Old Notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be required to pay any applicable transfer tax. CONSEQUENCES OF FAILURE TO EXCHANGE Holders of Old Notes who do not exchange their Old Notes for New Notes under the exchange offer will remain subject to the restrictions on transfer applicable to the Old Notes: - as set forth in the legend printed on the Old Notes as a consequence of the issuance of the Old Notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and - otherwise as set forth in the offering memorandum distributed in connection with the private offering of the Old Notes. 36 44 In general, you may not offer or sell the Old Notes unless they are registered under the Securities Act, or if the offer or sale is exempt from registration under the Securities Act and applicable state securities laws. Except as required by the exchange and registration rights agreement, we do not intend to register resales of the Old Notes under the Securities Act. Based on interpretations of the SEC staff, New Notes issued pursuant to the exchange offer may be offered for resale, resold or otherwise transferred by their holders (other than any such holder that is our "affiliate" within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the holders acquired the New Notes in the ordinary course of the holders' business and the holders have no arrangement or understanding with respect to the distribution of the New Notes to be acquired in the exchange offer. Any holder who tenders in the exchange offer for the purpose of participating in a distribution of the New Notes: - could not rely on the applicable interpretations of the SEC; and - must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. ACCOUNTING TREATMENT We will record the New Notes in our accounting records at the same carrying value as the Old Notes, as reflected in our accounting records on the date of exchange. Accordingly, we will not recognize any gain or loss for accounting purposes in connection with the exchange offer. We will record the expenses of the exchange offer as incurred. OTHER Participation in the exchange offer is voluntary, and you should carefully consider whether to accept. You are urged to consult your financial and tax advisors in making your own decision on what action to take. We may in the future seek to acquire untendered Old Notes in the open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plans to acquire any Old Notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any untendered Old Notes. 37 45 UNAUDITED PRO FORMA FINANCIAL DATA The following unaudited pro forma condensed consolidated financial data have been prepared by applying pro forma adjustments to the historical consolidated financial statements of Huntsman Packaging included elsewhere in this prospectus. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 1999, the three months ended March 31, 2000, and the twelve months ended March 31, 2000, give effect to the Transactions and the KCL Corporation acquisition as if they had occurred at the beginning of the respective periods. The unaudited pro forma condensed consolidated statements of operations do not reflect the expenses related to the Transactions. However, the unaudited pro forma balance sheet as of March 31, 2000 reflects these expenses as reductions to stockholders' equity or as capitalized debt issuance costs, as appropriate. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2000 gives effect to the Transactions as if they had occurred on March 31, 2000. The historical financial data for the KCL Corporation acquisition were derived from its audited and unaudited financial statements. The KCL Corporation acquisition was accounted for using the purchase method of accounting pursuant to which the purchase price of the acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The goodwill recorded in connection with the acquisition of KCL Corporation is based on preliminary allocations of estimated fair values. The unaudited pro forma condensed consolidated financial data are presented for informational purposes only and are not necessarily indicative of the operating results or financial position that would have occurred had the Transactions or the KCL Corporation acquisition been consummated on or as of the dates indicated and such data are not necessarily indicative of future operating results or financial position. The unaudited pro forma condensed financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Huntsman Packaging's consolidated financial statements and the notes thereto included elsewhere in this prospectus. 38 46 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 (DOLLARS IN MILLIONS)
HISTORICAL PRO FORMA HUNTSMAN HISTORICAL HUNTSMAN PACKAGING KCL PRO FORMA PACKAGING CORPORATION CORPORATION ADJUSTMENTS CORPORATION ----------- ----------- ------------- ----------- Net sales............................... $781.4 $26.2 $807.6 Cost of sales........................... 623.4 23.7 647.1 ------ ----- ------ Gross profit.......................... 158.0 2.5 160.5 Total operating expenses................ 82.0 2.5 $ (2.6)(1) 81.9 ------ ----- ------- ------ Operating income...................... 76.0 2.6 78.6 Interest expense........................ (44.0) (0.8) (33.0)(2) (77.8) Other income, net....................... 0.4 1.1 1.5 ------ ----- ------- ------ Income before income taxes.............. 32.4 0.3 (30.4) 2.3 Income tax expense...................... 14.1 0.1 (12.2)(3) 2.0 ------ ----- ------- ------ Net income.............................. $ 18.3 $ 0.2 $ (18.2) $ 0.3 ====== ===== ======= ======
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations. 39 47 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 (DOLLARS IN MILLIONS)
HISTORICAL PRO FORMA HUNTSMAN HUNTSMAN PACKAGING PRO FORMA PACKAGING CORPORATION ADJUSTMENTS CORPORATION ----------- ------------- ----------- Net sales............................................ $212.5 $212.5 Cost of sales........................................ 169.5 169.5 ------ ------ Gross profit....................................... 43.0 43.0 Total operating expenses............................. 28.2 $(5.3)(1) 22.9 ------ ----- ------ Operating income................................... 14.8 5.3 20.1 Interest expense..................................... (11.6) (7.7)(2) (19.3) Other income, net.................................... 0.5 0.5 ------ ----- ------ Income before income taxes........................... 3.7 (2.4) 1.3 Income tax expense................................... 2.3 (1.0)(3) 1.3 ------ ----- ------ Net income........................................... $ 1.4 $(1.4) $ (0.0) ====== ===== ======
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations. 40 48 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED MARCH 31, 2000 (DOLLARS IN MILLIONS)
HISTORICAL PRO FORMA HUNTSMAN HISTORICAL HUNTSMAN PACKAGING KCL PRO FORMA PACKAGING CORPORATION CORPORATION ADJUSTMENTS CORPORATION ----------- ----------- ------------- ----------- Net sales.................................. $819.5 $14.8 $834.3 Cost of sales.............................. 655.4 14.1 669.5 ------ ----- ------ Gross profit............................. 164.1 0.7 164.8 Total operating expenses................... 91.5 1.6 $ (7.7)(1) 85.4 ------ ----- ------ ------ Operating income......................... 72.6 (0.9) 7.7 79.4 Interest expense........................... (45.4) (0.6) (31.6)(2) (77.6) Other income, net.......................... 2.9 1.1 4.0 ------ ----- ------ ------ Income before income taxes................. 30.1 (0.4) (23.9) 5.8 Income tax expense (benefit)............... 12.7 (0.2) (9.6)(3) 2.9 ------ ----- ------ ------ Net income (loss).......................... $ 17.4 $(0.2) $(14.3) $ 2.9 ====== ===== ====== ======
See Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations. 41 49 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN MILLIONS) (1) Adjustments reflect the following operating expense items:
THREE MONTHS TWELVE MONTHS YEAR ENDED ENDED ENDED DECEMBER 31, 1999 MARCH 31, 2000 MARCH 31, 2000 ----------------- -------------- -------------- Amortization of goodwill(a)........ $ 0.2 $ 0.1 Elimination of non-recurring affiliated company expenses(b)..................... (2.8) $(0.3) (2.8) Elimination of long-term incentive compensation(c)................. (5.0) (5.0) ----- ----- ----- Total adjustments........ $(2.6) $(5.3) $(7.7) ===== ===== =====
- --------------- (a) Adjustment reflects amortization of goodwill of $2.6 million related to the acquisition of KCL Corporation in October 1999, amortized over ten years. (b) Adjustment reflects elimination of (i) Huntsman Cancer Institute charitable contribution and Huntsman Financial Corporation management fee and (ii) allocated expenses under the services agreement with Huntsman Corporation, including amounts paid for office rental, less the replacement costs under new contractual arrangements for the services provided. (c) Adjustment reflects elimination of long-term incentive compensation triggered by the Transactions of $5.0 million. See Note 2 to the condensed consolidated financial statements included elsewhere in this prospectus. (2) Adjustments reflect (i) interest expense associated with borrowings under the credit facilities and the Old Notes, (ii) amortization of the related debt issuance costs, and (iii) the elimination of our historical interest expense and debt issuance costs related to our prior credit facility and the 9 1/8% senior subordinated notes.
THREE MONTHS TWELVE MONTHS PRINCIPAL YEAR ENDED ENDED ENDED AMOUNT DECEMBER 31, 1999 MARCH 31, 2000 MARCH 31, 2000 --------- ----------------- -------------- -------------- New Credit Facilities: Tranche A facility(a).......... $200.0 $ 18.2 $ 4.6 $ 18.2 Tranche B facility(a).......... 280.0 26.9 6.7 26.9 Revolving credit facility(a).......... 5.9 0.5 0.1 0.5 Old Notes(a).............. 220.0 29.3 7.3 29.3 Amortization of debt issuance costs(b)...... 2.1 0.5 2.1 ------ ------ ------ 77.0 19.2 77.0 Elimination of historical interest expense....... (44.0) (11.5) (45.4) ------ ------ ------ Net adjustments........... $ 33.0 $ 7.7 $ 31.6 ====== ====== ======
- --------------- (a) At a rate of 9.11% (London Interbank Offered Rate of 6.61% + 2.50%) for tranche A facility, 9.61% (LIBOR + 3.00%) for tranche B facility, 9.11% (LIBOR + 2.50%) for 42 50 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED) revolving credit facility and 14.21% effective rate for the Old Notes after giving effect to the original issue discount and the estimated value of the Note Warrants. The effect of a 1/8% increase or decrease in interest rates would increase or decrease total interest expense by approximately $0.9 million, $0.2 million and $0.9 million for the year ended December 31, 1999, the three months ended March 31, 2000 and the twelve months ended March 31, 2000, respectively. (b) Adjustment reflects the amortization of debt issuance costs using the effective interest method over the term of the debt. (3) The adjustments represent the income tax benefit at an effective tax rate of 40.0% for the effects of adjustments (1) and (2). 43 51 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 (DOLLARS IN MILLIONS)
HISTORICAL PRO FORMA HUNTSMAN HUNTSMAN PACKAGING PRO FORMA PACKAGING CORPORATION ADJUSTMENTS CORPORATION ----------- ------------- ----------- ASSETS Current assets: Cash and cash equivalents.......................... $ 12.2 $ (7.0)(1) $ 5.2 Receivables........................................ 118.6 118.6 Inventories........................................ 92.4 92.4 Prepaid expenses and other......................... 2.5 2.5 Income taxes receivable............................ 0.4 8.2(2) 8.6 Deferred income taxes.............................. 5.4 5.4 ------ ------- ------- Total current assets................................. 231.5 1.2 232.7 Plant and equipment, net............................. 317.9 317.9 Intangible assets, net............................... 212.5 212.5 Other assets......................................... 18.2 9.6(3) 27.8 ------ ------- ------- Total assets......................................... $780.1 $ 10.8 $ 790.9 ====== ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Trade accounts payable............................. $ 69.2 $ 69.2 Accrued liabilities................................ 36.8 $ (12.0)(4) 24.8 Current portion of long-term debt.................. 18.3 (15.5)(5) 2.8 Due to affiliates.................................. 4.6 4.6 ------ ------- ------- Total current liabilities............................ 128.9 (27.5) 101.4 Long-term debt, net of current portion............... 488.3 203.0(5) 691.3 Other liabilities.................................... 15.2 15.2 Deferred income taxes................................ 51.9 51.9 ------ ------- ------- Total liabilities.................................... 684.3 175.5 859.8 ------ ------- ------- Redeemable preferred stock........................... 80.0(6) 80.0 ------ ------- ------- Redeemable common stock -- Class C nonvoting, no par value.............................................. 6.9 (6.9)(7) Stockholders' notes receivable....................... (2.8) 2.8(8) ------ ------- Net redeemable common stock.......................... 4.1 (4.1) ------ ------- Stockholders' equity (deficit): Common stock -- Class A voting, no par value....... 63.1 (63.1)(7) Common stock -- Class B voting, no par value....... 0.5 (0.5)(7) Common stock....................................... 134.0(7) 134.0 Warrants........................................... 26.5(9) 26.5 Treasury stock..................................... (314.0)(7) (314.0) Retained earnings.................................. 33.5 (20.7)(2) 12.8 Stockholders' notes receivable..................... (0.3) (2.8)(8) (3.1) Cumulative foreign currency translation adjustment...................................... (5.1) (5.1) ------ ------- ------- Total stockholders' equity (deficit)................. 91.7 (240.6) (148.9) ------ ------- ------- Total liabilities and stockholders' equity (deficit).......................................... $780.1 $ 10.8 $ 790.9 ====== ======= =======
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet. 44 52 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (DOLLARS IN MILLIONS) (1) Adjustment represents payment of accrued interest on our prior credit facility and the 9 1/8% senior subordinated notes. (2) Adjustment reflects the effect of the Transactions on stockholders' equity for (i) the tender and consent consideration, (ii) the write-off of deferred debt issuance costs related to our prior credit facility and the 9 1/8% senior subordinated notes and (iii) other fees and expenses related to the Transactions, other than capitalized debt issuance costs. The income tax benefit relates to items (i) and (ii) computed using an effective income tax rate of 40.0%. Tender and consent consideration....................... $11.9 Write-off of deferred debt issuance costs.............. 9.0 Other fees............................................. 8.0 ----- Adjustment before benefit for income taxes............. 28.9 Less benefit for income taxes.......................... (8.2) ----- Net adjustment......................................... $20.7 =====
(3) Adjustment reflects debt issuance costs incurred in connection with the borrowings under the credit facilities and the Old Notes, reduced by the write-off of debt issuance costs related to our prior credit facility and the 9 1/8% senior subordinated notes which is being repaid as follows: New debt issuance costs incurred....................... $18.6 Less existing debt issuance costs...................... (9.0) ----- Net adjustment......................................... $ 9.6 =====
(4) Adjustment reflects the payment of accrued interest on our prior credit facility and the 9 1/8% senior subordinated notes, and the payment of accrued long-term incentive compensation. Accrued interest paid.................................. $ 7.0 Accrued long-term incentive compensation............... 5.0 ----- $12.0 =====
45 53 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET -- (CONTINUED) (DOLLARS IN MILLIONS) (5) Adjustment reflects the net change in debt related to (i) the offering of the Old Notes, (ii) the credit facilities and (iii) the use of the proceeds therefrom: Credit facilities: Tranche A facility................................... $200.0 Tranche B facility................................... 280.0 Revolving credit facility............................ 5.9 Old Notes (net of discount and estimated value of Note Warrants)............................................ 206.1 ------ Total new issuance..................................... 692.0 ------ Prior Credit Facilities: Revolver............................................. 34.0 Original term loan................................... 75.0 Tranche A term loan.................................. 127.7 Tranche B term loan.................................. 98.0 Mexico term loan..................................... 41.0 9 1/8% senior subordinated notes....................... 125.0 Capital lease obligations.............................. 0.5 Line of credit agreement............................... 3.3 ------ Total repayment........................................ 504.5 ------ Net increase in debt................................... 187.5 Reclassification from current.......................... 15.5 ------ Net increase in long-term debt......................... $203.0 ======
(6) Adjustment reflects the issuance of the Preferred Stock less the estimated issuance costs and estimated value of the Preferred Stock Warrants. Proceeds............................................... $100.0 Issuance costs......................................... (1.5) Preferred Stock Warrants value......................... (18.5) ------ $ 80.0 ======
(7) Adjustment reflects the change in common stock due to the (i) exchange of the existing Class A, B and C common stock for the new common stock, (ii) Equity Redemption and (iii) Investor Common Equity Contribution. Exchange for the current common stock: Class A................................................ $ 63.1 Class B................................................ 0.5 Class C................................................ 6.9 ------- Total exchange......................................... 70.5 Investor Common Equity Contribution.................... 63.5 ------- Net increase in common stock........................... $ 134.0 ======= Treasury stock: Equity Redemption...................................... $(314.0) =======
(8) Adjustment reflects the "rollover" of the related stockholders' notes receivable resulting from the exchange of existing Class C common stock for the new common stock. (9) Adjustment reflects estimated value of New Preferred Stock Warrants and Note Warrants. Preferred Stock Warrants............................... $18.5 Note Warrants.......................................... 8.0 ----- $26.5 =====
46 54 SELECTED FINANCIAL DATA The following selected financial data have been summarized from our consolidated financial statements and are qualified in their entirety by reference to, and should be read in conjunction with, such consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
THREE MONTHS YEARS ENDED DECEMBER 31, ENDED MARCH 31, ------------------------------------------ --------------- 1995 1996 1997 1998 1999 1999 2000 ------ ------ ------ ------ ------ ------ ------ (DOLLARS IN MILLIONS) STATEMENT OF OPERATIONS DATA: Net sales........................................ $280.0 $295.7 $447.7 $651.9 $781.4 $174.4 $212.5 Cost of sales.................................... 235.1 253.5 389.6 532.4 623.4 137.6 169.5 ------ ------ ------ ------ ------ ------ ------ Gross profit..................................... 44.9 42.2 58.1 119.5 158.0 36.8 43.0 Total operating expenses......................... 31.8 38.1 45.0 70.1 82.0 18.6 28.2 ------ ------ ------ ------ ------ ------ ------ Operating income................................. 13.1 4.1 13.1 49.4 76.0 18.2 14.8 Interest expense................................. (8.8) (11.6) (17.0) (37.5) (44.0) (10.2) (11.6) Other income (expense), net...................... (2.5) (2.7) 0.7 (0.8) 0.4 (2.0) 0.5 ------ ------ ------ ------ ------ ------ ------ Income (loss) before income taxes, discontinued operations and extraordinary item.............. 1.8 (10.2) (3.2) 11.1 32.4 6.0 3.7 Income tax expense (benefit)..................... 0.9 (5.2) (0.5) 8.6 14.1 3.7 2.3 ------ ------ ------ ------ ------ ------ ------ Income (loss) before discontinued operations and extraordinary item............................. 0.9 (5.0) (2.7) 2.5 18.3 2.3 1.4 Income from discontinued operations(1)........... 1.4 1.8 3.1 0.6 Gain on sale of discontinued operations(1)....... 5.2 Extraordinary item(2)............................ (1.3) ------ ------ ------ ------ ------ ------ ------ Net income (loss)................................ $ 2.3 $ (4.5) $ 0.4 $ 8.3 $ 18.3 $ 2.3 $ 1.4 ====== ====== ====== ====== ====== ====== ====== OTHER FINANCIAL DATA: Depreciation and amortization.................... $ 10.6 $ 14.0 $ 16.4 $ 27.1 $ 35.0 $ 8.4 $ 9.5 Capital expenditures............................. 19.5 12.8 17.9 52.1 35.7 8.1 10.1 Ratio of earnings to fixed charges(3)............ 1.2x -- -- 1.3x 1.7x 1.6x 1.3x BALANCE SHEET DATA: Cash and cash equivalents........................ $ 3.8 $ 8.4 $ 12.4 $ 19.2 $ 9.1 $ 10.7 $ 12.2 Working capital.................................. 54.5 74.6 94.1 93.4 103.8 107.0 102.6 Total assets..................................... 213.6 317.8 400.4 734.3 769.0 730.7 780.1 Total debt....................................... 103.0 187.2 250.5 524.9 510.4 530.6 506.6 Total liabilities................................ 142.5 250.8 337.4 662.5 675.4 655.1 684.3 Redeemable common stock.......................... 1.2 2.9 2.3 4.1 Stockholders' equity............................. 71.1 67.0 63.0 70.6 90.7 73.3 91.7
- --------------- (1) In 1998, we sold our entire interest in our foam products operations, which were operated exclusively in Europe. The financial position and results of operations of this separate business segment are reflected as discontinued operations for the applicable years presented. See Note 3 to consolidated financial statements included elsewhere in this prospectus. (2) In 1996, we refinanced most of our long-term debt and recorded an extraordinary loss to write-off unamortized deferred debt issuance costs. (3) Earnings consist of income before income taxes plus fixed charges. Fixed charges consist of (i) interest, whether expensed or capitalized, (ii) amortization of debt issuance costs and (iii) an allocation of one-third of the rental expense from operating leases, which management considers to be a reasonable approximation of the interest factor of operating lease payments. In 1996 and 1997, earnings were insufficient to cover fixed charges by approximately $10.2 million and $3.2 million, respectively. 47 55 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The purpose of this section is to discuss and analyze our consolidated financial condition, liquidity and capital resources and results of operations. This analysis should be read in conjunction with the consolidated financial statements and notes which appear elsewhere in this prospectus. This section contains certain forward-looking statements that involve risks and uncertainties, including statements regarding our plans, objectives, goals, strategies and financial performance. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of factors set forth under "Disclosure Regarding Forward-Looking Statements" and "Risk Factors" and elsewhere in this prospectus. GENERAL We derive our revenues, earnings and cash flows from the sale of film and flexible packaging products throughout the world. We manufacture these products at facilities located in North America, Europe and Australia. Our net sales have grown primarily as a result of strategic acquisitions made over the past several years, increased levels of production at acquired facilities and the overall growth in the market for film and flexible packaging products. Our most recent acquisitions include (see Note 12 to the consolidated financial statements included elsewhere in this prospectus): - In October 1999, we acquired the assets of KCL Corporation, including its closure technology and its polyethylene bag making and printing facilities in Shelbyville, IN and Dallas, TX for approximately $11.5 million. - In December 1998, we acquired the customer accounts and technology associated with Allied Signal's sheet molding compound film business for approximately $3.0 million. - In May 1998, we acquired Blessings Corporation, a producer of personal care, medical and printed films, with operations in Washington, GA, McAlester, OK, Newport News, VA and Mexico City, Mexico for approximately $287.0 million. - In March 1998, we acquired the assets of Ellehammer Industries and Ellehammer Packaging Inc., producers of printed films and bags, with a facility in Langley, British Columbia for approximately $7.9 million. - In September 1997, we acquired the assets of CT Film, a producer of personal care, medical and converter films, with facilities in Chippewa Falls, WI, Harrington, DE, Clearfield, UT, Dalton, GA and Scunthorpe, England for approximately $70.0 million. In order to further benefit from these acquisitions, we ceased operations at certain less efficient manufacturing facilities and relocated equipment to more efficient facilities. In addition, we sold certain assets and restructured and consolidated our operations and administrative functions. As a result of these activities, we increased manufacturing efficiencies and product quality, reduced costs, and increased operating profitability. As part of this process, in 1999 and 1998, we undertook the following significant divestitures and closures of manufacturing facilities (see Notes 3 and 4 to the consolidated financial statements included elsewhere in this prospectus): - In connection with the acquisition of KCL Corporation, we announced a plan to eliminate certain employees, move certain purchased assets and install them at desired locations and cease certain purchased operations. - During 1999, we announced our plan to cease operations at one of our facilities located in Mexico City, Mexico. In addition, we announced our plan to cease the production of one of our product lines at our Kent, Washington facility. - In August 1998, we sold our entire interest in the capital stock of Huntsman Packaging UK Limited to Skymark Packaging International Limited. Huntsman Packaging UK owned our Scunthorpe, UK facility, which manufactured and sold polyethylene film exclusively in Europe. Net proceeds from this sale were approximately $5.6 million. 48 56 - In June 1998, Huntsman Container Corporation International, our wholly owned subsidiary, sold its entire interest in the capital stock of Huntsman Container Company Limited and Huntsman Container Company France SA to Polarcup Limited and Huhtamaki Holdings France Sarl, subsidiaries of Huhtamaki Oyj. Together, the two subsidiaries sold comprised our foam products business segment, which was operated exclusively in Europe. Net proceeds from the sale were approximately $28.3 million. - During 1998, we announced our plan to cease operations at our Clearfield, Utah facility, which was acquired as part of the CT Film acquisition. As of December 31, 1999, operations at the facility had ceased and all of the facility's assets had been relocated. RESULTS OF OPERATIONS The following table sets forth net sales, expenses, and operating income, and such amounts as a percentage of net sales, for the three months ended March 31, 2000 and 1999 and the years ended December 31, 1999, 1998 and 1997.
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, ------------------------------------------ --------------------------- 1997 1998 1999 1999 2000 ------------ ------------ ------------ ------------ ------------ (DOLLARS IN MILLIONS) Net sales............ $447.7 100% $651.9 100% $781.4 100% $174.4 100% $212.5 100% Cost of sales........ 389.6 87 532.4 82 623.4 80 137.6 79 169.5 80 ------ --- ------ --- ------ --- ------ --- ------ --- Gross profit......... 58.1 13 119.5 18 158.0 20 36.8 21 43.0 20 Total operating expenses........... 45.0 10 70.1 11 82.0 10 18.6 11 28.2 13 ------ --- ------ --- ------ --- ------ --- ------ --- Operating income..... $ 13.1 3% $ 49.4 7% $ 76.0 10% $ 18.2 10% $ 14.8 7% ====== === ====== === ====== === ====== === ====== ===
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THREE MONTHS ENDED MARCH 31, 1999 Net Sales. Net sales increased by $38.1 million, or 21.8%, from $174.4 million for the first quarter of 1999, to $212.5 million for the three months ended March 31, 2000. The increase was primarily due to a 7.5% increase in sales volume and a 13.3% increase in our average selling price. The sales volume increases were most significant in our design products and specialty films segments, while the sales price increase was spread across all of our business segments. In the markets we serve, the average selling price of our products generally increases or decreases as the price of resins, our primary raw material, increases or decreases. Average resin prices were significantly higher during the first quarter of 2000 compared to the first quarter of 1999 resulting in a significant increase in our average selling prices. Gross Profit. Gross profit increased by $6.2 million, or 16.8%, from $36.8 million for the first quarter of 1999, to $43.0 million for the three months ended March 31, 2000. The increase was primarily due to a strong increase in sales volumes, coupled with stable gross profit margins. Even though the average price of resins was significantly higher in the first quarter of 2000, as compared to the first quarter of 1999, as a percentage of net sales, gross profit for the first quarter of 2000 was consistent with gross profit for the first quarter of 1999. The majority of our gross profit increase was in our design products segment. Total Operating Expenses. Total operating expenses increased by $9.6 million, or 51.6%, from $18.6 million for the first quarter of 1999, to $28.2 million for the three months ended March 31, 2000. Most of the increase resulted from three significant, unusual items incurred in the first quarter of 2000. First, we incurred $5.2 million of costs related to the Transactions. These costs consisted of long-term incentive compensation expense of $5.0 million and transaction fees and expenses of $0.2 million. Under the provisions of our long-term incentive plans, certain incentive payments are due upon the occurrence of a "change of control" transaction. Since the Transactions were probable to occur and constituted a change of control transaction under our long-term incentive plans, during the first quarter of 2000, we accrued a liability for the long-term compensation due. 49 57 Second, we also incurred noncash stock-based compensation expense of $1.2 million related to outstanding options to purchase our Class C common stock. The stock options fully vested and became exercisable upon the completion of a change of control transaction, such as the Recapitalization. The $1.2 million noncash stock-based compensation expense recognizes the accelerated vesting of all performance based stock options based on the estimated per share purchase price implied in the Transactions. Finally, we incurred fees and expenses during the first quarter of 2000 totaling $1.4 million relating to a company-wide supply chain improvement initiative. We began this major initiative in the fourth quarter of 1999 with the assistance of A.T. Kearney, a management consulting firm. The project is focused on improving our procurement, logistics, planning and operations functions. We have completed the assessment phase of the project and have identified the potential for significant EBITDA and working capital improvements over the next three years. In March 2000, we began implementing specific improvement projects and expect that the identified projects will be fully implemented by the end of 2001. Excluding the three significant factors described above, operating expenses as a percentage of net sales were 9.6% for the first quarter of 2000, 1% lower than the first quarter of 1999. Operating Income. Operating income decreased by $3.4 million, or 18.7%, from $18.2 million for the first quarter of 1999 to $14.8 million for the three months ended March 31, 2000, due to the factors discussed above. Excluding the three significant factors described above, operating income increased by $4.4 million, or 24.2%, from $18.2 million for the first quarter of 1999 to $22.6 million for the first quarter of 2000. Interest Expense. Interest expense increased by $1.4 million, or 13.7%, from $10.2 million, for the first quarter of 1999, to $11.6 million, for the three months ended March 31, 2000. The increase was primarily due to higher interest rates, even though total outstanding indebtedness was lower. Other Income (Expense). Other income (expense) changed from expense of $2.0 million for the first quarter of 1999 to income of $0.4 million for the first quarter of 2000, an increase in income of $2.4 million. The increase was due to unrealized losses of $2.0 million from investments in trading securities in the first quarter of 1999. YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998 Net Sales. Net sales increased by $129.5 million, or 19.9%, in 1999 to $781.4 million from $651.9 million in 1998. The increase was primarily due to the inclusion of a full year's results from the Blessings acquisition, which occurred in May 1998. The full year's sales from the manufacturing facilities acquired as part of the Blessings acquisition and post-acquisition sales volume increases of approximately 15% over the 1998 pre-acquisition sales volume accounted for increased net sales of approximately $90.0 million in 1999. Excluding the sales increases resulting from this acquisition, we realized increased sales volumes of approximately 4.5% in 1999 compared to 1998. In the markets we serve, the average selling price of our products generally increases or decreases as resin prices increase or decrease. Although the price of resin, our primary raw material, increased significantly during most of 1999, the average price of resins for the entire year was only slightly higher in 1999 compared to 1998. As a result, our average selling prices were slightly higher in 1999 as compared to 1998. Gross Profit. Gross profit increased by $38.5 million, or 32.2%, in 1999 to $158.0 million from $119.5 million in 1998. The increase was due to increased sales volume from the recent acquisitions and internal growth, integration and rationalization of acquired and existing facilities and improved mix of products sold. The recent acquisitions and capital expenditures have allowed us to produce and sell proportionately more product in higher margin markets than in the past. Due to our rationalization and integration of operations and facilities, a precise measure of the additional gross profit added in 1999 from the recent acquisitions is not practicable. 50 58 Operating Income. Operating income increased by $26.6 million, or 53.8%, in 1999 to $76.0 million from $49.4 million in 1998 as a result of the factors discussed above. Total Operating Expenses. Total operating expenses (including research and development expenses) increased by $11.9 million, or 17.0%, in 1999 to $82.0 million from $70.1 million in 1998. The increase was due primarily to additional operating expenses resulting from the Blessings acquisition, including an increased intangible amortization expense of $2.1 million. Operating expenses as percentage of net sales decreased to 10% in 1999, as compared to 11% in 1998. YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997 Net Sales. Net sales increased by $204.2 million, or 45.6%, in 1998 to $651.9 million from $447.7 million in 1997. The increase was primarily due to the Blessings acquisition, which occurred in May 1998 and a full year's results from the September 1997 CT Film acquisition. The CT Film acquisition and the Blessings acquisition collectively accounted for $256.0 million of our total net sales in 1998. Excluding the sales increases resulting from these acquisitions, we realized increased sales volumes of approximately 5.1% in 1998 compared to 1997. These sales volume related increases were offset by a 8.4% reduction in the average selling prices for our products, excluding the effects of the acquisitions. The average selling price reductions were primarily due to declines in the price of resins, our primary raw material. Gross Profit. Gross profit increased by $61.4 million, or 105.7%, in 1998 to $119.5 million from $58.1 million in 1997. The increase was due to increased sales volume from the recent acquisitions and internal growth, integration and rationalization of acquired and existing facilities, realization of purchasing and operational synergies associated with the recent acquisitions, and improved manufacturing performance within our operations. Due to our rationalization and integration of operations and facilities, a precise measure of the additional gross profit added in 1998 from the recent acquisitions is not practicable. However, the gross profit for the facilities associated with the CT Film acquisition and the Blessings acquisition was approximately $49.2 million, including the effects of the above activities. Total Operating Expenses. Total operating expenses (including research and development expenses) increased by $25.1 million, or 55.8%, in 1998 to $70.1 million from $45.0 million in 1997. The increase was due primarily to additional operating expenses resulting from the CT Film acquisition and the Blessings acquisition. In addition, we incurred nonrecurring operating expenses totaling approximately $7.0 million in 1998. The nonrecurring expenses included the following components (in millions): Plant closing costs......................................... $4.9 Indirect plant closing costs................................ 1.6 Blessings acquisition transition costs...................... 0.5 ---- $7.0 ====
The plant closing costs relate to the closure of our Clearfield, Utah facility. During 1998, we ceased operations at the Clearfield facility and most of the production equipment was relocated to other of our facilities. The indirect plant closing costs include one-time costs to tear down and relocate equipment from closed plants to other of our facilities. The Blessings acquisition transition costs consist primarily of labor costs relating to former Blessings Corporation employees retained on a temporary basis to assist through the early stages of our ownership of the operation. Operating Income. Operating income increased by $36.3 million, or 277.1%, in 1998 to $49.4 million from $13.1 million in 1997 as a result of the factors discussed above. OPERATING SEGMENT REVIEW General. Operating segments are components of our company for which separate financial information is available that is evaluated regularly by our chief operating decision maker in deciding 51 59 how to allocate resources and in assessing performance. For more information on our operating segments, see Note 13 to the consolidated financial statements included elsewhere in this prospectus. YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998 Specialty Films Net Sales. The net sales of our specialty films segment increased by $81.5 million, or 22.0%, in 1999 to $452.7 million from $371.2 million in 1998. The increase was due primarily to inclusion of a full year's results from the 1998 Blessings acquisition, including post-acquisition sales volume increases in the operations acquired. The addition of these operations, including the post-acquisition sales improvements, resulted in 1999 increased sales of approximately $65.2 million. Excluding the acquisition related increases, our specialty film volume increased in 1999 by approximately 12.5%. The volume increase was due primarily to a full year's results of capacity expansion in our barrier film operations and the relocation of certain equipment from our closed facilities to our specialty films facilities. Segment Profit. The specialty films segment profit increased by $21.5 million, or 59.6%, in 1999 to $57.6 million from $36.1 million in 1998. The increase was due primarily to the recent acquisitions and the increase in sales volume resulting from production capacity expansions. In 1999, operating expenses associated with this segment increased due to a full year of operations from the facilities acquired as part of the Blessings acquisition and due to costs associated with a separate segment management team. Segment Total Assets. The specialty films segment total assets increased by $11.8 million, or 2.7%, in 1999 to $446.9 million from $435.1 million in 1998. The increase was primarily due to capital expenditures of approximately $18.8 million and an increase in working capital. These increases were off-set, in part, by 1999 depreciation and amortization. Capital expenditures related mainly to capacity expansion and to quality improvement projects, as well as ongoing capital improvements. Design Products Net Sales. The design products segment net sales increased by $39.3 million, or 28.9%, in 1999 to $175.4 million from $136.1 million in 1998. This increase was primarily due to our recent acquisitions and to sales volume increases resulting from production capacity expansions. The design products segment includes our Mexican operation acquired as part of the May 1998 Blessings acquisition and, accordingly, 1999 sales include a full year of results from this operation. Excluding the approximate effect of this acquisition, net sales dollars increased by 13.9% and sales volume increased by 12.7%. The sales dollar and volume increases were due to additional production capacity added over the last two years in our design products production facilities. Segment Profit. The design products segment profit decreased by $3.1 million, or 25.0%, in 1999 to $9.3 million from $12.4 million in 1998. The decrease was due to a 4.5% decline in the difference between our average selling price and our average raw material cost. A significant portion of our design products sales prices are tied to a resin price index with our sales price often adjusting quarterly. Due to the rapid increases in resin prices during 1999, we were unable to increase our selling prices as quickly as resin prices increased. Accordingly, our segment profit declined. During late 1999 and early 2000, our margins returned to normal levels as resin prices stabilized. The decrease is also due to higher operating expenses resulting from a full year of costs associated with a separate segment management team. Segment profit excludes nonrecurring plant closing costs. The 1999 plant closing costs of $2.5 million relate entirely to the design products operating segment. See Note 4 to the consolidated financial statements included elsewhere in this prospectus. Segment Total Assets. The design products segment total assets increased by $22.5 million, or 14.7%, in 1999 to $175.9 million from $153.4 million in 1998. The increase was due to the KCL 52 60 acquisition, 1999 capital expenditures of approximately $6.9 million and an increase in working capital. These additions were off-set, in part, by depreciation expense in 1999. Capital expenditures were for capacity expansion at our Rochester, New York facility and other ongoing capital improvements. Industrial Films Net Sales. The net sales of our industrial films segment increased by $8.6 million, or 5.9%, in 1999 to $153.3 million from $144.7 million in 1998. The increase in sales was due entirely to an increase in our sales volume as our average selling prices were unchanged in 1999 as compared to 1998. Segment Profit. The industrial films segment profit increased by $5.4 million, or 49.1%, in 1999 to $16.4 million from $11.0 million in 1998. The increase was due to increased sales volumes, lower operating expenses, and improved manufacturing performance. Segment Total Assets. The industrial films segment total assets increased by $2.1 million, or 2.5%, in 1999 to $84.8 million from $82.7 million in 1998. The increase was due to capital expenditures of approximately $6.6 million reduced, in part, by depreciation. The capital expenditures were for ongoing capital improvements, as well as a major upgrade to one of our stretch film production lines. YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997 Specialty Films Net Sales. The net sales of our specialty films segment increased by $192.3 million, or 107.5%, in 1998 to $371.2 million from $178.9 million in 1997. The increase was due primarily to the 1998 Blessings acquisition and the inclusion of a full year's results from the 1997 CT Film acquisition. The addition of these operations resulted in 1998 increased sales of approximately $182.9 million. Excluding the acquisition related increases, our specialty film 1998 volume increased by approximately 13.2%. The volume increase was due primarily to the completion of significant capacity expansions in our barrier film operations and the relocation of equipment from our closed facilities to our specialty films facilities. These increases were slightly off-set by a 5.1% reduction in our average selling prices, excluding the effects of the recent acquisitions. As previously discussed, the reduction in selling prices resulted from declines in 1998 resin prices. Segment Profit. The specialty films segment profit increased by $16.5 million, or 84.2%, in 1998 to $36.1 million from $19.6 million in 1997. The increase was due primarily to the recent acquisitions and the increase in sales volume resulting from production capacity expansions. In 1997, operating expenses associated with this segment were not allocated to the operating segment. Accordingly, the segment profit increase due to acquisitions and volume increases was partially off-set by increased operating expenses in 1998. The increase in operating expenses was due to the CT Film and Blessings acquisitions and the establishment of a separate segment management team. Segment profit excludes nonrecurring plant closing costs. The Clearfield, Utah plant closing, discussed above, resulted in a 1998 plant closing cost charge of $4.9 million. This charge relates entirely to the specialty films operating segment. See Note 4 to the consolidated financial statements included elsewhere in this prospectus. Segment Total Assets. The specialty films segment total assets increased by $247.0 million, or 131.3%, in 1998 to $435.1 million from $188.1 million in 1997. The increase was primarily due to the recent acquisitions and capital expenditures. The 1998 acquisitions increased segment total assets by approximately $244.4 million and 1998 capital expenditures were $26.2 million. 1998 capital expenditures included the purchase of a new barrier film production line at our Bloomington, Indiana facility and ongoing capital improvements. These increases were partially off-set by reductions in assets resulting from the closure of the Clearfield, Utah facility, the sale of the Scunthorpe, UK, facility, by 1998 depreciation and by reductions in working capital. 53 61 Design Products Net Sales. The design products segment net sales increased by $42.7 million, or 45.7%, in 1998 to $136.1 million from $93.4 million in 1997. This increase was primarily due to our recent acquisitions and to sales volume increases resulting from production capacity expansions. The Blessings acquisition added approximately $30.2 million to net sales in 1998. These additional sales relate to our Mexican operation acquired from Blessings Corporation. Excluding the effect of this acquisition, net sales dollars increased by 13.3% and sales volume increased by 16.1%. The sales dollar and volume increases were due to additional production capacity added over the last two years in our Rochester, New York and Seattle, Washington facilities. These increases were off-set, in part, by a 2.1% reduction in 1998 average selling prices, excluding the effects of the Blessings acquisition. As previously discussed, the decreased average selling prices resulted from a reduction in resin prices during 1998. Segment Profit. The design products segment profit increased by $1.1 million, or 9.7%, in 1998 to $12.4 million from $11.3 million in 1997. The increase was primarily due to our recent acquisitions and increased sales volume resulting from production capacity expansions. In 1997, operating expenses associated with this segment were not allocated to the operating segment. Accordingly, the acquisition and sales volume related segment profit increases were partially off-set by increased operating expenses in 1998 as compared to 1997. The increase in operating expenses was due to the Blessings acquisition and the establishment of a separate segment management team. Segment Total Assets. The design products segment total assets increased by $98.8 million, or 180.9%, in 1998 to $153.4 million from $54.6 million in 1997 due primarily to our recent acquisitions and capital expenditures to expand capacity. The 1998 acquisitions added total assets of approximately $84.6 million and 1998 capital expenditures added approximately $18.4 million. These additions were partially off-set by 1998 depreciation and reductions in working capital. Capital expenditures were for significant capacity expansion at our Rochester, New York and Seattle, Washington facilities and ongoing capital improvements. The capacity expansion expenditures included new, 8-color printing presses that allow us to pursue higher margin printing applications. Industrial Films Net Sales. The net sales of our industrial films segment decreased by $30.7 million, or 17.5%, in 1998 to $144.7 million from $175.4 million in 1997. The decrease in sales was primarily due to a combination of the closure of our Carrollton, Ohio facility and reductions in our average selling prices. During 1998, we completed the closure of the Carrollton facility. We relocated the more efficient Carrollton manufacturing equipment to facilities in other of our operating segments and the equipment that was not relocated was sold (see Note 4 to the consolidated financial statements included elsewhere in this prospectus). These asset transfers and dispositions caused net sales to decrease by approximately $17.0 million in 1998. Excluding the effects of the Carrollton closure, we experienced a decline in our average selling prices of approximately 11.8% as a result of general industry selling price declines resulting from declines in resin prices. The volume of our PVC film business was virtually unchanged in 1998, while our stretch film volume increased approximately 5.7% in 1998, excluding the effects of the Carrollton closure. Segment Profit. The industrial films segment profit increased by $1.5 million, or 15.8%, in 1998 to $11.0 million from $9.5 million in 1997. The increase in segment profit was primarily due to a combination of dramatically increased stretch film gross profits over 1997 and the closure of the Carrollton plant. The stretch film business realized a return to profitability in 1998 after sustaining significant losses in 1997. During 1997, our stretch film business suffered through historically low gross profits due to excess supply in stretch film markets and lower than expected production efficiencies in our facilities. Although excess supply continued to be a factor in 1998, we realized significantly increased production efficiencies and lower production costs. The closure of the Carrollton plant added approximately $1.0 million to our segment profit, as compared to 1997. The 54 62 increase in profitability was partially off-set by increased operating expenses in 1998, due to the establishment of a separate segment management team. In 1997, operating expenses associated with this segment were not allocated to the operating segment. Excluding the effects of the increase in segment operating expenses, the PVC business profitability was slightly increased over 1997. Segment profit excludes nonrecurring plant closing costs. The Carrollton plant closing, discussed above, resulted in a 1997 plant closing cost charge of $9.3 million. This charge relates entirely to the industrial film operating segment. See Note 4 to the consolidated financial statements included elsewhere in this prospectus. Segment Total Assets. The industrial films segment total assets decreased by $13.8 million, or 14.3%, in 1998 to $82.7 million from $96.5 million in 1997. The decrease was due primarily to the closure of the Carrollton plant, 1998 depreciation and reductions in working capital. These reductions were partially off-set by 1998 capital expenditures of approximately $5.7 million. The capital expenditures were for ongoing capital improvements, as well as a major upgrade to one of our stretch film production lines. LIQUIDITY AND CAPITAL RESOURCES Historical Liquidity and Capital Resources On September 30, 1997, we issued $125.0 million of the 9 1/8% senior subordinated notes, which would have matured on October 1, 2007. Interest on the 9 1/8% senior subordinated notes was payable semi-annually on each April 1 and October 1, commencing April 1, 1998. Additionally, on September 30, 1997, we entered into our prior $225.0 million credit facility with a syndicate of banks, including The Chase Manhattan Bank. On May 14, 1998, the prior credit facility was amended and restated as a $510.0 million facility. The prior credit facility provided for the continuation of a previous term loan in the principal amount of $75.0 million, maturing on September 30, 2005; a tranche A term loan in the principal amount of $140.0 million, maturing on September 30, 2005; a tranche B term loan in the principal amount of $100.0 million, maturing on June 30, 2006; and a term loan to ASPEN Industrial, S.A., our wholly owned Mexican subsidiary, in the principal amount of $45.0 million, maturing on September 30, 2005. The prior credit facility also provided for a $150.0 million revolving loan facility maturing on September 30, 2004. The prior credit facility's term loan amortized at an increasing rate on a quarterly basis. The tranche A term loan and the Mexico term loan began amortizing on December 31, 1998 and the other term loan began amortizing on December 31, 2001. The tranche B term Loan under our prior credit facility amortized at the rate of $1.0 million per year, beginning September 30, 1998, with an aggregate of $93.0 million due in the last four quarterly installments. The term loans described above were required to be prepaid with the proceeds of certain asset sales, with 50% of the proceeds of the sale of certain Huntsman Packaging equity securities, and with the proceeds of certain debt offerings. Loans under the prior credit facility bore interest, at our election, at either (i) zero to 0.75%, depending on certain of our financial ratios, plus the higher of (a) The Chase Manhattan Bank's prime rate, (b) the federal funds rate plus 1/2% or (c) The Chase Manhattan Bank's base CD rate plus 1%, or (ii) the London Interbank Offered Rate plus 2.00%, which may adjust downward based upon our leverage ratio to a minimum of LIBOR plus 1%. Our obligations under the prior credit facility were guaranteed by substantially all of our domestic subsidiaries and secured by substantially all of our domestic assets. The prior credit facility was also secured by a pledge of 65% of the capital stock of each of our foreign subsidiaries. See Notes 6 and 16 to the consolidated financial statements included elsewhere in this prospectus. As part of the Recapitalization, we refinanced borrowings under the prior credit facility and entered into the current credit facilities. At March 31, 2000, borrowings under the prior credit facility bore interest at a weighted average rate of 8.4% per annum. As of March 31, 2000, we had $116.0 million available under the revolver of our prior credit facility, $1.3 million of which was issued as letters of credit. In addition on May 31, 2000, we completed the tender offer for all of the outstanding 9 1/8% senior subordinated notes and discharged our obligations under the related indenture. You 55 63 should read "Liquidity and Capital Resources Following the Transactions" below for a discussion of our liquidity following the Recapitalization. Net cash provided by operating activities was $17.9 million for the three months ended March 31, 2000, an increase of $25.7 million from the same period in 1999. The increase resulted primarily from a decrease in accounts receivable and an increase in accounts payable off-set, in part, by lower net income and an increase in inventories. Net cash provided by operating activities was $51.4 million in 1999, an increase of $5.9 million, or 13.0%, from $45.5 million in 1998. The increase resulted primarily from increased net income in 1999 of $10.0 million, an increase in accounts payable, an increase in noncash items and a decrease in income taxes receivable. These increases in cash flows were offset by increases in receivables and inventories. Net cash provided by operating activities increased $16.9 million, or 59.1%, in 1998 to $45.5 million from $28.6 million in 1997. The 1998 increase resulted primarily from increased net income in 1998 of $8.0 million and a reduction in inventories and prepaid expenses. Net cash used in investing activities was $10.1 million for the three months ended March 31, 2000, an increase of $2.0 million from the same period in 1999. Net cash used in investing activities was higher during the first quarter of 2000 due to increased capital expenditures. Capital expenditures during the first quarter of 2000 were primarily for new capacity in our industrial films and specialty films segments and normal upgrade and improvement projects throughout all of our operating segments. Net cash used in investing activities was $46.0 million, $314.8 million and $87.2 million for 1999, 1998 and 1997, respectively. The majority of cash was used in the KCL, Blessings, and CT Film acquisitions and capital expenditures discussed below. During 1999, we made net cash payments of approximately $11.5 million for KCL Corporation. During 1998, we made net cash payments of approximately $285.7 million for the purchase of Blessings Corporation and $10.9 million for other acquisitions. During 1997, we made net cash payments of approximately $69.4 million for the purchase of CT Film. See Note 12 to the consolidated financial statements included elsewhere in this prospectus. Total capital expenditures were $35.7 million, $52.1 million and $17.9 million for 1999, 1998 and 1997, respectively. The 1999 capital expenditures included expenditures to add new capacity, to upgrade and relocate existing equipment, and to upgrade existing information systems. The 1998 capital expenditures included expenditures to upgrade and relocate existing equipment, to add significant new capacity in our design products and specialty films facilities, to add new information systems, and to upgrade existing information systems. The 1997 capital expenditures included film production capacity expansions in our facilities acquired in 1996, as well as printing capacity expansion in our design products facilities. Net cash provided by (used in) financing activities was $(3.9) million for the three months ended March 31, 2000, compared to $6.8 million for the same period in 1999. The 2000 net cash used by financing activities resulted from principal payments on the prior credit facility. Net cash provided by (used in) financing activities was $(16.7) million, $275.9 million and $63.2 million for 1999, 1998 and 1997, respectively. Net cash provided by financing activities consists primarily of net borrowings under our current and prior credit arrangements in 1998 and 1997. In 1999, cash was used to pay scheduled principal payments on the prior credit facility and to pay down the outstanding balance on the Existing Revolver. See Note 6 to the consolidated financial statements included elsewhere in this prospectus. Net cash provided by financing activities was used primarily to fund our capital expenditures, as well as the 1998 Blessings acquisition and the 1997 CT Film acquisition. Liquidity and Capital Resources Following the Transactions Interest payments on the Notes and on borrowings under the credit facilities significantly increased our liquidity requirements. The credit facilities provide for term loans under the tranche A 56 64 facility and the tranche B facility of $480.0 million, which we borrowed in connection with the Transactions, and up to $100.0 million of revolving credit borrowings under the revolving credit facility, which is available for working capital and general corporate purposes, including financing of acquisitions, investments and strategic alliances. We borrowed $5.9 million under the revolving credit facility to consummate the Transactions and have reserved $1.3 million for letters of credit. Borrowings under the tranche A facility, the tranche B facility and the revolving credit facility under our credit facilities bear interest at variable rates plus any applicable margin. See "Description of Credit Facilities." The following table sets forth the principal payments on the tranche A and B facilities, for the years 2001 through their maturity in 2008:
YEAR PRINCIPAL PAYMENT - ---- ----------------- 2001................................................ $ 8,050,000 2002................................................ 22,550,000 2003................................................ 32,800,000 2004................................................ 55,300,000 2005................................................ 62,800,000 2006................................................ 35,300,000 2007................................................ 158,760,000 2008................................................ 104,440,000
In addition, commencing with the year ending December 31, 2000, we are required to make annual mandatory prepayments of the tranche A and B facilities under the credit facilities in an amount equal to 50% of excess cash flow. In addition, the tranche A and B facilities are subject to mandatory prepayments in an amount equal to (a) 100% of the net cash proceeds of equity and debt issuances by us or any of our subsidiaries and (b) 100% of the net cash proceeds of asset sales or other dispositions of property by us or any of our subsidiaries, in each case subject to certain exceptions. The credit facilities and the Indenture impose certain restrictions on us, including restrictions on our ability to incur indebtedness, pay dividends, make investments, grant liens, sell our assets and engage in certain other activities. In addition, the credit facilities require us to maintain certain financial ratios. Indebtedness under the credit facilities is secured by substantially all of our assets, including our real and personal property, inventory, accounts receivable, intellectual property and other intangibles. See "Description of Credit Facilities." We incurred premium and consent fees, plus accrued and unpaid interest on the 9 1/8% senior subordinated notes in connection with the tender offer and consent solicitation, of $11.9 million in connection with the Transactions. In addition, approximately $18.6 million, principally relating to financing fees and expenses associated with the Transactions, will be capitalized and amortized over the terms of the Notes and the credit facilities. As of March 31, 2000, we had $8.9 million in cash and cash equivalents held by our foreign subsidiaries. The effective tax rate of repatriating this money and future foreign earnings to the U.S. varies from approximately 40% to 65% depending on various U.S. and foreign tax factors, including each foreign subsidiary's country of incorporation. High effective repatriation tax rates may limit our ability to access cash and cash equivalents generated by our foreign operations for use in our U.S. operations, including to pay principal, premium, if any, and interest on the Notes and the credit facilities. For the three months ended March 31, 2000, our foreign operations generated net income from continuing operations of $1.8 million. In 1999, 1998 and 1997, our foreign operations generated income from continuing operations of $4.7 million, $1.4 million and $1.7 million, respectively. We expect that our total capital expenditures will be approximately $52.0 million in 2000 and approximately $35.0 million in 2001. Of such amounts, we currently estimate that a minimum range of $12.0 million to $15.0 million of ongoing maintenance capital expenditures are required each year. 57 65 We expect that cash flows from operating activities and available borrowings under our credit arrangements will provide sufficient working capital to operate our business, to make expected capital expenditures and to meet foreseeable liquidity requirements, including debt service on the Notes and the credit facilities. If we were to engage in a significant acquisition transaction, however, it may be necessary for us to restructure our existing credit arrangements. OTHER MATTERS Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards that require derivative instruments to be recorded on the balance sheet as either an asset or liability, measured at fair market value, and that changes in the derivative's fair value be recognized currently in earnings, unless specific hedging accounting criteria are met. SFAS No. 133 is effective for fiscal years beginning after June 15, 2000. We expect that the adoption of this statement will not have a material effect on our consolidated financial statements. Quantitative and Qualitative Disclosures About Market Risk We are exposed to various interest rate and resin price risks that arise in the normal course of business. We finance our operations with borrowings comprised primarily of variable rate indebtedness. Our resin costs comprised approximately 65% of our total manufacturing costs in 1999. Significant increases in interest rates or the price of resins could adversely affect our operating margins, results of operations and ability to service our indebtedness. From time to time, we enter into interest rate collar and swap agreements to manage interest rate market risks and commodity collar agreements to manage resin market risks. As of March 31, 2000, we had one interest rate collar agreement and one commodity collar agreement in place. The estimated fair market value of the interest rate collar was $226,000 and the estimated fair market value of the commodity collar was $70,000. We have performed a sensitivity analysis assuming a hypothetical 10% adverse movement in interest rates and commodity prices applied to the agreements described above. The analysis indicated that such market movements would not have a material effect on our consolidated financial position, results of operations or cash flows. Factors that could impact the effectiveness of our hedging programs include the volatility of interest rates and commodity markets and the availability of hedging instruments in the future. 58 66 BUSINESS GENERAL We are one of North America's leading manufacturers of value-added films and flexible packaging for food, personal care, medical, agricultural and industrial applications. We offer one of the most diverse product lines in the film industry and have achieved leading market positions in each of our major product lines. We believe our market leadership is primarily attributable to our strategy of building strong relationships with market-leading customers, by offering a broad line of innovative products and by providing technological leadership through our modern and low-cost manufacturing facilities. Our products are frequently highly engineered and are important components of, or provide critical attributes to, our customers' end-products. We operate 24 manufacturing and research and development facilities worldwide and we currently have approximately one billion pounds of annual production capacity. For the twelve months ended March 31, 2000, we generated pro forma net sales of $834.3 million, pro forma EBITDA of $124.6 million and pro forma Adjusted EBITDA of $128.0 million. PRODUCTS, MARKETS AND CUSTOMERS Our products are sold into numerous markets for a wide variety of end uses and are offered through three operating segments: Specialty Films, Design Products and Industrial Films. SPECIALTY FILMS Specialty Films accounted for 40.0%, 56.9% and 57.9% of our net sales in 1997, 1998 and 1999, respectively. Our Specialty Films include personal care films, medical films, converter films, barrier and custom films, and agricultural films. Our Specialty Films customers include Baxter, Becton- Dickinson, General Mills, Johnson & Johnson, Kendall Healthcare, Kimberly-Clark, Lawson Mardon, Nabisco, Pechiney, Printpack, Ralston Foods and Sonoco. Personal Care. We are the leading producer of personal care films used in disposable diapers, feminine care products and adult incontinence products. Personal care films must meet diverse and highly technical specifications. Many of these films must "breathe," allowing water vapors to escape. In some applications, the softness or "quietness" of the film is important, as in adult incontinence products. A significant portion of our Specialty Films business consists of the sale of personal care films to Kimberly-Clark Corporation and its affiliates. Kimberly-Clark Corporation is our largest customer and accounts for approximately 22% of our Specialty Films net sales and 13% of our 1999 consolidated net sales. We are North America's leading producer of personal care films, with an estimated market share of approximately 45%. Medical. We are a leading manufacturer of medical films used for sterile packaging for medical supplies, such as disposable syringes and intravenous fluid bags. Other of our medical films become components in disposable surgical drapes and gowns. Our medical films are manufactured in "clean-room" environments and must meet stringent barrier requirements. A sterile barrier is necessary to provide and assure the integrity of the devices and to prevent contamination and tampering. These films must also be able to withstand varied sterilization processes. We are a leading provider of medical films in North America, in a highly fragmented market. Converter. Converter films are mono-layer and multi-layer, co-extruded films that are sold to converters of flexible packaging who may laminate them to foil, paper or other films, print them, and may ultimately fabricate them into the final flexible packaging product. Our converter films are a key component in a wide variety of flexible packaging products, such as fresh-cut produce packages, toothpaste tubes and stand-up pouches. Generally, our converter films add value by providing the final packaging product with specific performance characteristics, such as moisture, oxygen or odor barriers, ultraviolet protection or desired sealant properties. Because converter films are sold for their sealant, barrier or other properties, they must meet stringent performance specifications 59 67 established by the converter, including gauge control, clarity, sealability and width accuracy. We are a leader in introducing new converter film products to meet flexible packaging industry trends and specific customer needs. We are North America's leading manufacturer of films sold to converters, with an estimated market share of approximately 30%. Barrier and Custom. We manufacture a variety of barrier and custom films, primarily for smaller, but profitable, niche segments in flexible packaging and industrial markets. For example, we are North America's second largest producer of films for cookie, cracker and cereal box liners, with an estimated market share of approximately 20%. We are also a leading manufacturer of barrier films for liners in multi-wall pet food bags, films for photoresist coatings for the electronics industry, and films for the protection and transportation of the sheet molding compound used in the manufacture of boats and automotive parts. Agricultural. We are a leading manufacturer of polyethylene mulch films that are sold to fruit and vegetable growers and to nursery operators. Our mulch films are used extensively in North America and Latin America. Commercial growers of crops like peppers, tomatoes, cucumbers and strawberries are the primary consumers of our mulch films. These crops are typically planted on raised beds that are tightly covered with mulch film. The mulch film eliminates or retards weed growth, significantly reduces the amount of water required by plants, controls soil bed temperatures for ideal growing conditions and allows easy application of fertilizer. We are one of North America's two largest producers of mulch films, with an estimated market share of approximately 40%. DESIGN PRODUCTS Design Products accounted for 20.8%, 20.9% and 22.5% of our net sales in 1997, 1998 and 1999, respectively. Our Design Products are primarily printed films and flexible packaging products. For financial reporting purposes, this reporting segment also includes our Mexican subsidiary, NEPSA. NEPSA is a leading producer of printed products for Mexico and other Latin American countries. NEPSA also produces personal care and barrier films for these markets. In 1999, approximately 32% of our Design Products sales were outside the United States, primarily in Mexico and Latin America. Our Design Products include printed rollstock, bags and sheets used to package food and consumer goods. Printed bags or rollstock are sold to bakeries, fresh and frozen food processors, manufacturers of personal care products, textile manufacturers and other dry goods processors. Bread and bakery bags represent a significant portion of our Design Products business. Our Design Products group produces approximately three billion bread and bakery bags each year. We are the leading manufacturer of films for the frozen foods market in North America, with an estimated market share of approximately 30%. In addition, we are the second largest manufacturer of films for the bread and bakery goods market in North America, with an estimated market share of approximately 20%. Our customers in this segment include IGA Fleming, Interstate Bakeries, Kimberly-Clark de Mexico, Mission Foods, Ore-Ida, Pictsweet and Schmidt Baking. INDUSTRIAL FILMS Our Industrial Films segment manufactures stretch and PVC films. Industrial Films accounted for 39.2%, 22.2% and 19.6% of our net sales in 1997, 1998 and 1999, respectively. In 1999, approximately 32% of our Industrial Films sales were outside the United States, primarily in Canada, Europe and Australia. Our customers in this segment include national distributors such as Bunzl, Unisource and xpedx, grocery chains, such as Albertson's, Kroger, Publix and Safeway, and end-users, such as General Mills and Wal-Mart. Stretch Films. Our stretch films are used to bundle, unitize and protect palletized loads during shipping and storage. Stretch films are replacing more traditional packaging, such as corrugated boxes and metal strapping, because of stretch films' lower cost, higher strength, and ease of use. We are North America's fourth largest producer of stretch films, with an estimated market share of approximately 10%. 60 68 PVC Films. Our PVC films are used by supermarkets, delicatessens and restaurants to wrap meat, cheese and produce. PVC films are preferred in these applications because of their clarity, elasticity and cling. We also produce PVC films for laundry and dry cleaning bags. Finally, we produce PVC films for companies that repackage the films in smaller cutterbox rolls for sale in retail markets in North America, Latin America and Asia. We are the second largest producer of PVC films in North America, with an estimated market share of approximately 25%. In addition, we are the leading producer of PVC films in Australia and the third largest producer in Europe, with estimated market shares of approximately 60% and 15%, respectively. SALES AND MARKETING Because of our broad range of product offerings and customers, our sales and marketing efforts are generally product or customer specific. We market in various ways, depending on both the customer and the product. However, most of our salespeople are dedicated to a specific product line and sometimes to specific customers. The majority of our Specialty Films are sold by our own direct sales force. These salespeople are supported by customer service and technical specialists assigned to each salesperson, and in some cases, to specific customers. Customer service representatives assist with order intake, scheduling and product information. Technical support personnel assist the salesperson and the customer with technical expertise, quality control and product development. We believe it is critical that our sales, marketing and technical support teams work together in order to meet our customers' product needs and provide meaningful product development. We sell some of our Specialty Films, such as our agricultural films, through regional distributors. In addition, certain of our personal care and barrier films are sold through brokers who have long-standing relationships with customers. Most of our Design Products are sold through brokers. National grocery chains and some smaller customer accounts are serviced by our own direct sales force. Generally, each Design Products salesperson is supported individually by a customer service specialist and by a group of technical specialists. Industrial Films are generally sold through distributors. We have an independent contract sales force that sells our stretch films to national and regional distributors. Our PVC films are sold by our own sales force to regional and national distributors, directly to national grocery chains, and directly to converters, who repackage the film into cutterbox rolls for sale at retail. MANUFACTURING We have a modern and efficient portfolio of manufacturing assets. During 1998 and 1999, we invested a total of $87.8 million to expand, upgrade and maintain our asset base. With 23 plants and over 180 extrusion lines, we are able to allocate lines to specific products. This results in fewer change-overs and more efficient use of capacity, effectively expanding our production capacity. Our multiple manufacturing sites and varied production capabilities also allow us to offer multiple plant service to our national customers. In addition, our large, efficient plants allow overhead to be allocated over higher volumes, providing lower unit costs. Generally, our manufacturing plants operate 24 hours a day, seven days a week. We manufacture our film products using both the blown and cast extrusion processes. In each process, thermoplastic resin pellets are combined with other resins, plasticizers or modifiers in a controlled, high-temperature, pressurized process to create films with specific performance characteristics. In the cast film process, molten resin is extruded through a horizontal die onto a chill roll, where the film is quickly cooled. As the film comes off the end of the chill roll, it is wound onto rolls. Blown film is produced by extruding molten resin through a circular die and chilled air ring to form a bubble as large as 55 feet high and 25 feet in diameter. The bubble is then collapsed, cut and wound onto rolls. 61 69 These two basic film manufacturing processes produce films with uniquely different performance characteristics. Cast films are generally clearer, softer and more uniform in thickness. Blown films offer enhanced physical properties, such as increased tear and puncture resistance and better barrier protection. We also produce a significant amount of printed films and bags. We employ both flexographic and rotogravure printing equipment in our printing operations. Flexographic printing uses flexible plates on a rotary letter press and is preferred for shorter runs. Rotogravure printing uses engraved cylinders and produces sharper images. TECHNOLOGY AND RESEARCH AND DEVELOPMENT We believe our technology base and research and development support are among the best in the film industry. Our Newport News, Virginia research and development center employs 43 engineers, technical specialists and operators who provide the latest resin and extrusion technology to our manufacturing facilities and test new resins and process technologies. This 54,000 square foot technical center has a pilot plant with a 17 million pound annual capacity, with four extrusion lines. These extrusion lines include two blown lines, including a seven-layer line installed in 1999, and two cast lines, including a five-layer line. These pilot lines are staffed with 24 operating and supervisory personnel. These capabilities allow the technical center to run commercial "scale-ups" for new products. Our Newport News technical center has a fully-equipped analytical laboratory for evaluating new resin technologies. The lab is staffed by 12 analytical and technical specialists, and is headed by a Ph.D. chemist. This group works closely with the largest resin producers, not only to test and analyze resins for use by us, but also to help develop new resin technologies. Finally, the Newport News technical center has seven process engineering specialists who provide technical support to our 23 manufacturing facilities. This group also provides centralized technical review of capital expenditures for machinery and equipment. We believe this centralized technical review helps to conserve financial resources, by providing technical consistency across our manufacturing divisions, and leverages our equipment purchasing power. We are able to use our broad product offerings and technology to transfer technological innovations from one market to another. For example, our expertise in coextrusion technology, gained from the production of converter and barrier films, and our expertise in applications involving metallocene and other specialty resins, have helped us produce thinner and stronger personal care and medical films. Many of our customers work in partnership with our technical representatives to develop new, more competitive products. We have enhanced our relationships with these customers by providing the technical service needed to support commercialization of new products and by helping customers improve operational efficiency and quality throughout a product's life cycle. These customers, in order to ensure product quality and consistency for their own customers, do not change suppliers often, because supplier changes can be expensive and time-consuming. Qualifying a new supplier can take up to a year to complete and can, in some cases, cost over $1 million. We spent $2.5 million, $3.7 million and $5.5 million on research and development in 1997, 1998 and 1999, respectively. INTELLECTUAL PROPERTY RIGHTS Patents, trademarks and licenses are significant to our business. We have patent protection on many of our products and processes, and we regularly apply for new patents on significant product and process developments. We have registered trademarks on many of our products. We also rely on unpatented proprietary know-how, continuing technological innovation and other trade secrets to develop and maintain our competitive position. In addition to our own patents, trade secrets and proprietary know-how, we have licensed from third parties the right to use some of their intellectual property. Although we constantly seek to protect our patents, trademarks and other intellectual 62 70 property, there can be no assurance that our precautions will provide meaningful protection against competitors or that the value of our trademarks will not be diluted. We routinely enter into confidentiality agreements to protect our trade secrets and proprietary know-how. We cannot assure you, however, that such agreements will not be breached, that they will provide meaningful protection, or that adequate remedies will be available to us if these confidentiality agreements are breached. Pursuant to the Recapitalization Agreement, after December 31, 2000, we will no longer be able to use "Huntsman" as or in our trademarks or tradenames. We do not believe the replacement of "Huntsman" with another name or names will have a significant impact on our business. RAW MATERIALS Polyethylene, PVC, and other resins and additives constitute the major raw materials for our products. For the year ended December 31, 1999, resin costs comprised approximately 65% of our total manufacturing costs. The price of resins is a function of, among other things, manufacturing capacity, demand, and the price of crude oil and natural gas feedstocks. While temporary shortages of raw materials may occur from time to time, these items generally are considered to be readily available from numerous suppliers. Resin shortages or significant increases in the price of resin, however, could have a significant adverse effect on our business. Our major polyethylene resin suppliers are Chevron, Dow Chemical, Equistar, Exxon/Mobil and Huntsman Polymers, a wholly owned subsidiary of Huntsman Corporation. All resin is purchased at arm's length at prevailing market prices. Our major suppliers of PVC resin are Borden Chemical, OxyGeon and Shintech. COMPETITION The markets in which we operate are highly competitive on the basis of service, product quality, product innovation and price. Small and medium-sized manufacturers, which compete primarily in regional markets, predominate, and there are relatively few large national manufacturers. Statistics of the Flexible Packaging Association and available trade and industry information indicate that the ten largest flexible packaging companies accounted for approximately 35% of total North American industry sales in 1999. In addition to competition from many smaller competitors, we face strong competition from a number of large film and flexible packaging companies, including AEP, Bemis, Pactiv (formerly Tenneco), Pechiney and Printpack. Some of our competitors are substantially larger, are more diversified and have greater financial, personnel and marketing resources than we have, and, therefore, may have certain competitive advantages. See "Risk Factors -- Competition." EMPLOYEES As of March 31, 2000, we had approximately 3,600 employees worldwide. Of those, approximately 1,500 are subject to a total of 11 collective bargaining agreements that expire from October 2000 to November 2002. We believe our relationships with employees historically have been good. However, on March 7, 2000, approximately 130 employees at our Chippewa Falls, Wisconsin manufacturing plant went on strike, the first strike in our history. During this strike, we continued to service our customers and our business was not materially affected. The strike was subsequently resolved and the striking employees returned to work on March 20, 2000. See "Risk Factors -- Risks Associated with Labor Relations." PROPERTIES Our principal executive offices are located at 500 Huntsman Way, Salt Lake City, Utah 84108. We lease these facilities from Huntsman Headquarters Corporation, an indirect, wholly owned subsidiary of Huntsman Corporation. We will relocate our corporate offices to another facility in Salt Lake City in the third or fourth quarter of 2000. 63 71 We own most of the improved real property and other assets used in our operations. We lease all or part of seven of the sites at which we have manufacturing operations. We also lease warehouse and office space at various locations. We consider the condition of our plants, warehouses and other properties and the other assets owned or leased by us to be generally good. We have an annual film production capacity of approximately one billion pounds. In 1999, we produced approximately 800 million pounds of films and flexible packaging products. We believe that the capacities of our plants are adequate to meet our current needs. Our principal manufacturing plants are listed below. Unless otherwise indicated, we own each of these properties.
APPROXIMATE SQUARE LOCATION PRODUCTS PRODUCTION PROCESS FOOTAGE -------- -------- ------------------ ----------- SPECIALTY FILMS: Birmingham, Alabama Barrier and custom films Blown and cast lines 119,000 Bloomington, Indiana* Barrier and custom films Blown lines 58,000 Chippewa Falls, Wisconsin Converter and personal care Blown and cast lines 134,000 films Dalton, Georgia Converter, barrier and Blown lines 211,000 custom films Danville, Kentucky Converter and custom films Blown lines 94,000 Deerfield, Massachusetts Converter films Blown lines 168,000 Harrington, Delaware Personal care, medical and Blown and cast lines 129,000 agricultural films McAlester, Oklahoma Personal care films Blown and cast lines 135,000 Newport News, Virginia Research facility and pilot Blown and cast lines 54,000 plant Odon, Indiana* Barrier and custom films Blown lines 20,000 Washington, Georgia Personal care and Blown and cast lines 180,000 agricultural films DESIGN PRODUCTS: Dallas, Texas Printed bags and rollstock Flexographic printing and 62,000 blown lines Kent, Washington Printed bags and rollstock Flexographic printing and 125,000 blown lines Langley, British Printed bags and rollstock Flexographic printing and 90,000 Columbia* blown lines Macedon, New York+ Personal care films, Flexographic printing and 238,000 printed bags and rollstock cast lines Mexico City, Mexico Barrier films, printed bags Rotogravure printing and 99,000 (NEPSA)* and rollstock blown lines Mexico City, Mexico Printed bags and rollstock Flexographic printing and 113,000 (NEPSA)* cast lines Shelbyville, Indiana Closures and reclosable Zipper profile lines, 313,000 bags flexographic printing and blown lines INDUSTRIAL FILMS: Calhoun, Georgia PVC films Blown and cast lines 46,000 Danville, Kentucky Stretch films Blown and cast lines 91,000 Lewisburg, Tennessee Stretch films Cast lines 82,000 Merced, California PVC films Blown lines 38,000 Phillipsburg, Germany PVC films Blown lines 33,000 Preston, Australia* PVC films Blown lines 40,000 Toronto, Canada PVC and stretch films Blown and cast lines 106,000
- --------------- * Indicates a leased building. + Indicates a building of which 225,000 square feet are owned and 13,000 square feet are leased. ENVIRONMENTAL MATTERS Our operations are subject to environmental laws in the United States and abroad, including those described below. Our capital and operating budgets include costs and expenses associated 64 72 with complying with these laws, including the acquisition, maintenance and repair of pollution control equipment, and routine measures to prevent, contain and clean up spills of materials that occur in the ordinary course of our business. In addition, our production facilities require environmental permits that are subject to revocation, modification and renewal. We believe that we are in substantial compliance with environmental laws and our environmental permit requirements, and that the costs and expenses associated with such compliance are not material to our business. However, additional operating costs and capital expenditures could be incurred if, among other developments, additional or more stringent requirements relevant to our operations are promulgated. Among other environmental laws, our operations are subject to regulation under the federal Clean Air Act and the Clean Water Act, as well as similar state statutes. Some capital costs for additional air pollution controls or monitors may be required at certain of our sites, and several of our facilities may be required to obtain stormwater permits under the Clean Water Act and implementing regulations. However, we do not expect such costs or expenditures to be material. Under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), and similar state statutes, an owner or operator of real property or a person who arranges for disposal of hazardous substances may be liable for the costs of removing or remediating hazardous substance contamination. Liability may be imposed under these statutes regardless of whether the owner or operator owned or operated the real property at the time of the release of the hazardous substances and regardless of whether the release or disposal was in compliance with law at the time it occurred. We are not aware of any current claims under CERCLA or similar state statutes against us. From time to time, contaminants from current or historical operations have been detected at some of our present and former sites, principally in connection with the removal or closure of underground storage tanks. We are not currently aware that any of our facility locations have material outstanding claims or obligations relating to contamination issues. In conjunction with the sale of a predecessor subsidiary's New Jersey polypropylene plant site in 1992, we agreed to indemnify the buyer for environmental losses of up to $5.0 million associated with conditions, if any, resulting from the predecessor subsidiary's operations at the plant site between January 1, 1988 and May 18, 1992. The indemnity amount has reduced ten percent each year since May 12, 1997, and the indemnity expires altogether on May 8, 2002. Currently, we are not aware of any environmental issues at this site for which we will incur material liabilities under this indemnity. LITIGATION We are involved in litigation from time to time in the ordinary course of our business. In our opinion, none of such litigation is material to our financial condition or results of operations. 65 73 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS Certain information about our executive officers and directors is presented in the table below. Pursuant to the stockholders' agreement among us and our current stockholders and the holders Preferred Stock Warrants, our board of directors currently consists of seven members, four of whom were designated by Chase Domestic Investments, L.L.C., two of whom were designated by the Trust and one of whom was designated by the Management Investors.
NAME AGE POSITION - ---- --- -------- Richard P. Durham*............. 36 Chairman of the Board, President and Chief Executive Officer Jack E. Knott.................. 46 Executive Vice President and Chief Operating Officer and Director Scott K. Sorensen*............. 38 Executive Vice President and Chief Financial Officer, Treasurer and Director Ronald G. Moffitt.............. 47 Executive Vice President and General Counsel, Secretary Donald J. Hofmann, Jr. ........ 42 Director Timothy J. Walsh............... 37 Director John M. B. O'Connor............ 46 Director Richard D. Waters.............. 50 Director
- --------------- * Richard P. Durham and Scott K. Sorensen are brothers-in-law. RICHARD P. DURHAM became our President and Chief Executive Officer in March 1997 and became the Chairman of our board of directors on May 31, 2000. Mr. Durham is also a director of Huntsman Corporation. Mr. Durham has been with various Huntsman affiliates since 1987. Prior to becoming our President, Mr. Durham served as Co-President and Chief Financial Officer of Huntsman Corporation, where, in addition to being responsible for finance, tax, legal, human resources, public affairs, purchasing, research and development, and information systems, he also was responsible for our operations. Mr. Durham is a graduate of The Wharton School of Business at the University of Pennsylvania. Pursuant to the stockholders' agreement, Mr. Durham is one of the Trust's designees to the board. JACK E. KNOTT became our Executive Vice President and Chief Operating Officer on September 1, 1997. Prior to joining us, Mr. Knott was a member of the board of directors of Rexene Corporation and held the position of Executive Vice President of Rexene Corporation and President of Rexene Products. Mr. Knott served in various capacities at Rexene from 1985 to 1997, including Executive Vice President-Sales and Market Development, Executive Vice President, and President of CT Film, a division of Rexene Corporation. Prior to joining Rexene Corporation, Mr. Knott worked for American National Can. Mr. Knott received a B.S. degree in Chemical Engineering and an M.B.A. degree from the University of Wisconsin. Mr. Knott also holds nine patents. Pursuant to the stockholders' agreement, Mr. Knott is the Management Investors' designee to the board. SCOTT K. SORENSEN joined us as Executive Vice President and Chief Financial Officer on February 1, 1998. Prior to that time, Mr. Sorensen was an executive with Westinghouse Electric Corporation, serving as Chief Financial Officer for both the Communication and Information Systems Division and the Power Generation Division. Prior to joining Westinghouse in 1996, Mr. Sorensen spent two years as Director of Business Development and Planning at Phelps Dodge Industries, a subsidiary of Phelps Dodge Corporation. He also spent over four years as a management consultant with McKinsey & Company. Mr. Sorensen received a B.S. degree in Accounting from the University of Utah and an M.B.A. degree from the Harvard Business School. Pursuant to the stockholders' agreement, Mr. Sorensen is one of the Trust's designees to the board. 66 74 RONALD G. MOFFITT joined us in 1997, after serving as Vice President and General Counsel of Huntsman Chemical Corporation. Prior to joining Huntsman Chemical Corporation in 1994, Mr. Moffitt was a partner and a member of the board of directors of the Salt Lake City law firm of Van Cott, Bagley, Cornwall & McCarthy, with which he had been associated since 1981. Mr. Moffitt holds a B.A. degree in Accounting, a Master of Professional Accountancy degree, and a J.D. degree from the University of Utah. DONALD J. HOFMANN, JR. became one of our directors on May 31, 2000. Mr. Hofmann has been a General Partner of Chase Capital Partners since 1992. Prior to that, he was head of MH Capital Partners Inc., the equity investment arm of Manufacturers Hanover. Mr. Hofmann is also a director of Advanced Accessory Systems, LLC, Berry Plastics Corporation, BPC Holding Corporation, the parent company of Berry Plastics Corporation, Mackie Automotive Holdings, Inc., Metalforming Industries, MetoKote Corporation, Penske Corporation, Skip Barber Racing Schools, Top Driver, TriPoint Global Communications Inc. and Truck-Lite Company, Inc. Mr. Hofmann received a B.A. degree from Hofstra University and an M.B.A. degree from the Harvard Business School. Pursuant to the stockholders' agreement, Mr. Hofmann is one of Chase Domestic Investments, L.L.C.'s designees to the board. TIMOTHY J. WALSH became one of our directors on May 31, 2000. Mr. Walsh has been a General Partner of Chase Capital Partners since 1999 and has held various positions with Chase Capital Partners in Europe and North America since 1993. Prior to that, he was a Vice President of The Chase Manhattan Corporation. Mr. Walsh is also a director of MetoKote Corporation and Better Minerals & Aggregates Company. Mr. Walsh received a B.S. degree from Trinity College and an M.B.A. from the University of Chicago. Pursuant to the stockholders' agreement, Mr. Walsh is one of Chase Domestic Investments, L.L.C.'s designees to the board. JOHN M. B. O'CONNOR became one of our directors on May 31, 2000. Mr. O'Connor joined Chase Capital Partners in 1995 and is a General Partner. Prior to that time, Mr. O'Connor was a Managing Director of Chemical Securities, Inc. Mr. O'Connor is also a director of Affiliated Managers Group Inc., FHC Health Systems, e-BondTrade.com, and AdvisorTech. Mr. O'Connor received his B.A. degree from Tulane University and an M.B.A. degree from the Columbia University Graduate School of Business. Pursuant to the stockholders' agreement, Mr. O'Connor is one of Chase Domestic Investments, L.L.C.'s designees to the board. RICHARD D. WATERS became one of our directors on May 31, 2000. Mr. Waters has been a Partner of Chase Capital Partners since 1999 and has held various positions with Chase Capital Partners since 1996. Prior to that time, Mr. Waters was a Managing Director in the Merchant Banking Group of The Chase Manhattan Bank, N.A. Mr. Waters is also a director of NuCo 2 Inc. Mr. Waters received a B.A. degree from Hamilton College and an M.B.A. degree from the Columbia University Graduate School of Business. Pursuant to the stockholders' agreement, Mr. Waters is one of Chase Domestic Investments, L.L.C.'s designees to the board. 67 75 EXECUTIVE COMPENSATION The following summary compensation table sets forth information about compensation earned in the fiscal years ended December 31, 1999, 1998 and 1997 by the chief executive officer and the three other executive officers of Huntsman Packaging (as of the end of the last fiscal year) (collectively, the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1) LONG TERM COMPENSATION AWARDS -------------------------------- ------------------------------ SECURITIES UNDERLYING ALL OTHER SALARY BONUS OPTIONS/SARS COMPENSATION NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($) - --------------------------- ---- -------- -------- ------------ ------------ Richard P. Durham........................... 1999 $450,000 $327,325 -- $ 29,800(3) President and Chief 1998 400,000 73,721 15,734 29,800 Executive Officer(2) 1997 415,618 420,000 -- 117,033 Jack E. Knott............................... 1999 $285,421 $140,622 -- $ 4,800(5) Executive Vice President 1998 263,333 31,331 10,489 4,800 and Chief Operating Officer(4) 1997 85,000 70,000 -- 2,400 Scott K. Sorensen........................... 1999 $232,504 $112,534 -- $ 4,800(7) Executive Vice President 1998 206,068 28,574 7,867 82,035 and Chief Financial Officer, Treasurer(6) 1997 -- -- -- -- Ronald G. Moffitt........................... 1999 $183,336 $ 63,053 -- $ 4,800(8) Executive Vice President 1998 170,527 18,761 2,622 4,800 and General Counsel, Secretary(2) 1997 116,939 50,000 -- 17,973
- --------------- (1) Perquisites and other personnel benefits, securities or property, in the aggregate, are less than either $50,000 or 10% of the total annual salary and bonus reported for the applicable Named Executive Officer. (2) Prior to September 30, 1997, the compensation of Richard P. Durham and Ronald G. Moffitt, other than Mr. Durham's director's fees for 1997 (which are described in "-- Compensation of Directors," and listed in the "All Other Compensation" column), was paid entirely by Huntsman Corporation. We reimbursed Huntsman Corporation for such compensation for the period beginning October 1, 1997 and ending December 31, 1997. Salary figures for 1997 for Mr. Durham and Mr. Moffitt represent a prorated portion of Huntsman Corporation compensation attributable to the percentage of executive services that were dedicated to us. (3) Consists of a $25,000 director's fee, which is also described in "-- Compensation of Directors," and our employer's 401(k) contributions of $4,800. (4) Mr. Knott joined us on September 1, 1997. His 1997 compensation is reported only for the period we employed him. (5) Consists of employer's 401(k) contributions of $4,800. (6) Mr. Sorensen joined us on February 1, 1998. His 1998 compensation is reported only for the period we employed him. (7) Consists of employer's 401(k) contributions of $4,800. (8) Consists of employer's 401(k) contributions of $4,800. STOCK OPTIONS AND RESTRICTED STOCK During 1998, our board of directors adopted the 1998 Huntsman Packaging Corporation Stock Option Plan. The 1998 plan authorized grants of nonqualified stock options covering up to 41,956 shares of our nonvoting Class C common stock. During 1998, we granted options covering a total of 41,956 shares under the 1998 plan. Options covering 5,244 shares were subsequently canceled. In addition, as described below, outstanding options covering 26,223 shares under the 1998 plan were canceled on February 22, 1999 in connection with the sale of 26,223 shares of Class C common stock to certain members of our senior management. Options covering a total of 8,902 shares remain outstanding under the 1998 plan. 68 76 The following table provides information as to the value of options held by each of the Named Executive Officers at the end of 1999, measured in terms of the fair market value of our nonvoting Class C common stock on December 31, 1999 ($247 per share, as determined by us pursuant to a formula set forth in the stockholders agreement in effect prior to May 31, 2000). None of the Named Executive Officers exercised any options under the 1998 plan during the last fiscal year. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE- ACQUIRED OPTIONS/SARS AT MONEY OPTIONS/SARS ON VALUE FY-END (#) AT FY-END ($) NAME EXERCISE (#) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE - ---- ------------ -------- ------------------------- ---------------------------- Jack E. Knott........... -- -- 4,196/6,293 $616,812/$925,071
Outstanding options under the 1998 plan were subject to time and performance vesting requirements. One-half of the outstanding options were time vested options, which became exercisable in equal increments over a five-year period commencing January 1, 1998, and the remaining one-half of the outstanding options were performance vested options, which vested in equal increments over a five-year period commencing January 1, 1998, provided we had achieved a specific market value of equity applicable to such increment. For purposes of the performance vested options, our adjusted market value of equity was determined pursuant to a formula based upon our adjusted earnings. The terms of the option agreement provided for partial vesting of the performance vested shares if more than 80% of the applicable market value of equity was achieved. The option agreement also provided for accelerated vesting in the event of a change of control. The Transactions accelerated the vesting of these options, and the shares underlying these options were part of the Management Equity Rollover or the Investor Share Purchase. On February 22, 1999, 26,223 outstanding options under the 1998 plan were canceled in connection with the sale of 26,223 shares of Class C common stock to certain members of our senior management. The 26,223 shares were purchased by certain Named Executive Officers for $100 per share, the estimated fair market value of the shares on the date of purchase, pursuant to the terms of an option cancellation and restricted stock purchase agreement between us and certain Named Executive Officers. Mr. Durham purchased 15,734 shares, Mr. Sorensen purchased 7,867 shares and Mr. Moffitt purchased 2,622 shares. We loaned the funds necessary to purchase the stock to each of the Named Executive Officers. See "Certain Relationships and Related Transactions -- Transactions with Management." All of such shares were subject to vesting requirements similar to the canceled options. Accordingly, one-half of the shares purchased by each Named Executive Officer were time vested shares, which vested in equal increments over a five-year period commencing January 1, 1998, and the remaining one-half of the shares purchased by each Named Executive Officer were performance vested shares, which vested in equal increments over a five-year period commencing January 1, 1998, provided we had achieved a specified market value of equity applicable to such increment. For purposes of the performance vested shares, our market value of equity was determined pursuant to a formula based upon our adjusted earnings. The terms of the restricted stock purchase agreements provided for partial vesting of the performance vested shares if more than 80% of the applicable market value of equity was achieved. The restricted stock purchase agreements also provided for accelerated vesting in the event of a change of control. The Transactions accelerated the vesting of the restricted stock, and these shares of restricted stock were part of the Management Equity Rollover or the Investor Share Purchase. Pursuant to the recapitalization agreement, we adopted a 2000 stock-based incentive compensation plan. The 2000 plan became effective as of the consummation of the Transactions and authorizes grants to our management employees as designated by the compensation committee of our board of directors of nonqualified stock options or restricted stock covering 51,010 shares of 69 77 our common stock. As of July 20, 2000, we had granted restricted stock covering 32,750 shares of common stock and options to acquire 10,030 shares of common stock. The options or restricted common stock will vest as follows: (1) one-sixth are "time-vested" options or shares, which means they will vest on January 1, 2001, so long as the recipient is still our employee on such date, and (2) the remainder are "performance vested" options or shares, which will vest in equal increments over a five-year period commencing on December 31, 2000 as follows: (a) vesting in full, if 100% or more of the applicable target market value of equity is achieved as of the end of the applicable calendar year and (b) partial vesting if more than 90% of the applicable target market value of equity is achieved as of the end of the applicable calendar year. Moreover, all performance vested options or shares not previously vested in accordance with the preceding sentence will vest automatically in full on December 31, 2009 so long as the recipient is still our employee on such date. PENSION PLANS The following table shows the estimated annual benefits payable under our tax-qualified defined benefit pension plan in specified final average earnings and years of service classifications. HUNTSMAN PACKAGING PENSION PLAN TABLE
YEARS OF BENEFIT SERVICE AT RETIREMENT -------------------------------------------------------------------- FINAL AVERAGE COMPENSATION 10 15 20 25 30 35 40 - -------------------------- ------- ------- ------- ------- ------- ------- -------- $100,000 $16,000 $24,000 $32,000 $40,000 $48,000 $56,000 $ 64,000 125,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 150,000 24,000 36,000 48,000 60,000 72,000 84,000 96,000 175,000 25,600 38,400 51,200 64,000 76,800 89,600 102,400 200,000 25,600 38,400 51,200 64,000 76,800 89,600 102,400
Our current pension plan benefit is based on the following formula: 1.6% of final average compensation multiplied by years of credited service, minus 1.5% of estimated Social Security benefits multiplied by years of credited service (with a maximum of 50% of Social Security benefits). Final average compensation is based on the highest average of three consecutive years of compensation. Covered compensation for purposes of the pension plan includes compensation earned with our former affiliates. The Named Executive Officers were participants in the pension plan in 1999. The final average compensation for purposes of the pension plan in 1999 for each of the Named Executive Officers is $160,000, which is the maximum that can be considered for the 1999 plan year under federal regulations. Federal regulations also provide that the maximum annual benefit paid from a qualified defined benefit plan cannot exceed $130,000 as of January 1, 1999. Benefits are calculated on a straight line annuity basis. The benefit amounts under the pension plan are offset for Social Security as described above. 70 78 The number of completed years of credit service as of December 31, 1999 under our pension plan for the named executive officers participating in the plan were as follows:
NAME YEARS OF CREDITED SERVICE - ---- -------------------------- Richard P. Durham(1).................................. 14 Jack E. Knott(1)...................................... 14 Scott K. Sorensen..................................... 2 Ronald G. Moffitt(1).................................. 5
- --------------- (1) The years of credited service under the pension plan include 12 years of service credited with affiliates of Huntsman Packaging for Mr. Durham, 12 years of service credited with affiliates of Huntsman Packaging for Mr. Knott, and three years of service credited with affiliates of Huntsman Packaging for Mr. Moffitt. The benefit calculation upon retirement under our pension plan is calculated by multiplying years of credited service by a fraction representing that part of total credited service for which services were provided to us. EMPLOYMENT AGREEMENTS On May 31, 2000, we entered into five-year employment agreements with each of Richard P. Durham, Jack E. Knott, Scott K. Sorensen and Ronald G. Moffitt. The employment agreements provide for the payment of a base salary, plus a bonus, at least four weeks paid vacation per year, participation in our leased car program and participation in our other employee benefit programs, including our management incentive program, and include non-disclosure of confidential information provisions and a non-compete provision for one year following the executive officer's termination of employment with us (unless termination is due to the term expiring). Each executive officer has agreed in his respective employment agreement that any inventions, improvements, technical or software developments, trademarks, patents and similar information relating to us or our business, products or services conceived, developed or made by such executive officer while employed by us belong to us. In addition, if the executive officer's employment with us terminates for any reason, we will have the right under the employment agreements to repurchase the shares of our common stock owned by such executive officer at a purchase price equal to their fair market value. The base salary for each of Messrs. Durham, Knott, Sorensen and Moffitt as of the date of this prospectus are $500,000, $300,000, $250,000 and $190,000, respectively. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Prior to May 31, 2000, our board of directors had designated an executive committee, which was comprised of Jon M. Huntsman and Richard P. Durham, to perform the duties of a compensation committee for us. Richard P. Durham is our President and Chief Executive Officer and Jon M. Huntsman was our Chairman of the Board. As of May 31, 2000, Richard P. Durham and Timothy J. Walsh comprise the Compensation Committee and perform such duties. Richard P. Durham serves as a director of Huntsman Corporation, but is not one of the people who performs the duties of a member of the compensation committee of Huntsman Corporation. COMPENSATION OF DIRECTORS Prior to May 31, 2000, each director received an annual fee of $25,000. As of May 31, 2000, each director who is not an employee of either Huntsman Packaging or Chase Capital Partners will receive an annual fee of $25,000. Currently, all of our directors are employees of either us or Chase Capital Partners. 71 79 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information with respect to the ownership of our common stock as of July 20, 2000 by - each person known to own beneficially more than 5% of the common stock, - each of our directors, - each of our executive officers, and - all of our executive officers and directors as a group. The amounts set forth in the table and footnotes below do not include shares of restricted common stock issued under the 2000 plan as outstanding because they are subject to vesting requirements that have not yet been met. Notwithstanding the beneficial ownership of common stock presented below, the stockholders' agreement governs the stockholders' exercise of their voting rights with respect to election of directors and certain other material events. The parties to the stockholders' agreement have agreed to vote their shares to elect the board of directors as set forth therein. See "Certain Relationships and Related Transactions." The amounts and percentages of shares beneficially owned are reported on the basis of SEC regulations governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person's ownership percentage, but not for purposes of computing any other person's percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. Except as otherwise indicated in these footnotes, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of common stock.
NUMBER OF SHARES OF COMMON STOCK BENEFICIALLY PERCENT OF NAME OF BENEFICIAL OWNER OWNED CLASS - ------------------------ ------------ ---------- Chase Domestic Investments, L.L.C.(1)....................... 339,792 60.5% The Christena Karen H. Durham Trust(2)...................... 158,917 29.5 Richard P. Durham(3)........................................ 28,289 5.2 Jack E. Knott(4)............................................ 8,902 1.6 Scott K. Sorensen(5)........................................ 7,423 1.4 Ronald G. Moffitt(6)........................................ 2,832 * Donald J. Hofmann, Jr.(7)................................... * Timothy J. Walsh(7)......................................... * John M. B. O'Connor(7)...................................... * Richard D. Waters(7)........................................ * All directors and executive officers as a group (8 persons).................................................. 47,446 8.7
- --------------- * Less than 1%. (1) Chase Domestic Investments, L.L.C. is an affiliate of Chase Capital Partners and its address is c/o Chase Capital Partners, 1221 Avenue of the Americas, New York, New York 10020. Includes 22,486 shares of common stock which are issuable upon exercise of the Preferred Stock Warrants. 72 80 (2) The address of The Christena Karen H. Durham Trust is c/o First Security Trust Company of Nevada, 530 Las Vegas Boulevard South, 4th Floor, Las Vegas, Nevada 89101, Attention: Mark Dreschler. The Trust was established for the benefit of Christena H. Durham and her children. Christena H. Durham is the wife of Richard P. Durham. Richard P. Durham disclaims beneficial ownership of the shares of common stock owned by the Trust. (3) Does not include 14,500 shares of restricted common stock issued under the 2000 plan that do not vest until the time and performance conditions discussed under "Management -- Stock Options and Restricted Stock" are met. (4) Represents shares of common stock issuable upon exercise of options that are immediately exercisable. Does not include 7,750 shares of restricted common stock issued under the 2000 plan that do not vest until the time and performance conditions discussed under "Management -- Stock Options and Restricted Stock" are met. (5) Does not include 6,750 shares of restricted common stock issued under the 2000 plan that do not vest until the time and performance conditions discussed under "Management -- Stock Options and Restricted Stock" are met. (6) Does not include 3,750 shares of restricted common stock issued under the 2000 plan that do not vest until the time and performance conditions discussed under "Management -- Stock Options and Restricted Stock" are met. (7) Each of Messrs. Hofmann, Walsh, O'Connor and Waters may be deemed the beneficial owner of the shares of common stock and New Preferred Stock Warrants owned by Chase Domestic Investments, L.L.C. due to their status as either a General Partner or Partner of Chase Capital Partners, which controls Chase Domestic Investments, L.L.C. 73 81 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS TRANSACTIONS WITH HUNTSMAN CORPORATION Prior to the Transactions, we had entered into a services agreement with Huntsman Corporation pursuant to which Huntsman Corporation provided us with most of our insurance coverage, administered our employee benefit plans, rented to us corporate headquarters space and provided other services to us. Under that services agreement, we paid Huntsman Corporation $2.2 million, $2.3 million and $2.6 million in 1999, 1998 and 1997, respectively. In addition to amounts paid for services provided under the services agreement, we also reimbursed Huntsman Corporation for insurance premiums and certain other expenses incurred on our behalf. Prior to the Transactions, the most significant services provided under the services agreement were as follows: - Our principal executive offices were leased from Huntsman Headquarters Corporation, an indirect wholly owned subsidiary of Huntsman Corporation. - We obtained most of our insurance coverage under policies of Huntsman Corporation. We reimbursed Huntsman Corporation for insurance premiums they pay on our behalf. The reimbursement payments were based on premium allocations which are determined in cooperation with Huntsman Corporation's independent insurance broker. - We contracted with Huntsman Corporation for administration of our employee benefit plans. In connection with the Transactions, most of the services provided under the services agreement were discontinued. Currently, the only services purchased from Huntsman Corporation under the services agreement are the lease of our headquarters and administration of our employee benefit plans. These services will end by approximately September 30, 2000. We have entered into a lease for new office space with an unaffiliated third party and expect to relocate our corporate offices in the third quarter of 2000. We intend to provide for our own employee benefit administration, either internally or through unaffiliated third party providers. We purchase some of our polyethylene resins from Huntsman Polymers Corporation, a wholly owned subsidiary of Huntsman Corporation. All resin is purchased at arm's length at prevailing market prices. During 1999 and 1998, we paid a management fee in the amount of $150,000 and $133,333, respectively, to Huntsman Financial Corporation, an affiliate of Huntsman Corporation, for consulting services provided to us by Jon M. Huntsman. At May 31, 2000, this consulting agreement was terminated. TRANSACTIONS WITH MANAGEMENT On May 31, 2000, we issued restricted stock under the terms of our 2000 plan to each of our executive officers in the following amounts: (a) Richard P. Durham -- 2,417 time-vested shares and 12,083 performance-vested shares in exchange for a promissory note of $7,005,389; (b) Jack E. Knott -- 1,292 time-vested shares and 6,458 performance-vested shares in exchange for a promissory note of $3,744,260; (c) Scott K. Sorensen -- 1,125 time-vested shares and 5,625 performance-vested shares in exchange for a promissory note of $3,261,129; and (d) Ronald G. Moffitt -- 625 time-vested shares and 3,125 performance-vested shares in exchange for a promissory note of $1,811,739. Each promissory note bears interest at 7% per annum and principal on such promissory note is payable in three equal annual installments beginning on May 31, 2006. Interest payable on each promissory note from May 31, 2000 to May 31, 2006 is payable in three equal installments beginning on May 31, 2006 and may be paid in additional promissory notes. Interest accruing from May 31, 2006 to May 31, 2007 is payable on May 31, 2007 in cash and interest accruing from May 31, 2007 to 74 82 May 31, 2008 must be paid in cash at maturity on May 31, 2008. Each promissory note is fully recourse to the executive officer and is secured by the shares of restricted stock owned by such executive officer. In connection with our split-off from Huntsman Corporation, we issued 7,000 shares of our Class C common stock to Richard P. Durham, our President and Chief Executive Officer and a director, in exchange for a $700,000 promissory note. This promissory note bears interest at 7% per annum and is payable over approximately 51 months. As of December 31, 1999, the outstanding balance on this note was $299,000. On February 22, 1999, we sold 26,223 shares of Class C common stock to certain members of our senior management. 15,734 of these shares were issued to Richard P. Durham, our President and Chief Executive Officer in exchange for a $1,573,400 promissory note; 7,867 of these shares were sold to Scott K. Sorensen, our Executive Vice President, Chief Financial Officer and Treasurer, in exchange for a $786,700 promissory note; and 2,622 shares were sold to Ronald G. Moffitt, our Executive Vice President and General Counsel, Secretary, in exchange for a $262,200 promissory note. All of such notes bear interest at 7% per annum and were originally payable in three annual installments beginning in February 2002. Pursuant to the recapitalization agreement, each of these promissory notes receivable was amended on May 31, 2000 to provide that they are payable in three annual installments beginning on May 31, 2006. On August 7, 1998, we made an offer to the board of directors of Applied Extrusion Technologies, Inc., a publicly traded company, to purchase all of the outstanding shares of common stock of AET at $10.50 per share in a merger transaction. AET's board rejected the offer. On September 10, 1998, we made another offer to the board of directors of AET to purchase all of the outstanding shares of common stock of AET at $12.50 per share in a merger transaction. On September 14, 1998, HPC Investment, Inc., our wholly owned subsidiary, purchased shares of the common stock of AET from Richard P. Durham, our President and Chief Executive Officer, for an aggregate purchase price of $3.30 million, in an arms-length transaction approved by the Board of Directors of HPC Investment, Inc. Mr. Durham's original cost of acquiring those AET shares was approximately $3.33 million. AET's Board of Directors subsequently rejected our second offer, and we liquidated our entire investment in AET stock. In connection with our exploring options to monetize Jon M. Huntsman's approximate 61% interest, we adopted a Retention Bonus Plan for our eligible employees effective as of March 1, 2000. The purpose of the retention plan was to encourage our senior management and other key employees to continue their employment with us during this period of exploring strategic alternatives. Pursuant to the retention plan, we are required to pay bonuses to those who remain our employees for six months following the completion of the Transactions. Under the retention plan we will pay Messrs. Durham, Knott, Sorensen and Moffitt $125,000, $75,000, $62,500 and $47,500, respectively, if they meet the six-month continued employment requirement following the consummation of the Transactions. During 1999 and 1998, we made charitable contributions of $1,000,000 and $500,000, respectively, to the Huntsman Cancer Institute, a public charity. Jon M. Huntsman, our former Chairman of the Board of Directors, and Richard P. Durham, our President and Chief Executive Officer, serve on the Board of Trustees of the Huntsman Cancer Institute. These charitable contributions ceased as of May 31, 2000. TRANSACTIONS BETWEEN HUNTSMAN PACKAGING AND NEW STOCKHOLDERS Common Stock Registration Rights Agreement Pursuant to the registration rights agreement entered into on May 31, 2000, we granted to Chase Domestic Investments, L.L.C., the Trust, the Management Investors, the holders of our Preferred Stock Warrants and the holders of the Note Warrants certain "demand" and "piggyback" registration rights for the registration under the Securities Act of the shares of common stock owned by them. Under the registration rights agreement, upon request of holders holding in excess of 50% 75 83 of the shares of common stock held by Chase Domestic Investments, L.L.C. and its transferees and affiliates (the "Requisite Investor Stockholders"), we are required to use our best efforts to register the shares. The Requisite Investor Stockholders will be entitled to request two demand registrations. Also, if we are not a public company or sold to a third party prior to May 31, 2005, the Trust and its transferees and affiliates will be entitled to request one demand registration. Further, at any time 60 days after our initial public offering, holders holding in excess of 60% of the shares of common stock underlying the Preferred Stock Warrants and holders holding in excess of 60% of the shares of common stock underlying the Note Warrants will each be entitled to exercise one demand registration. At any time after we have qualified for use of Form S-3, all parties to the registration rights agreement will have the right to request that we effect a registration under the Securities Act of their shares of common stock, subject to customary "blackout" and "cutback" provisions. The stockholders and holders of the Preferred Stock Warrants and Note Warrants party to the registration rights agreement also may request that we use our best efforts to register shares of common stock held by them in other registrations initiated by us on our own behalf or on behalf of any other stockholder. We must pay all reasonable out-of-pocket costs and expenses, other than underwriting discounts and commissions, of any registration under the registration rights agreement. The registration rights agreement also contains customary provisions with respect to registration procedures, underwritten offerings and indemnification and contribution rights in connection with the registration of common stock on behalf of the stockholders, holders of the Preferred Stock Warrants and holders of the Note Warrants party to the registration rights agreement. The above summary of certain provisions of the registration rights agreement does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the registration rights agreement, a copy of which has been filed as an exhibit to the registration statement of which this prospectus forms a part. The Stockholders' Agreement The stockholders' agreement entered into on May 31, 2000 governs the exercise of voting rights by our stockholders', including holders of our Preferred Stock Warrants who exercise their warrants for common stock, with respect to the election of directors and certain other material events. The parties to the stockholders' agreement agreed initially to vote their shares of common stock to elect (i) four directors designated by Chase Domestic Investments, L.L.C., (ii) two directors designated by the Trust and (iii) one director designated by the Management Investors. At the request of the Requisite Investor Stockholders, the size of our board of directors may be increased from seven to nine. If so increased, one of the two additional directors will be designated by Chase Domestic Investments, L.L.C. and the other will be designated by the Management Investors. The provisions of the stockholders' agreement also govern: - restrictions on the transfer of shares of common stock and the Preferred Stock Warrants; - preemptive rights for holders of our common stock and Preferred Stock Warrants to purchase certain equity securities to be issued by us in the amounts required to maintain their percentage ownership; - stockholder or company rights of first refusal to purchase certain shares of our common stock to be sold by other stockholders; - agreement by stockholders and holders of the Preferred Stock Warrants to consent to the sale of all of, or a controlling interest in, us to a third party, if such sale is approved by our 76 84 board of directors, and to sell their shares of common stock and Preferred Stock Warrants if so required; - rights of stockholders and holders of the Preferred Stock Warrants to participate in certain sales of the shares of our common stock by other stockholders; and - rights of holders of our common stock and Preferred Stock Warrants to receive certain financial and other information. The above summary of certain provisions of the stockholders' agreement does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the stockholders' agreement, a copy of which has been filed as an exhibit to the registration statement of which this prospectus forms a part. Credit Facilities and Offering of Old Notes The Chase Manhattan Bank is the syndication agent and its affiliate, The Chase Manhattan Corporation, is a lender under our credit facilities. The Chase Manhattan Bank was also a lender under our prior credit facility, and as a result, received a portion of the proceeds from the financing for the Transactions. Chase Securities, Inc., which was one of the initial purchasers in the offering of the Old Notes, The Chase Manhattan Bank and The Chase Manhattan Corporation are each affiliates of Chase Domestic Investments, L.L.C., which owns approximately 58% of our outstanding common stock and 52% of our Preferred Stock and has the right under the stockholders' agreement to appoint up to five of our directors. Chase Domestic Investments, L.L.C. is an affiliate of Chase Capital Partners. Donald J. Hofmann, Jr., Timothy J. Walsh and John M. B. O'Connor, who serve as our directors, are General Partners of Chase Capital Partners, and Richard D. Waters, who also serves as one of our directors, is a Partner of Chase Capital Partners. 77 85 DESCRIPTION OF CREDIT FACILITIES The following is a summary of the material terms of the our credit facilities with Chase Securities Inc., as sole and exclusive advisor, lead arranger and lead book manager, The Chase Manhattan Bank, as sole and exclusive syndication agent, Bankers Trust Company, as administrative agent and collateral agent, The Bank of Nova Scotia, as documentation agent, and a syndicate of banking and financial institutions who became parties thereto. The following summary is qualified in its entirety by reference to the definitive documentation for the credit facilities, copies of which have been filed as exhibits to the registration statement of which this prospectus forms a part. The Facilities Structure. The credit facilities provide for - tranche A facility in an aggregate principal amount of up to $200.0 million; -- $40.0 million of the tranche A facility is available to our principal Mexican subsidiary; - tranche B facility in an aggregate principal amount of up to $280.0 million; and - revolving credit facility in an aggregate principal amount of up to $100.0 million. -- Up to $30.0 million (plus an additional amount up to $40.0 million to support certain borrowings by our principal Mexican subsidiary) of the revolving credit facility is available in the form of letters of credit. Availability. The full amounts of the tranche A facility and the tranche B facility were drawn on May 31, 2000 to finance a portion of the Transactions. Amounts borrowed under the tranche A facility and the tranche B facility that are repaid or prepaid may not be reborrowed. Loans and letters of credit under the revolving credit facility are available on and after May 31, 2000 and at any time prior to the final maturity of the revolving credit facility in specified minimum principal amounts. Amounts repaid under the revolving credit facility may be reborrowed. Interest The interest rates under the revolving credit facility and the tranche A facility are, at our option, Adjusted LIBOR plus 2.50% or ABR plus 1.50%, in each case subject to certain adjustments. Adjusted LIBOR is the London inter-bank offered rate adjusted for statutory reserves. ABR is the alternate base rate, which is the higher of Bankers Trust Company's prime rate or the federal funds effective rate plus 1/2 of 1%. The interest rates under the tranche B facility are, at our option, Adjusted LIBOR plus 3.00% or ABR plus 2.00%. Huntsman Packaging may elect interest periods of one, two, three or six months for Adjusted LIBOR borrowings. The calculation of interest is on the basis of actual days elapsed in a year of 360 days (or 365 or 366 days, as the case may be, in the case of ABR loans based on the Prime Rate) and interest is payable at the end of each interest period and, in any event, at least every three months. Fees We pay certain fees with respect to the credit facilities, including (a) 0.50% per annum on the undrawn portion of the commitments in respect of the credit facilities, which began to accrue on May 31, 2000 and is payable quarterly in arrears after May 31, 2000, subject to certain adjustments and (b) a fee at a per annum rate equal to the spread over Adjusted LIBOR under the revolving credit facility accruing on the aggregate face amount of outstanding letters of credit under the revolving credit facility, which is payable in arrears at the end of each quarter and upon the termination of the revolving credit facility, in each case for the actual number of days elapsed over a 360-day year. The fees referred to in (b) are distributed to the lenders participating in the revolving credit facility pro rata in accordance with the amount of each such lender's revolving credit facility 78 86 commitment. In addition, we pay to the issuing bank, for its own account, (i) a per annum fronting fee on the aggregate face amount of outstanding letters of credit, payable in arrears at the end of each quarter and upon the termination of the revolving credit facility, in each case for the actual number of days elapsed over a 360-day year, and (ii) customary issuance and administration fees. We also pay the administrative agent a customary annual administration fee. Guarantees; Security Our obligations under the credit facilities, under the related security documentation and under any interest protection or other hedging arrangements entered into by us with a lender (or any affiliate thereof) are unconditionally guaranteed by each of our existing and subsequently acquired or organized domestic (and, to the extent no adverse tax consequences would result therefrom, foreign) restricted subsidiaries. These obligations are secured by substantially all of our assets (subject to customary exceptions) and by the assets of each of our existing and subsequently acquired or organized domestic (and, to the extent no adverse tax consequences would result therefrom, foreign) restricted subsidiaries, including but not limited to - a first-priority pledge of all capital stock held by us or any other of our domestic (and, subject to the foregoing limitation, foreign) restricted subsidiaries and held by subsequently acquired or organized restricted subsidiaries of ours (which pledge, in the case of any foreign subsidiaries, is limited to 65% of the capital stock of such foreign subsidiary to the extent the pledge of any greater percentage would result in adverse tax consequences to us), and - a perfected first-priority security interests in and, in some cases, mortgages on, substantially all of our tangible and intangible assets and on those of each of our existing or subsequently acquired or organized domestic (and, subject to the foregoing limitation, foreign) restricted subsidiaries (including but not limited to accounts receivable, inventory, real property, equipment, trademarks, other intellectual property, licensing agreements, cash and proceeds of the foregoing). Commitment Reductions and Repayments The tranche A facility matures on May 31, 2006 and amortizes on a quarterly basis, commencing with the quarter ended September 30, 2001. The tranche B facility matures on May 31, 2008, and amortizes on an annual basis in nominal amounts for the period from June 30, 2001 to June 30, 2006 and amortizes on a quarterly basis for the period beginning June 30, 2007 and ending on the final maturity date. The revolving credit facility matures on May 31, 2006. Affirmative, Negative and Financial Covenants Affirmative Covenants. The credit facilities contain a number of affirmative covenants including, among others: - delivery of financial statements and other information; - notices of material events; - information regarding collateral; - existence; - conduct of business; - payment of obligations; - maintenance of properties; - insurance; 79 87 - casualty and condemnation; - maintenance of books and records; - inspection and audit rights; - compliance with laws; - use of proceeds and letters of credit; - additional subsidiaries; - further assurances; and - interest rate hedging. Negative Covenants. The credit facilities contain a number of negative covenants including, among others: - indebtedness; - liens; - fundamental changes; - investments, loans, advances, guarantees and acquisitions, subject to exceptions for certain permitted acquisitions - certain equity securities; - asset sales; - sale and lease-back transactions; - hedging agreements; - restricted payments; - certain payments of indebtedness; - transactions with affiliates; - restrictive agreements; - amendment of material documents; and - designated senior debt. Financial Covenants. The credit facilities contain a number of financial covenants, including, among others: - a maximum ratio of debt to EBITDA; - a minimum interest coverage ratio; and - maximum capital expenditures. Events of Default The credit facilities contain customary events of default, including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross default to certain other indebtedness, bankruptcy events, ERISA events, material judgments and liabilities, actual or asserted invalidity of security interests and change of control. 80 88 DESCRIPTION OF CAPITAL STOCK GENERAL Our authorized capital stock consists of 10,000,000 shares of common stock, no par value, and 200,000 shares of preferred stock, no par value. As of July 20, 2000, 574,006 shares of our common stock (of which 32,750 shares are subject to vesting requirements which have not yet been met) and 100,000 shares of preferred stock were outstanding. The outstanding shares of common stock consist of 572,356 shares issued upon consummation of the Transactions on May 31, 2000 and 1,650 shares of common stock issued on July 17, 2000 in a private placement offering to members of our senior management who were not Management Investors. In the private placement offering, we received cash consideration of $483.13 per share, or approximately $800,000 in the aggregate. In addition, at July 20, 2000, we had reserved for issuance the 43,242 shares of common stock underlying the Preferred Stock Warrants, the 18,532 shares of common stock underlying the Note Warrants, the 10,030 shares of common stock underlying the options granted under the 2000 plan, the 8,230 shares of common stock which remain available for issuance under the 2000 plan and the 8,902 shares of common stock underlying the options granted to Mr. Knott under the 1998 plan. The following are summaries of the terms of the common stock and the preferred stock. Such summaries do not purport to be complete and are subject in all respects to our articles of incorporation and bylaws and the preferred stock warrant agreement, copies of which have been filed as exhibits to the registration statement of which this prospectus forms a part. For a summary of the terms of our Note Warrants, please see "Description of the Note Warrants." COMMON STOCK Subject to the rights of holders of any outstanding preferred stock, the holders of common stock are entitled to receive dividends when and as declared by our Board of Directors out of our assets legally available for distribution. The holders of common stock are entitled to one vote per share on all matters on which the holders of the common stock are entitled to vote. The holders of common stock do not have cumulative voting rights; as a result, the holders of a majority of the shares of common stock represented at a meeting can elect all the directors standing for election at the meeting. See "Risk Factors -- Concentration of Ownership and Control." The holders of common stock do not have any exchange, redemption or preemptive rights (however, pursuant to the Stockholders Agreement, we have granted preemptive rights to acquire additional shares of the common stock). See "Certain Relationships and Related Transactions." In the event of the liquidation, dissolution or winding up of the Company, the holders of common stock would be entitled to share ratably, subject to the liquidation preferences of any preferred stock then outstanding, in our assets legally available for distribution. Fully-paid shares of common stock are not liable to further calls or assessments by us and holders of common stock are not liable for any of our liabilities. PREFERRED STOCK We are authorized to issue up to 200,000 shares of preferred stock. Of this amount, 100,000 shares have been designated as Series A Cumulative Exchangeable Redeemable Preferred Stock (the "Preferred Stock"). The preferences, limitations and relative rights of the remaining 100,000 shares of preferred stock have not been established. A summary description of the Preferred Stock may be found under the heading "-- Description of Preferred Stock." Our board of directors has authority to issue, without any further action by our shareholders, one or more additional series of preferred stock, and to determine at the time of issuance the number, designation, preferences, limitations and relative rights of such additional series of preferred stock. The holders of additional series of preferred stock, if issued, will be entitled to such 81 89 voting rights as our board of directors shall determine in its discretion, subject to the limitations set forth in the Articles of Incorporation. As a result, our board of directors, without shareholder approval, could authorize the issuance of preferred stock with rights which could adversely affect the rights of the holders of common stock. Any future issuance of preferred stock may have the effect of delaying or preventing a change in control of us without further action by the shareholders and may adversely affect the voting and other rights of the holders of common stock. Other than the Preferred Stock issued as part of the Transactions, we presently have no plans to issue any additional series of preferred stock. DESCRIPTION OF PREFERRED STOCK Dividends. Dividends on the Preferred Stock accrue from the issue date at an annual rate of 14%. We have the option to pay dividends in cash or to have the dividends accrue and compound quarterly. After May 31, 2005, however, the annual dividend rate increases to 16% unless we pay dividends in cash. The annual dividend rate also increases to 16% if we fail to comply with certain of our obligations or upon certain events of bankruptcy. The credit facilities will prohibit and the Indenture restricts our ability to pay cash dividends on the Preferred Stock. Voting Rights. Holders of the Preferred Stock have no voting rights, except as otherwise required by law and except in certain circumstances, including: - amending certain rights of the holders of the Preferred Stock; and - the issuance of any class of equity securities that ranks on par with or senior to the Preferred Stock. Ranking. The Preferred Stock is, with respect to dividend and liquidation rights, our most senior class or series of capital stock. We may not issue any capital stock which ranks equal or senior to the Preferred Stock in terms of dividend and liquidation rights without the approval of holders of at least a majority of the shares of outstanding Preferred Stock. Exchange Rights. We may, at our option, exchange the Preferred Stock for 14% senior subordinated exchange notes so long as such exchange and the associated debt incurrence is permitted by our existing debt instruments, but no holder of Preferred Stock may be required to make the exchange without its consent. Redemption. We must redeem the Preferred Stock at a price equal to its liquidation preference of $1,000 per share, plus accumulated dividends, on May 31, 2011. On or after May 31, 2003, we may redeem the Preferred Stock at our option, in whole or in part, at a redemption price of: - 107% of the sum of the liquidation preference plus accrued and unpaid dividends if redeemed prior to May 31, 2004; - 103% of the sum of the liquidation preference plus accrued and unpaid dividends if redeemed on or after May 31, 2004 and prior to May 31, 2005; and - 100% of the sum of the liquidation preference plus accrued and unpaid dividends if redeemed at any time on or after May 31, 2005. In addition, prior to May 31, 2003, we may redeem the Preferred Stock, at any time, at our option, in whole or in part, at the higher of (x) a redemption price (expressed as a percentage of the sum of the liquidation preference plus all accrued and unpaid dividends, if any) equal to 115%; and (y) the present value as of the redemption date of the redemption price that would be payable if the Preferred Stock were redeemed on May 31, 2003 (assuming dividends were to accrue and be unpaid through May 31, 2003) determined by discounting such 82 90 redemption price at a rate equal to the then current yield on a treasury note with a maturity date corresponding closest to May 31, 2003 plus 100 basis points. The credit facilities prohibit and the Indenture restricts our ability to redeem the Preferred Stock. Change of Control Offer. Before we consummate a change of control, we must give holders of the Preferred Stock the opportunity to sell us their Preferred Stock at 103% of the sum of the liquidation preference plus accrued and unpaid dividends and either obtain the consent of the lenders under the credit facilities and the holders of the Notes, if required, or repay such debt to comply with this repurchase obligation. Certain Restrictive Provisions. The articles of incorporation or the purchase agreement for the Preferred Stock limit our ability to, among other things: - issue stock that ranks senior to or equally with the Preferred Stock, including additional shares of Preferred Stock; - pay dividends and make distributions on, or redeem, capital stock that ranks junior to the Preferred Stock; - enter into transactions with affiliates; - merge, consolidate, recapitalize, dissolve or liquidate; and - amend or modify our articles of incorporation. These covenants are subject to a number of important exceptions. DESCRIPTION OF PREFERRED STOCK WARRANTS Exercise Period. The holders of Preferred Stock Warrants may exercise them at any time prior to May 31, 2011. Exercise Price. The Preferred Stock Warrants have a nominal exercise price of $.01 per share, which may be paid at the holder's option in cash or surrender of Preferred Stock Warrants with a value equal to the exercise price. The Preferred Stock Warrants contain customary anti-dilution provisions with respect to stock splits and combinations, stock dividends, below market issuances, distributions of securities or other unusual distributions of cash or other assets, mergers, consolidations and reorganizations. Dividend Rights. We may not pay dividends on our common stock unless the holders of the Preferred Stock Warrants receive a pro rata portion of such dividends on a basis as if they had exercised the Preferred Stock Warrants immediately prior to such dividend. Board Attendance Rights. The holders of at least a majority of the common stock issued or issuable upon exercise of the Preferred Stock Warrants are entitled to designate one non-voting representative to attend all meetings of our board of directors and committees thereof. Other Rights. Holders of the Preferred Stock Warrants are party to the registration rights agreement and the stockholders agreement entered into on May 31, 2000. See "Certain Relationships and Related Transactions -- Transactions between Huntsman Packaging and New Stockholders." UTAH CONTROL SHARES ACQUISITION ACT The Utah Control Shares Acquisition Act (the "Control Shares Act") provides that, when a person or group acquires shares (or the power to direct the voting of shares) of a corporation that is subject to the Control Shares Act equal to or in excess of 20%, 33 1/3% or a majority of the voting power of the corporation, the acquiror is not permitted to vote (or to direct the voting of) the shares unless a majority of the corporation's shares (voting in voting groups, if applicable), excluding shares held by the acquiror or by the officers and employee-directors of the corporation, approve a 83 91 resolution granting the acquiror the right to vote the shares. Shareholder approval may occur at the next meeting of the shareholders or, if the acquiror requests a special meeting and agrees to pay the associated costs of the corporation for the requested special meeting, at the requested special meeting of the shareholders (to be held within 50 days of the corporation's receipt of the request by the acquiror). If authorized by the corporation's articles of incorporation or bylaws, the corporation may redeem the acquiror's shares at their fair market value if the acquiror does not file an "acquiring person statement." Our articles of incorporation and bylaws do not provide for redemption of an acquiror's shares in the event the acquiror fails to file an "acquiring person statement." An acquiror's shares are not subject to redemption after an "acquiring person statement" has been filed unless the shares are not accorded full voting rights by the shareholders. If the acquiror obtains the right to vote, and if the acquiror obtains a majority of the voting power of the corporation, the shareholders may be entitled to dissenters' rights. The Control Shares Act does not apply if (a) a corporation's articles of incorporation or bylaws provide that the Control Shares Act does not apply, (b) the acquisition of shares of the corporation is consummated pursuant to a merger (to which the corporation is a party), or (c) under certain other specified circumstances. In addition, the Control Shares Act applies only to Utah corporations that (a) have 100 or more shareholders, (b) have their (i) principal place of business, (ii) principal office, or (iii) substantial assets in the State of Utah, and (c) have (i) more than 10% of their shareholders who are residents of Utah, (ii) more than 10% of their shares owned by Utah residents, or (iii) 10,000 or more shareholders who are residents of Utah. Our articles of Incorporation and bylaws contain no additional provision restricting transactions with interested shareholders or other takeover situations, nor do they contain provisions opting out of the Control Shares Act. 84 92 DESCRIPTION OF THE NOTES Definitions of certain terms used in this Description of the Notes may be found under the heading "-- Certain Definitions." For the purposes of this section, the term "Company" refers only to Huntsman Packaging Corporation and not any of its subsidiaries. Certain of the Company's Subsidiaries will guarantee the Notes. In addition, certain of the Company's subsidiaries formed or acquired in the future, if any, will be required to guarantee the Notes and therefore will be subject to many of the provisions contained in this Description of the Notes. Each company which guarantees the Notes is referred to in this section as a "Note Guarantor." Each such guarantee is termed a "Note Guarantee." The Company issued the Old Notes and will issue the New Notes under the Indenture, dated as of May 31, 2000, among the Company, the Note Guarantors and The Bank of New York, as trustee (the "Trustee"), a copy of which has been filed as an exhibit to the registration statement of which this prospectus is a part. The Indenture contains provisions which define your rights under the Notes. In addition, the Indenture governs the obligations of the Company and of each Note Guarantor under the Notes. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the TIA. On May 31, 2000, the Company issued 220,000 units, consisting of $220.0 million aggregate principal amount of Old Notes and Note Warrants to purchase 18,532 shares of common stock. The Notes and the Note Warrants will not be separately transferable until the earlier of November 27, 2000 or the date of effectiveness of the registration statement of which this prospectus forms a part. The terms of the New Notes are identical in all material respects to the Old Notes, except the New Notes will not contain transfer restrictions and holders of New Notes will no longer have any registration rights or be entitled to any liquidated damages. The Trustee will authenticate and deliver New Notes for original issue only in exchange for a like principal amount of Old Notes. Any Old Notes that remain outstanding after the consummation of the exchange offer, together with the New Notes, will be treated as a single class of securities under the indenture. Accordingly, all references in this section to specified percentages in aggregate principal amount of the outstanding New Notes shall be deemed to mean, at any time after the exchange offer is consummated, such percentage in aggregate principal amount of the Old Notes and New Notes then outstanding. The following description is meant to be only a summary of certain provisions of the Indenture. It does not restate the terms of the Indenture in their entirety. We urge that you carefully read the Indenture as it, and not this description, governs your rights as Holders. OVERVIEW OF THE NOTES AND THE NOTE GUARANTEES The Notes The Old Notes are, and the New Notes will be: - general unsecured obligations of the Company; - subordinated in right of payment to all existing and future Senior Indebtedness of the Company; - pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of the Company; - senior in right of payment to any future Subordinated Obligations of the Company; - effectively subordinated to any Secured Indebtedness of the Company and its Subsidiaries to the extent of the value of the assets securing such Indebtedness; and - effectively subordinated to all liabilities (including trade payables) and Preferred Stock of each Subsidiary of the Company which is not guaranteeing the Notes, and any other future Subsidiaries which do not guarantee the Notes. 85 93 The Note Guarantors The Old Notes are, and the New Notes will be, guaranteed by each of the following domestic Restricted Subsidiaries of the Company: - Edison Plastics International, Inc.; - Huntsman Bulk Packaging Corporation; - Huntsman Container Corporation International; - Huntsman Edison Films Corporation; - Huntsman Film Products of Mexico, Inc.; - Huntsman KCL Corporation; - Huntsman Packaging Georgia, Inc.; and - Huntsman Packaging of Canada, LLC. The Old Notes and the New Notes will not be guaranteed by Restricted Subsidiaries which also do not guarantee any Senior Indebtedness, currently consisting of the following: - Aspen Industrial S.A. de C.V.; - Edison Exports, Inc. FSC Limited; - Huntsman Film Products of Canada Ltd.; - Huntsman Film Products GmbH; - Huntsman Film Products Pty, Ltd.; - Huntsman Film Products, UK, Limited; - Mexicana de Tintas S.A.; and - Nepsa de Mexico S.A. de C.V. The Old Notes and the New Notes will not be guaranteed by HPC Investment, Inc., which will be an Unrestricted Subsidiary. HPC Investment Inc. is currently inactive and does not have any material assets or liabilities. On a pro forma basis, the Restricted Subsidiaries that are not Note Guarantors would have generated 13.0% of the Company's net sales for the twelve months ended March 31, 2000, and would have accounted for 12.6% of the assets as of March 31, 2000 of the Company and its Subsidiaries on a consolidated basis. The Note Guarantees The Note Guarantee of each Note Guarantor and all Note Guarantees, if any, made by future Restricted Subsidiaries of the Company: - are general unsecured obligations of the applicable Note Guarantor; - are subordinated in right of payment to all existing and future Senior Indebtedness of such Note Guarantor; - rank pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of such Note Guarantor; - are senior in right of payment to any future Subordinated Obligations of such Note Guarantor; and 86 94 - are effectively subordinated to any Secured Indebtedness of such Note Guarantor and its Subsidiaries to the extent of the value of the assets securing such Indebtedness. PRINCIPAL, MATURITY AND INTEREST We issued the Old Notes in an aggregate principal amount of $220 million. The Old Notes are limited to $220,000,000 in aggregate principal amount and will mature on June 1, 2010. The Old Notes are, and the New Notes will be, in fully registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000. Each Note bears interest at a rate of 13% per annum from May 31, 2000, or from the most recent date to which interest has been paid or provided for. We will pay interest semiannually on June 1 and December 1 of each year, commencing December 1, 2000 to Holders of record at the close of business on May 15 or November 15 immediately preceding the interest payment date. We will pay interest on overdue principal at the rate borne by the Notes and, to the extent lawful, overdue installments of interest at such rate. Holders of Old Notes whose Old Notes are accepted for exchange in the exchange offer will be deemed to have waived the right to receive any payment in respect of interest on the Old Notes accrued from May 31, 2000 (the original issue date of the Old Notes) to the date of issuance of the New Notes. Consequently, Holders who exchange their Old Notes for New Notes will receive the same interest payment on December 1, 2000 (the first interest payment date with respect to the Old Notes and the New Notes following consummation of the exchange offer) that they would have received had they not accepted the exchange offer. PAYING AGENT AND REGISTRAR We will pay the principal of, premium, if any, interest and liquidated damages, if any, on the Notes at any office of ours or any agency designated by us which is located in the Borough of Manhattan, The City of New York. We have initially designated the corporate trust office of the Trustee to act as our agent in such matters. The location of the corporate trust office is 101 Barclay Street, New York, New York 10286. We, however, reserve the right to pay interest to Holders by check mailed directly to Holders at their registered addresses. Holders may exchange or transfer their Notes at the same location given in the preceding paragraph. No service charge will be made for any registration of transfer or exchange of Notes. We, however, may require Holders to pay any transfer tax or other similar governmental charge payable in connection with any such transfer or exchange. OPTIONAL REDEMPTION Except as set forth in the following paragraph, the Company may not redeem the Notes prior to June 1 , 2005. On or after that date, the Company may redeem the Notes, in whole or in part, on not less than 30 nor more than 60 days' prior notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest and liquidated damages thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest and liquidated damages, if any, due on the relevant interest payment date), if redeemed during the 12-month period commencing on June 1 of the years set forth below:
YEAR REDEMPTION PRICE - ---- ---------------- 2005.............................................. 106.500% 2006.............................................. 104.333% 2007.............................................. 102.167% 2008 and thereafter............................... 100.000%
Prior to June 1, 2003, the Company may, on one or more occasions, also redeem up to a maximum of 35% of the original aggregate principal amount of the Notes with the Net Cash Proceeds of one or more Equity Offerings by the Company at a redemption price equal to 113% of 87 95 the principal amount thereof, plus accrued and unpaid interest and liquidated damages thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that after giving effect to any such redemption: (1) at least 65% of the original aggregate principal amount of the Notes remains outstanding; and (2) any such redemption by the Company must be made within 120 days of such Equity Offering and must be made in accordance with certain procedures set forth in the Indenture. SELECTION If we partially redeem Notes, the Trustee will select the Notes to be redeemed on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, although no Note of $1,000 in original principal amount will be redeemed in part. If we redeem any Note in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancelation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption so long as we have deposited with the Paying Agent funds sufficient to pay the principal of, plus accrued and unpaid interest and liquidated damages, if any, on, the Notes to be redeemed. RANKING The Old Notes are, and the New Notes will be, unsecured Senior Subordinated Indebtedness of the Company, will be subordinated in right of payment to all existing and future Senior Indebtedness of the Company, will rank pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of the Company and will be senior in right of payment to all future Subordinated Obligations of the Company. The Old Notes are, and the New Notes also will be effectively subordinated to any Secured Indebtedness of the Company and its Subsidiaries to the extent of the value of the assets securing such Indebtedness. However, payment from the money or the proceeds of U.S. Government Obligations held in any defeasance trust described below under the caption "-- Defeasance" will not be subordinated to any Senior Indebtedness or subject to the restrictions described herein. The Company currently conducts certain of its operations through its Subsidiaries. To the extent any existing or future Subsidiary does not Guarantee the Notes, creditors of such Subsidiaries, including trade creditors and preferred stockholders (if any), generally will have priority with respect to the assets and earnings of such Subsidiaries over the claims of the Company's creditors, including Holders. The Notes, therefore, will be effectively subordinated to claims of creditors, including trade creditors, and preferred stockholders (if any) of Subsidiaries of the Company, including those formed or acquired in the future, that do not Guarantee the Notes. As of March 31, 2000, on a pro forma basis after giving effect to the Transactions and the use of proceeds therefrom, the Subsidiaries of the Company, other than those Subsidiaries that are Note Guarantors, would have had total liabilities, including trade payables, of approximately $59.3 million (excluding liabilities owed to the Company). Assuming that we had completed the Transactions as of March 31, 2000 and applied the net proceeds we receive from the Transactions in the manner described under the heading "Use of Proceeds," as of March 31, 2000, there would have been outstanding: (1) approximately $487.2 million of Senior Indebtedness of the Company, all of which would have been Secured Indebtedness (exclusive of unused commitments of $92.8 million under the Revolving Credit Facility); 88 96 (2) no Senior Subordinated Indebtedness of the Company (other than the Notes) and no indebtedness of the Company that is subordinate or junior in right of payment to the Notes; (3) no Senior Indebtedness of the Note Guarantors (other than the guarantees of Indebtedness under the Credit Agreement); and (4) no Senior Subordinated Indebtedness of the Note Guarantors (other than the Note Guarantees), and no Indebtedness of the Note Guarantors that is subordinate or junior in right of payment to the Note Guarantees. Subject to certain conditions, the Indenture permits us to incur substantial amounts of additional Indebtedness. Such Indebtedness may be Senior Indebtedness. See "-- Certain Covenants -- Limitation on Indebtedness" below. "Senior Indebtedness" of the Company or any Note Guarantor, as the case may be, means the principal of, premium (if any) and accrued and unpaid interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization of the Company or any Note Guarantor, as applicable, regardless of whether or not a claim for post-filing interest is allowed in such proceedings), and fees and all other amounts owing in respect of, Bank Indebtedness and all other Indebtedness of the Company or any Note Guarantor, as applicable, whether outstanding on the Closing Date or thereafter Incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are not superior in right of payment to the Notes or such Note Guarantor's Note Guarantee; provided, however, that Senior Indebtedness shall not include: (1) any obligation of the Company to any Subsidiary of the Company or of any Note Guarantor to the Company or any other Subsidiary of the Company; (2) any liability for Federal, state, local or other taxes owed or owing by the Company or any Note Guarantor; (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities); (4) any Indebtedness or obligation of the Company or any Note Guarantor (and any accrued and unpaid interest in respect thereof) that by its terms is subordinate or junior in right of payment to any other Indebtedness or obligation of the Company or such Note Guarantor, as applicable, including any Senior Subordinated Indebtedness and any Subordinated Obligations; (5) any obligations with respect to any Capital Stock; or (6) any Indebtedness Incurred in violation of the Indenture, unless such Indebtedness was Incurred based on an Officers' Certificate of the Company (delivered in good faith after reasonable investigation) to the effect that the Incurrence of such Indebtedness did not violate the provisions of the Indenture. Only Indebtedness of the Company that is Senior Indebtedness will rank senior to the Notes. The Notes will rank pari passu in all respects with all other Senior Subordinated Indebtedness of the Company. The Company has agreed in the Indenture that it will not Incur, directly or indirectly, any Indebtedness which is subordinate or junior in right of payment to Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not deemed to be subordinate or junior to Secured Indebtedness merely because it is unsecured. 89 97 The Company may not pay principal of, premium (if any) or interest on the Notes, or make any deposit pursuant to the provisions described under "-- Defeasance" below, and may not otherwise repurchase, redeem or otherwise retire any Notes (collectively, "pay the Notes") if: (1) any principal of, interest on, unpaid drawings for letters of credit in respect of, or regularly accruing fees with respect to any, Designated Senior Indebtedness of the Company is not paid when due, or (2) any other default on Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded, or (y) such amounts due under Designated Senior Indebtedness have been paid in full; provided, however, that the Company may pay the Notes without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the Designated Senior Indebtedness with respect to which either of the events set forth in clause (1) or (2) above has occurred and is continuing. During the continuance of any default (other than a default described in clause (1) or (2) above) with respect to any Designated Senior Indebtedness of the Company pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, we may not pay the Notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to us) of written notice, specified as a "Notice of Default" and describing with particularity the default under such Designated Senior Indebtedness (a "Blockage Notice"), of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated: (1) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (2) by repayment in full of such Designated Senior Indebtedness, or (3) because the default giving rise to such Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the second preceding sentence and in the immediately succeeding paragraph), unless the holders of such Designated Senior Indebtedness or the Representative of such holders have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Notes after the end of such Payment Blockage Period, including any missed payments. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. However, if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness other than the Bank Indebtedness, the Representative of the Bank Indebtedness may give another Blockage Notice within such period. In no event, however, may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. For purposes of this paragraph, no default or event of default that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior 90 98 Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) the holders of Senior Indebtedness of the Company will be entitled to receive payment in full of such Senior Indebtedness before the Holders of the Notes are entitled to receive any payment of principal of or interest on the Notes; and (2) until such Senior Indebtedness is paid in full, any payment or distribution to which Holders would be entitled but for the subordination provisions of the Indenture will be made to holders of such Senior Indebtedness as their interests may appear, except that Holders of the Notes may receive: (i) Capital Stock; and (ii) debt securities that are subordinated to such Senior Indebtedness to at least the same extent as the Notes. If a payment or distribution is made to Holders of the Notes that due to the subordination provisions of the Indenture should not have been made to them, such Holders will be required to hold it in trust for the benefit of the holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness of the Company (or their Representative) of the acceleration. If any such Designated Senior Indebtedness is outstanding, the Company may not pay the Notes until five Business Days after such holders or the Representative of such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if the subordination provisions of the Indenture otherwise permit payment at that time. By reason of the subordination provisions of the Indenture, in the event of insolvency, creditors of the Company who are holders of Senior Indebtedness of the Company may recover more, ratably, than the Holders of the Notes, and creditors of the Company who are not holders of Senior Indebtedness of the Company or Senior Subordinated Indebtedness of the Company (including the Notes) may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than the holders of the Notes. NOTE GUARANTEES The Note Guarantors and certain future Subsidiaries of the Company (as described below), as primary obligors and not merely as sureties, will jointly and severally unconditionally Guarantee on an unsecured senior subordinated basis the performance and full and punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all obligations of the Company under the Indenture (including obligations to the Trustee) and the Notes, whether for payment of principal of or interest on or liquidated damages in respect of the Notes, expenses, indemnification or otherwise (all such obligations guaranteed by such Note Guarantors being herein called the "Guaranteed Obligations"'). Such Note Guarantors will agree to pay, in addition to the amount stated above, any and all costs and expenses (including reasonable counsel fees and expenses) incurred by the Trustee or the Holders in enforcing any rights under the Note Guarantees. Each Note Guarantee will be limited to an amount not to exceed the maximum amount that can be Guaranteed by the applicable Note Guarantor without rendering the Note Guarantee, as it relates to such Note Guarantor, void or voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. The Company will cause each 91 99 Domestic Subsidiary and any other Restricted Subsidiary that guarantees any Senior Indebtedness (other than a Foreign Subsidiary that guarantees Senior Indebtedness Incurred by another Foreign indenture pursuant to which such Restricted Subsidiary will Guarantee payment of the Notes. See "-- Certain Covenants -- Future Note Guarantors" below. The obligations of a Note Guarantor under its Note Guarantee are senior subordinated obligations. As such, the rights of Holders to receive payment by a Note Guarantor pursuant to its Note Guarantee will be subordinated in right of payment to the rights of holders of Senior Indebtedness of such Note Guarantor. The terms of the subordination provisions described above with respect to the Company's obligations under the Notes apply equally to a Note Guarantor and the obligations of such Note Guarantor under its Note Guarantee. Each Note Guarantee is a continuing guarantee and shall (a) remain in full force and effect until payment in full of all the Guaranteed Obligations or such Note Guarantee is released upon the merger or the sale of all the Capital Stock or assets of the Note Guarantor in compliance with the conditions set forth in the Indenture under "-- Merger and Consolidation" or "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock", (b) be binding upon each Note Guarantor and its successors and (c) inure to the benefit of, and be enforceable by, the Trustee, the Holders and their successors, transferees and assigns. CHANGE OF CONTROL Upon the occurrence of any of the following events (each a "Change of Control"), each Holder will have the right to require the Company to repurchase all or any part of such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest and liquidated damages, if any, due on the relevant interest payment date); provided, however, that notwithstanding the occurrence of a Change of Control, the Company shall not be obligated to repurchase the Notes pursuant to this section in the event that it has exercised its right to redeem all the Notes under the terms of the section titled "Optional Redemption": (1) prior to the first public offering of common stock of the Company, the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by any Permitted Holder or otherwise (for purposes of this clause (1) and clause (2) below, the Permitted Holders shall be deemed to beneficially own any Voting Stock of an entity (the "specified entity") held by any other entity (the "parent entity") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent entity); (2) (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in clause (1) above, except that for purposes of this clause (2) a person (including a Permitted Holder) shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately, only after the passage of time, upon the happening of any event or otherwise), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company and (B) the Permitted Holders "beneficially own" (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election 92 100 a majority of the Board of Directors of the Company (for the purposes of this clause (2), such other person shall be deemed to beneficially own any Voting Stock of a specified entity held by a parent entity, if such other person is the beneficial owner (as defined in this clause (2)), directly or indirectly, of more than 50% of the voting power of the Voting Stock of such parent entity and the Permitted Holders "beneficially own" (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of such parent entity); (3) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors (A) selected in accordance with the Stockholders Agreement so long as such agreement is in effect or otherwise nominated by the Permitted Holders or (B) whose election by the Board of Directors of the Company or whose nomination for election by the stockholders of the Company was approved by a vote of at least a majority of the members of the Board of Directors of the Company, then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved by the Board of Directors or in accordance with the Stockholders Agreement or otherwise by the Permitted Holders) cease for any reason to constitute a majority of the Board of Directors of the Company then in office; (4) the adoption of a plan relating to the liquidation or dissolution of the Company; or (5) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving Person or transferee that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving Person or transferee. In the event that at the time of such Change of Control the terms of any agreement governing Bank Indebtedness of the Company or its Subsidiaries restrict or prohibit the repurchase of Notes pursuant to this covenant, then prior to the mailing of the notice to Holders provided for in the immediately following paragraph but in any event within 30 days following any Change of Control, the Company shall: (1) repay in full all such Bank Indebtedness or offer to repay in full all such Bank Indebtedness and repay the Indebtedness of each lender who has accepted such offer, or (2) obtain the requisite consent of the lenders under such agreements to permit the repurchase of the Notes as provided for below. If the Company does not obtain such consents or repay such Bank Indebtedness, the Company will remain prohibited from repurchasing the Notes pursuant to this covenant. In such event the Company's failure to make an offer to purchase Notes pursuant to this covenant would constitute an Event of Default under the Indenture which in turn would constitute a default under the Credit Agreement. In such circumstances, the subordination provisions of the Indenture would likely prohibit payments to Holders of the Notes. Within 30 days following any Change of Control, the Company shall mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase (subject to the right of 93 101 Holders of record on the relevant record date to receive interest and liquidated damages, if any, on the relevant interest payment date); (2) the circumstances and relevant facts and financial information regarding such Change of Control; (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with this covenant, that a Holder must follow in order to have its Notes purchased. The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof. The Change of Control purchase feature is a result of negotiations between the Company and the Initial Purchaser. Management has no present intention to engage in a transaction involving a Change of Control, although it is possible that the Company would decide to do so in the future. Subject to the limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect the Company's capital structure or credit ratings. Restrictions on the ability of the Company to incur additional Indebtedness are contained in the covenants described under "-- Certain Covenants -- Limitation on Indebtedness". Such restrictions can only be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenants, however, the Indenture will not contain any covenants or provisions that may afford Holders protection in the event of a highly leveraged transaction. The occurrence of certain of the events which would constitute a Change of Control would constitute a default under the Credit Agreement. Future Senior Indebtedness of the Company may contain prohibitions of certain events which would constitute a Change of Control or require such Senior Indebtedness to be repurchased upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to repurchase the Notes could cause a default under such Senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company. Finally, the Company's ability to pay cash to the Holders upon a repurchase may be limited by the Company's then existing financial resources. There can be no assurance that the Company will have sufficient funds available when necessary to make any required repurchases. The provisions under the Indenture relative to the Company's obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes. 94 102 CERTAIN COVENANTS The Indenture will contain covenants including, among others, the following: Limitation on Indebtedness. (a) The Company will not, and will not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided, however, that the Company or any Restricted Subsidiary that is a Note Guarantor may Incur Indebtedness if on the date of such Incurrence and after giving effect thereto the Consolidated Coverage Ratio would be greater than 2.00:1.00 if such Indebtedness is Incurred on or prior to December 31, 2002 and 2.25:1.00 if such Indebtedness is Incurred thereafter. (b) Notwithstanding the foregoing paragraph (a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness: (1) Indebtedness Incurred pursuant to the Credit Agreement in an aggregate principal amount not to exceed $580.0 million at any one time outstanding less the aggregate amount of all repayments of principal of such Indebtedness pursuant to the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock"; (2) Indebtedness of the Company owed to and held by any Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the Company or any Restricted Subsidiary; provided, however, that (A) any subsequent issuance or transfer of any Capital Stock or any other event that results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof, (B) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Notes, (C) if a Restricted Subsidiary is the obligor on such Indebtedness, such Indebtedness is made pursuant to an intercompany note and (D) if a Note Guarantor is the obligor on such Indebtedness and the Company is not the obligee, such Indebtedness is subordinated in right of payment to the Note Guarantee of such Note Guarantor; (3) Indebtedness (A) represented by the Old Notes, the Note Guarantees, the New Notes and the New Note Guarantees, (B) outstanding on the Closing Date (other than the Indebtedness described in clauses (1) and (2) above), (C) consisting of Refinancing Indebtedness Incurred in respect of any Indebtedness described in this clause (3) (including Refinancing Indebtedness) or the foregoing paragraph (a) and (D) consisting of Guarantees of any Indebtedness otherwise permitted by the terms of the Indenture; (4) (A) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Subsidiary of or was otherwise acquired by the Company) and (B) Refinancing Indebtedness Incurred by a Restricted Subsidiary in respect of Indebtedness Incurred by such Restricted Subsidiary pursuant to this clause (4); (5) Indebtedness of the Company or a Restricted Subsidiary (A) in respect of performance bonds, bankers' acceptances, letters of credit and surety or appeal bonds provided by the Company and the Restricted Subsidiaries in the ordinary course of their business, and (B) under Commodity Agreements, Interest Rate Agreements and Currency Agreements entered into for bona fide hedging purposes of the Company or any Restricted Subsidiary in the ordinary course of business; provided, however, that such Interest Rate Agreements or Currency Agreements do not increase the principal amount of Indebtedness of the Company and its Restricted Subsidiaries outstanding at any time other than as a result of fluctuations in 95 103 interest rates or foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (6) Indebtedness (including Capitalized Lease Obligations and Attributable Debt) Incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal), equipment or other assets (in each case whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount which, when aggregated with the principal amount of all other Indebtedness then outstanding and Incurred pursuant to this clause (6) and all Refinancing Indebtedness Incurred to refund, refinance or replace any Indebtedness Incurred pursuant to this clause (6), does not exceed the greater of (x) 5.0% of Tangible Assets and (y) $30.0 million; (7) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course, provided that such Indebtedness is extinguished within five Business Days of Incurrence; (8) Indebtedness of the Company and its Restricted Subsidiaries arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case incurred or assumed in connection with the disposition of any business, assets or a Subsidiary of the Company in accordance with the terms of the Indenture, other than Guarantees by the Company or any Restricted Subsidiary of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary of the Company for the purpose of financing such acquisition; provided, however, that the maximum aggregate liability in respect of all such Indebtedness shall not exceed the gross proceeds, including the fair market value as determined in good faith by a majority of the Board of Directors of noncash proceeds (the fair market value of such noncash proceeds being measured at the time it is received and without giving effect to any subsequent changes in value), actually received by the Company and its Restricted Subsidiaries in connection with such disposition; (9) the Incurrence by a Securitization Entity of Indebtedness in a Qualified Securitization Transaction that is not recourse to the Company or any Restricted Subsidiary of the Company (except for Standard Securitization Undertakings); (10) Indebtedness of Foreign Subsidiaries to the extent that the aggregate outstanding amount of Indebtedness incurred by such Foreign Subsidiaries under this clause (10) does not exceed at any one time an amount equal to the sum of (A) 80% of the consolidated book value of the accounts receivable of all Foreign Subsidiaries and (B) 60% of the consolidated book value of the inventory of all Foreign Subsidiaries; (11) Indebtedness under any Domestic Overdraft Facility; or (12) Indebtedness of the Company and its Restricted Subsidiaries (in addition to Indebtedness permitted to be Incurred pursuant to the foregoing paragraph (a) or any other clause of this paragraph (b)) in an aggregate principal amount on the date of Incurrence that, when added to all other Indebtedness Incurred pursuant to this clause (12) and then outstanding, will not exceed $20.0 million. (c) Notwithstanding the foregoing, the Company may not Incur any Indebtedness pursuant to paragraph (b) above if the proceeds thereof are used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated Obligations unless such Indebtedness will be subordinated to the Notes to at least the same extent as such Subordinated Obligations. The Company may not Incur any Indebtedness if such Indebtedness is subordinate or junior in right of payment to any Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. In addition, the Company may not Incur any Secured Indebtedness 96 104 which is not Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Notes equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Notes) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien, except for Senior Subordinated Indebtedness and Subordinated Obligations secured by Liens on the assets of any entity existing at the time such entity is acquired by, and becomes a Restricted Subsidiary of, the Company, whether by merger, consolidation, purchase of assets or otherwise, provided that such Liens (x) are not created, incurred or assumed in connection with, or in contemplation of such entity being acquired by the Company and (y) do not extend to any other assets of the Company or any of its other Subsidiaries. A Note Guarantor may not Incur any Indebtedness if such Indebtedness is by its terms expressly subordinate or junior in right of payment to any Senior Indebtedness of such Note Guarantor unless such Indebtedness is Senior Subordinated Indebtedness of such Note Guarantor or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Note Guarantor. In addition, a Note Guarantor may not Incur any Secured Indebtedness that is not Senior Indebtedness of such Note Guarantor unless contemporaneously therewith effective provision is made to secure the Note Guarantee of such Note Guarantor equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to such Note Guarantee) such Secured Indebtedness for as long as such Secured Indebtedness is secured by a Lien, except for Senior Subordinated Indebtedness and Subordinated Obligations of such Note Guarantor secured by Liens on the assets of any entity existing at the time such entity is acquired by such Note Guarantor, whether by merger, consolidation, purchase of assets or otherwise, provided that such Liens (x) are not created, incurred or assumed in connection with or in contemplation of such assets being acquired by such Note Guarantor and (y) do not extend to any other assets of the Company or any of its other Subsidiaries. (d) Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may Incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rates of currencies. For purposes of determining the outstanding principal amount of any particular Indebtedness Incurred pursuant to this covenant: (1) Indebtedness Incurred pursuant to the Credit Agreement prior to or on the Closing Date shall be treated as Incurred pursuant to clause (1) of paragraph (b) above, (2) Guarantees of, or obligations in respect of letters of credit relating to, Indebtedness which is otherwise included in the determination of a particular amount of Indebtedness shall not be included, (3) If obligations in respect of letters of credit are Incurred pursuant to the Credit Agreement and are being treated as Incurred pursuant to clause (1) of paragraph (b) above and the letters of credit relate to other Indebtedness, then such other Indebtedness shall not be included, (4) The principal amount of any Disqualified Stock of the Company or a Restricted Subsidiary or Preferred Stock of a Restricted Subsidiary that is not a Note Guarantor will be equal to the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) or the maximum liquidation preference, (5) The principal amount of Indebtedness, Disqualified Stock of the Company or a Restricted Subsidiary or Preferred Stock of a Restricted Subsidiary that is not a Note Guarantor issued at a price less than the principal amount thereof, the maximum fixed redemption or repurchase price thereof or liquidation preference thereof, as applicable, will be equal to the amount of the liability or obligation in respect thereof determined in accordance with GAAP, 97 105 (6) If such Indebtedness is denominated in a currency other than U.S. dollars, the U.S. dollar equivalent principal amount thereof will be calculated based on the relevant currency exchange rates in effect on the date such Indebtedness was Incurred, (7) The accrual of interest, accrual of dividends, the accretion of accreted value, the payment of interest in the form of additional Indebtedness and the payment of dividends or distributions in the form of additional Capital Stock will not be deemed an Incurrence of Indebtedness for purposes of this covenant, (8) Indebtedness permitted by this covenant need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this covenant permitting such Indebtedness, and (9) In the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in this covenant, the Company, in its sole discretion, will classify (or later reclassify) such Indebtedness and only be required to include the amount of such Indebtedness in one of such clauses. Limitation on Restricted Payments. (a) The Company will not, and will not permit any Restricted Subsidiary, directly or indirectly, to: (1) declare or pay any dividend or make any distribution of any kind on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) or similar payment to the holders (solely in their capacities as such) of its Capital Stock except dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and except dividends or distributions payable to the Company or another Restricted Subsidiary (and, if such Restricted Subsidiary has shareholders other than the Company or other Restricted Subsidiaries, to its other shareholders on a pro rata basis), (2) purchase, redeem, retire or otherwise acquire for value any Capital Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or another Restricted Subsidiary, (3) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment any Subordinated Obligations (other than (A) the purchase, repurchase or other acquisition of Subordinated Obligations purchased 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 (B) Indebtedness described in clause (2) of paragraph (b) of the covenant described under "-- Limitation on Indebtedness"), or (4) make any Investment (other than a Permitted Investment) in any Person (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement or Investment being herein referred to as a "Restricted Payment") if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (A) a Default will have occurred and be continuing (or would result therefrom); (B) the Company could not Incur at least $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "-- Limitation on Indebtedness"; or (C) the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination will be conclusive and evidenced by a 98 106 resolution of the Board of Directors) declared or made subsequent to the Closing Date would exceed the sum, without duplication, of: (i) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Closing Date occurs to the end of the most recent fiscal quarter ending prior to the date of such Restricted Payment for which consolidated financial statements of the Company are publicly available (or, in case such Consolidated Net Income will be a deficit, minus 100% of such deficit); (ii) 100% of the aggregate Net Cash Proceeds (other than in respect of an Excluded Contribution) received by the Company (x) as capital contributions to the Company after the Closing Date or (y) from the issue or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Closing Date (other than a capital contribution from or an issuance or sale to (a) a Subsidiary of the Company or (b) an employee equity ownership or participation plan or other trust established by the Company or any of its Subsidiaries); (iii) 100% of the fair market value (as determined in good faith by the Board of Directors of the Company) of shares of Qualified Stock of the Company or any Restricted Subsidiary issued after the Closing Date to acquire assets from a third party; (iv) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Closing Date of any Indebtedness of the Company or its Restricted Subsidiaries issued after the Closing which is convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash or the fair market value of other property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); (v) 100% of the aggregate amount received by the Company or any Restricted Subsidiary in cash from the sale or other disposition (other than to (x) the Company or a Subsidiary of the Company or (y) an employee equity ownership or participation plan or other trust established by the Company or any of its Subsidiaries) of Restricted Investments made by the Company or any Restricted Subsidiary after the Closing Date and from repurchases and redemptions of such Restricted Investments from the Company or any Restricted Subsidiary by any Person (other than (x) the Company or any of its Subsidiaries or (y) an employee equity ownership or participation plan or other trust established by the Company or any of its Restricted Subsidiaries) and from repayments of loans or advances which constituted Restricted Investments; (vi) the amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (x) payments of dividends, repayments of the principal of loans or advances or other transfers of assets to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries or (y) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investment") not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments; and (vii) $5.0 million. 99 107 (b) The provisions of the foregoing paragraph (a) will not prohibit: (1) any purchase, repurchase, retirement or other acquisition or retirement for value of, or other distribution in respect of, Capital Stock of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company or capital contributions to the Company after the Closing Date (other than Disqualified Stock and other than Capital Stock issued or sold to, or capital contributions from, a Subsidiary of the Company or an employee equity ownership or participation plan or other trust established by the Company or any of its Subsidiaries); provided, however, that: (A) such Restricted Payment will be excluded in the calculation of the amount of Restricted Payments, and (B) the Net Cash Proceeds from such sale or capital contribution applied in the manner set forth in this clause (1) will be excluded from the calculation of amounts under clause (4)(C)(ii) of paragraph (a) above; (2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations of the Company or a Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent sale of, (x) Capital Stock of the Company or a Restricted Subsidiary or (y) Subordinated Obligations of the Company or a Restricted Subsidiary that are permitted to be Incurred pursuant to the covenant described under "-- Limitation on Indebtedness"; provided, however, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value will be excluded in the calculation of the amount of Restricted Payments; (3) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock"; provided, however, that such purchase or redemption will be excluded in the calculation of the amount of Restricted Payments; (4) Investments that are made with Excluded Contributions; provided, however, that such Investments shall be excluded in the calculation of the amount of Restricted Payments; (5) dividends or other distributions paid to holders of, or redemptions from holders of, Capital Stock within 60 days after the date of declaration thereof, or the giving of formal notice of redemption, if at such date of declaration such dividends or other distributions or redemptions would have complied with this covenant; provided, however, that such dividends, distributions or redemptions will be included in the calculation of the amount of Restricted Payments; (6) any repurchase of Capital Stock owned by former officers, directors, consultants or employees of the Company or its Subsidiaries or their assigns, estates and heirs or entities controlled by them, provided, however, that the amount of such repurchases shall not, in the aggregate, exceed the sum of (A) $10.0 million (which amount shall be increased by the amount of any Net Cash Proceeds to the Company from (i) sales of Capital Stock of the Company to management, other employees or Permitted Holders subsequent to the Closing Date to the extent such amounts are not included under clause 4(C)(ii) of paragraph (a) above and (ii) any "key-man" life insurance policies which are used to make such repurchases) and (B) $2.0 million per fiscal year of the Company (which amount may be used in a subsequent fiscal year to the extent not used during a fiscal year); provided further, however, that the cancelation of Indebtedness owing to the Company from such former officers, directors, consultants or employees of the Company or any of its Restricted Subsidiaries in connection with a repurchase of Capital Stock of the Company will not be deemed to constitute a Restricted Payment under the Indenture, provided further, however, that such repurchase will be included in the calculation of the amount of Restricted Payments; 100 108 (7) any of the transactions pursuant to the Recapitalization Agreement; provided, however, that such amounts will be excluded in the calculation of the amount of Restricted Payments; (8) repurchases of Capital Stock deemed to occur upon the exercise of stock options, warrants or other convertible securities if such Capital Stock represents a portion of the exercise price thereof; provided, however, that such repurchases will be excluded in the calculation of the amount of Restricted Payments; or (9) so long as no Default or Event of Default shall have occurred and be continuing, payments not to exceed $500,000 in the aggregate to enable the Company to make payments to holders of its Capital Stock in lieu of the issuance of fractional shares of its Capital Stock; provided, however, that such payments will be excluded in the calculation of the amount of Restricted Payments. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations owed to the Company (it being understood that the priority of any preferred stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock shall not be deemed a restriction on the ability to make distributions on Capital Stock); (2) make any loans or advances to the Company (it being understood that the subordination of loans or advances made to the Company to other Indebtedness Incurred by the Company shall not be deemed a restriction on the ability to make loans or advances); or (3) transfer any of its property or assets to the Company, except: (A) any encumbrance or restriction pursuant to applicable law or any applicable rule, regulation or order, or an agreement in effect at or entered into on the Closing Date (including the Credit Agreement); (B) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Capital Stock or Indebtedness of such Restricted Subsidiary, in each case Incurred by such Restricted Subsidiary prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Capital Stock or Indebtedness Incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company) and outstanding on such date; (C) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (A) or (B) of this covenant or this clause (C) or contained in any amendment to an agreement referred to in clause (A) or (B) of this covenant or this clause (C); provided, however, that the encumbrances and restrictions contained in any such Refinancing agreement or amendment are no more restrictive, taken as a whole, than the encumbrances and restrictions contained in such predecessor agreements; (D) in the case of clause (3), any encumbrance or restriction (i) that restricts in a customary manner the assignment of any lease, license or similar contract or the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, 101 109 (ii) that is or was created by virtue of any transfer of, agreement to transfer or option or right with respect to any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by the Indenture, (iii) contained in security agreements securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance or restriction restricts the transfer of the property subject to such security agreements, or (iv) encumbrances or restrictions relating to Indebtedness permitted to be Incurred pursuant to clause (b)(6) of the covenant described under "-- Limitation on Indebtedness" for property acquired in the ordinary course of business that only imposes encumbrances or restrictions on the property so acquired (it being agreed that any such encumbrance or restriction may also secure other Indebtedness permitted to be Incurred by the Company and provided by the same financing source providing the Indebtedness Incurred pursuant to such clause (b)(6)); (E) with respect to a Restricted Subsidiary, any restriction imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; (F) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business; (G) Indebtedness or other contractual requirements of a Securitization Entity in connection with a Qualified Securitization Transaction; provided, that such restrictions apply only to such Securitization Entity; (H) net worth provisions in leases and other agreements entered into by the Company or any Restricted Subsidiary in the ordinary course of business; and (I) any agreement or instrument governing Indebtedness (whether or not outstanding) of Foreign Subsidiaries of the Company permitted to be Incurred pursuant to clause (a) or (b)(10) under the caption "-- Limitation on Indebtedness". Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will not, and will not permit any Restricted Subsidiary to, make any Asset Disposition unless: (1) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the fair market value of the Capital Stock and assets subject to such Asset Disposition, (2) at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of (A) cash or Temporary Cash Investments, (B) properties and assets to be owned by the Company or any Restricted Subsidiary and used in a Permitted Business or (C) Capital Stock in one or more Persons engaged in a Permitted Business that are or thereby become Restricted Subsidiaries of the Company, and (3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be) (A) first, (i) to the extent the Company elects (or is required by the terms of any Indebtedness), to prepay, repay, redeem or purchase (x) Bank Indebtedness or (y) other Senior Indebtedness of the Company or Indebtedness (other than any Disqualified Stock) of a Restricted Subsidiary (in the case of clause (y), other than Indebtedness owed to the Company or an Affiliate of the Company and other than Preferred Stock of a Restricted Subsidiary that is not a Note Guarantor) or (ii) to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash 102 110 received by the Company or another Restricted Subsidiary or the application by the Company of the Net Available Cash received by a Restricted Subsidiary of the Company), in each case within 365 days (or, in the case of Foreign Subsidiary Asset Dispositions, 545 days) from the later of such Asset Disposition or the receipt of such Net Available Cash, provided that pending the final application of any such Net Available Cash, the Company and its Restricted Subsidiaries may temporarily reduce Indebtedness or otherwise invest such Net Available Cash in any manner not prohibited by the Indenture; (B) second, within 365 days from the later of such Asset Disposition or the receipt of such Net Available Cash (or, in the case of Foreign Subsidiary Asset Dispositions, 545 days), to the extent of the balance of such Net Available Cash after such application in accordance with clause (A), to make an Offer (as defined below) to purchase Notes pursuant to and subject to the conditions set forth in section (b) of this covenant; provided, however, that if the Company elects (or is required by the terms of any Senior Subordinated Indebtedness), such Offer may be made ratably to purchase the Notes and other Senior Subordinated Indebtedness of the Company; and (C) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) (other than the proviso thereof) and (B), for any general corporate purpose not restricted by the terms of the Indenture; provided, however that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (B) above, the Company or such Restricted Subsidiary will retire such Indebtedness and will cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this covenant, the Company and the Restricted Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions that is not applied in accordance with this covenant exceeds $10.0 million. For the purposes of this covenant, the following are deemed to be cash: - the assumption of any liabilities of the Company (other than Disqualified Stock of the Company) or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such liabilities in connection with such Asset Disposition, and - securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash. (b) In the event of an Asset Disposition that requires the purchase of Notes (and other Senior Subordinated Indebtedness) pursuant to clause (a)(3)(B) of this covenant, the Company will be required to purchase Notes (and other Senior Subordinated Indebtedness) tendered pursuant to an offer by the Company for the Notes (and other Senior Subordinated Indebtedness) (the "Offer") at a purchase price of 100% of their principal amount plus accrued and unpaid interest and liquidated damages thereon, if any, to the date of purchase in accordance with the procedures (including prorating in the event of oversubscription), set forth in the Indenture. If the aggregate purchase price of Notes (and other Senior Subordinated Indebtedness) tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Notes (and other Senior Subordinated Indebtedness), the Company may apply the remaining Net Available Cash for any general corporate purpose not restricted by the terms of the Indenture. The Company will not be required to make an Offer for Notes (and other Senior Subordinated Indebtedness) pursuant to this covenant if the Net Available Cash available therefor (after application of the proceeds as provided in clause (a)(3)(A)) is less than $10.0 million for any particular Asset Disposition (which lesser amount will be carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). Upon completion of the Offer, the amount of Net Available Cash shall be reduced to zero. 103 111 (c) The Company will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof. The provisions under the Indenture relative to the Company's obligation to make an offer to repurchase the Notes as a result of an Asset Disposition may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes. Limitation on Transactions with Affiliates. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless such transaction is on terms: (1) that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate, (2) that, in the event such Affiliate Transaction involves an aggregate amount in excess of $5.0 million, (A) are set forth in writing, and (B) except as provided in clause (a)(3) below, have been approved by a majority of the members of the Board of Directors having no personal stake in such Affiliate Transaction (if any such members exist), and (3) that, in the event (i) such Affiliate Transaction involves an amount in excess of $10.0 million, or (ii) if there are no members of the Board of Directors having no personal stake in such Affiliate Transaction and such Affiliate Transaction involves an aggregate amount in excess of $5.0 million, have been determined by a nationally recognized appraisal, accounting or investment banking firm to be fair, from a financial standpoint, to the Company and its Restricted Subsidiaries. (b) The provisions of the foregoing paragraph (a) will not prohibit: (1) any Restricted Payment permitted to be paid pursuant to the covenant described under "-- Limitation on Restricted Payments," (2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, options to purchase Capital Stock of the Company and equity ownership, restricted stock plans, long-term incentive plans, stock appreciation rights plans, participation plans or similar employee benefits plans approved by the Board of Directors, (3) the grant of options (and the exercise thereof) to purchase Capital Stock of the Company or similar rights to employees and directors of the Company pursuant to plans approved by the Board of Directors, (4) loans or advances to officers, directors or employees in the ordinary course of business, but in any event not to exceed $2.0 million in the aggregate outstanding at any one time, (5) the payment of reasonable fees to directors of the Company and its Subsidiaries who are not employees of the Company or its Subsidiaries and other reasonable fees, compensation, benefits and indemnities paid or entered into by the Company or its Restricted Subsidiaries in the ordinary course of business to or with the officers, directors or employees of the Company and its Restricted Subsidiaries, 104 112 (6) any transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries, (7) the provision by Persons who may be deemed Affiliates or stockholders of the Company (other than Chase Capital Partners and Persons directly or indirectly controlled by Chase Capital Partners) of investment banking, commercial banking, trust, lending or financing, investment, underwriting, placement agent, financial advisory or similar services to the Company or its Subsidiaries performed after the Closing Date, (8) sales of Capital Stock to Permitted Holders approved by a majority of the members of the Board of Directors who do not have a material direct or indirect financial interest in or with respect to the transaction being considered, or (9) the existence or performance by the Company or any Restricted Subsidiary under any agreement as in effect as of the Closing Date (including the Recapitalization Agreement and the agreements to be entered into pursuant thereto or any amendment thereto) or replacement agreement therefor or any transaction contemplated thereby (including pursuant to any amendment thereto or replacement agreement therefor) so long as such amendment or replacement is not more disadvantageous to the Holders of the Notes in any material respect than the original agreement as in effect on the Closing Date. SEC Reports. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the SEC (if permitted by SEC practice and applicable law and regulations) and provide the Trustee and Holders and prospective Holders (upon request) within 15 days after it files them with the SEC (or if not permitted, within 15 days after it would have otherwise been required to file them with the SEC), copies of the Company's annual report and the information, documents and other reports that are specified in Sections 13 and 15(d) of the Exchange Act. In addition, following the existence of a Public Market, the Company will furnish to the Trustee and the Holders, promptly upon their becoming available, copies of the annual report to shareholders and any other information provided by the Company to its shareholders generally. The Company also will comply with the other provisions of Section 314(a) of the TIA. Future Note Guarantors. The Company will cause each Domestic Subsidiary and any other Restricted Subsidiary that guarantees any Senior Indebtedness (other than a Foreign Subsidiary that guarantees Senior Indebtedness Incurred by another Foreign Subsidiary) to become a Note Guarantor, and, if applicable, execute and deliver to the Trustee a supplemental indenture in the form set forth in the Indenture pursuant to which such Domestic or other Restricted Subsidiary will Guarantee payment of the Notes. Each Note Guarantee will be limited to an amount not to exceed the maximum amount that can be Guaranteed by that Domestic or other Restricted Subsidiary without rendering the Note Guarantee, as it relates to such Domestic or other Restricted Subsidiary, void or voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. Limitation on Lines of Business. The Company will not, and will not permit any Restricted Subsidiary to, engage in any business, other than a Permitted Business, except that the Company and any of its Restricted Subsidiaries may engage in a new business so long as the Company and its Restricted Subsidiaries, taken as a whole, remain substantially engaged in a Permitted Business. MERGER AND CONSOLIDATION The Company will not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless: (1) the resulting, surviving or transferee Person (the "Successor Company") will be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) will 105 113 expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indenture; (2) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (3) immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness under paragraph (a) of the covenant described under "-- Certain Covenants -- Limitation on Indebtedness"; and (4) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. The Successor Company will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture, but the predecessor Company in the case of a conveyance, transfer or lease of all or substantially all its assets will not be released from the obligation to pay the principal of and interest on the Notes. In addition, the Company will not permit any Note Guarantor to consolidate with or merge with or into any Person unless either (1) (A) the resulting, surviving or transferee Person will be a corporation, partnership or limited liability company organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and such Person (if not such Note Guarantor) will expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Note Guarantor under its Note Guarantee; (B) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person or any Restricted Subsidiary as a result of such transaction as having been Incurred by such Person or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; and (C) the Company will have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture; or (2) such transaction results in the Company receiving cash or other property (other than Capital Stock representing a controlling interest in the successor entity), and the transaction is made in compliance with the covenant described under "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock." Notwithstanding any of the foregoing: (A) any Restricted Subsidiary may consolidate with, merge into or transfer or lease all or part of its properties and assets to the Company or a Subsidiary that is a Note Guarantor, and (B) the Company may merge with an Affiliate incorporated solely for (i) the purpose of incorporating the Company or (ii) organizing the Company in another jurisdiction to realize tax or other benefits. 106 114 DEFAULTS Each of the following is an Event of Default: (1) a default in any payment of interest or liquidated damages on any Note when due and payable, whether or not prohibited by the provisions described under "Ranking" above, continued for 30 days, (2) a default in the payment of principal of any Note when due and payable at its Stated Maturity, upon required redemption or repurchase, upon declaration or otherwise, whether or not such payment is prohibited by the provisions described under "Ranking" above, (3) the failure by the Company or any Note Guarantor to comply with its obligations under the covenant described under "Merger and Consolidation" above, (4) the failure by the Company or any Restricted Subsidiary to comply for 45 days after written notice (specifying the default and demanding that the same be remedied) with any of its obligations under the covenants described under "-- Change of Control" or "-- Certain Covenants" above (in each case, other than a failure to purchase Notes), (5) the failure by the Company or any Restricted Subsidiary to comply for 60 days after written notice (specifying the default and demanding that the same be remedied) with its other agreements contained in the Notes or the Indenture, (6) the failure by the Company or any Restricted Subsidiary of the Company to pay the principal amount of any Indebtedness within any applicable grace period after final maturity or the acceleration of any such Indebtedness by the holders thereof because of a default if the aggregate principal amount of such Indebtedness unpaid or accelerated exceeds $10.0 million or its foreign currency equivalent (the "cross acceleration provision") and such failure continues for 30 days after receipt of the notice specified in the Indenture, (7) certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary (the "bankruptcy provisions"), (8) the rendering of any judgment or decree for the payment of money in excess of $10.0 million (net of any amounts with respect to which a reputable and creditworthy insurance company has acknowledged liability in writing) or its foreign currency equivalent against the Company, or a Restricted Subsidiary of the Company if such judgment or decree becomes final and nonappealable and remains outstanding for a period of 60 days following such judgment and is not discharged, waived or stayed (the "judgment default provision") or (9) any Note Guarantee of a Material Subsidiary ceases to be in full force and effect (except as contemplated by the terms thereof) or any Note Guarantor or Person acting by or on behalf of such Note Guarantor denies or disaffirms such Note Guarantor's obligations under the Indenture or any Note Guarantee and such Default continues for 10 days after receipt of the notice specified in the Indenture. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. However, a default under clauses (4), (5), (6) or (9) will not constitute an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes notify the Company of the default and the Company or the Note Guarantor, as applicable, does not cure such default within the time specified in clauses (4), (5), (6) or (9) hereof after receipt of such notice. 107 115 If an Event of Default (other than an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes by written notice to the Company and the Trustee specifying the Event of Default and that it is a "notice of acceleration" may declare the principal of and accrued but unpaid interest and liquidated damages on all the Notes to be due and payable. Upon such a declaration, such principal and interest and liquidated damages will be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal of and interest and liquidated damages on all the Notes will become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity or security reasonably satisfactory to it against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Notes unless: (1) such Holder has previously given the Trustee notice that an Event of Default is continuing, (2) Holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee in writing to pursue the remedy, (3) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (4) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and (5) the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes will be given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee will be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. If a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is actually known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of, premium (if any) or interest on any Note (including payments pursuant to the redemption provisions of such Note), the Trustee may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interests of the Holders. In addition, the Company will be required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company will also be required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Events of Default, their status and what action the Company is taking or proposes to take in respect thereof. 108 116 AMENDMENTS AND WAIVERS Subject to certain exceptions, the Indenture or the Notes may be amended with the written consent of the Holders of a majority in principal amount of the Notes then outstanding and any past default or compliance with any provisions may be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. However, without the consent of each Holder of an outstanding Note affected, no amendment may, among other things: (1) reduce the amount of Notes whose Holders must consent to an amendment, (2) reduce the rate of or extend the time for payment of interest or any liquidated damages on any Note, (3) reduce the principal of or extend the Stated Maturity of any Note, (4) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed as described under "-- Optional Redemption" above, (5) make any Note payable in money other than that stated in the Note, (6) make any change to the subordination provisions of the Indenture that adversely affects the rights of any Holder, (7) impair the right of any Holder to receive payment of principal of, and interest or any liquidated damages on, such Holder's Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Notes, (8) make any change in the amendment provisions which require each Holder's consent or in the waiver provisions or (9) modify the Note Guarantees in any manner adverse to the Holders. Without the consent of any Holder, the Company, the Note Guarantors and the Trustee may amend the Indenture to: - cure any ambiguity, omission, defect or inconsistency, - provide for the assumption by a successor corporation of the obligations of the Company under the Indenture, - provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code), - make any change in the subordination provisions of the Indenture that would limit or terminate the benefits available to any holder of Senior Indebtedness of the Company or a Note Guarantor (or any representative thereof) under such subordination provisions, - add additional Guarantees with respect to the Notes, - secure the Notes, - add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company, - make any change that does not materially and adversely affect the rights of any Holder, - provide for the issuance of the New Notes, or - comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA. 109 117 The consent of the Holders will not be necessary to approve the particular form of any proposed amendment. It will be sufficient if such consent approves the substance of the proposed amendment. After an amendment becomes effective, the Company is required to mail to Holders a notice briefly describing such amendment. However, the failure to give such notice to all Holders, or any defect therein, will not impair or affect the validity of the amendment. TRANSFER AND EXCHANGE Subject to compliance with the restrictions on transfer and exchange set forth in the Indenture, a Holder will be able to transfer or exchange Notes. Upon any transfer or exchange, the registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes required by law or permitted by the Indenture. The Company will not be required to transfer or exchange any Note selected for redemption or to transfer or exchange any Note for a period of 15 days prior to a selection of Notes to be redeemed. The Notes will be issued in registered form and the Holder will be treated as the owner of such Note for all purposes. DEFEASANCE The Company may at any time terminate all its obligations under the Notes and the Indenture ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. In addition, the Company may at any time terminate: (1) its obligations under the covenants described under "-- Change of Control" and "-- Certain Covenants", (2) the operation of the cross acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries, the judgment default provision and the Note Guarantee provision described under "-- Defaults" above and the limitations contained in clause (3) under the first paragraph of "-- Merger and Consolidation" above ("covenant defeasance"). In the event that the Company exercises its legal defeasance option or its covenant defeasance option, each Note Guarantor will be released from all of its obligations with respect to its Note Guarantee. The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (4), (5), (6), (7) (with respect to Significant Subsidiaries only), (8) or (9) under "-- Defaults" above or because of the failure of the Company to comply with clause (3) under the first paragraph of "-- Merger and Consolidation" above. In order to exercise either defeasance option, the Company must irrevocably deposit in trust (the "defeasance trust") with the Trustee money or U.S. Government Obligations for the payment of principal, premium (if any) and interest on and liquidated damages (if any) in respect of the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such deposit and defeasance had not 110 118 occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable Federal income tax law). CONCERNING THE TRUSTEE The Bank of New York is the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with regard to the Notes. GOVERNING LAW The Indenture and the Notes are governed by, and the New Notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. CERTAIN DEFINITIONS "Additional Assets" means: (1) any property or assets (other than Indebtedness and Capital Stock) to be used by the Company or a Restricted Subsidiary in a Permitted Business; (2) Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that: any such Restricted Subsidiary described in clauses (2) or (3) above is primarily engaged in a Permitted Business. "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 the purposes of this definition, "control" when used with respect to any 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. For purposes of the provisions described under "-- Certain Covenants -- Limitation on Transactions with Affiliates" and "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease (other than an operating lease entered into in the ordinary course of business), transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation, or similar transaction (each referred to for the purposes of this definition as a "disposition"), of: (1) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary), (2) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary or (3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary 111 119 other than, in the case of (1), (2) and (3) above, (A) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, (B) for purposes of the provisions described under "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only, the making of a Permitted Investment or a disposition subject to the covenant described under "-- Certain Covenants -- Limitation on Restricted Payments", (C) sales of accounts receivable and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" to a Securitization Entity for the fair market value thereof, (D) a disposition of obsolete or worn out property or equipment or property or equipment that is no longer used or useful in the conduct of business of the Company and its Restricted Subsidiaries, (E) any other disposition of assets with a fair market value, as conclusively determined by senior management of the Company in good faith, of less than $1.0 million, (F) sales or grants of licenses to use the Company's or any Restricted Subsidiary's patents, trade secrets, know-how and technology to the extent that such license does not prohibit the licensor from using the patent, trade secret, know-how or technology or require the licensor to pay any fees for such use, (G) the disposition of all or substantially all of the assets of the Company in compliance with the covenant described under the heading "-- Merger and Consolidation", and (H) the disposition of any Capital Stock or other ownership interest in or assets or property of an Unrestricted Subsidiary. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing: (1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (2) the sum of all such payments. "Bank Indebtedness" means any and all amounts payable under or in respect of the Credit Agreement and any Refinancing Indebtedness with respect thereto, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of the Board of Directors of the Company. "Business Day" means each day which is not a Legal Holiday. 112 120 "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty. "Closing Date" means the date of the Indenture. "Code" means the Internal Revenue Code of 1986, as amended. "Commodity Agreement" means any commodity futures contract, commodity option or other similar agreement or arrangement entered into by the Company or any of its Subsidiaries designed to protect the Company or any of its Subsidiaries against fluctuations in the price of commodities actually at the time used in the ordinary course of business of the Company or its Subsidiaries. "Consolidated Coverage Ratio" as of any date of determination means the ratio of: (1) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters for which financial statements are publicly available ending prior to the date of such determination to (2) Consolidated Interest Expense for such four fiscal quarters; provided, however, that: (A) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, (B) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness, (C) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition in excess of $10.0 million, which constitutes all or substantially all of an operating unit of a business, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the 113 121 Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), (D) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary or is merged with and into the Company) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period, and (E) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (C) or (D) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an Investment or acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. Any such pro forma calculations may include operating expense reductions for such period resulting from the acquisition which is being given pro forma effect that (a) would be permitted pursuant to Article 11 of Regulation S-X under the Securities Act or (b) have been realized or for which the steps necessary for realization have been taken or are reasonably expected to be taken within six months following any such acquisition, including, but not limited to, the execution or termination of any contracts, the termination of any personnel or the closing (or approval by the Board of Directors of any closing) of any facility, as applicable, provided that, such adjustments are set forth in an Officers' Certificate signed by the Company's chief financial officer and another Officer which states (i) the amount of such adjustment or adjustments, (ii) that such adjustment or adjustments are based on the reasonable good faith beliefs of the officers executing such Officers' Certificate at the time of such execution and (iii) that any related Incurrence of Indebtedness is permitted pursuant to the Indenture. In addition, to the extent not covered by the foregoing, if the Transactions have occurred in the four quarter period used to determine the Consolidated Coverage Ratio, then the Consolidated Coverage Ratio shall be determined giving pro forma effect on the basis given in the offering memorandum dated May 25, 2000 relating to the private offering of the Old Notes to the Transactions, with all calculations relating thereto to be made at the date of determination by the Company's chief financial officer, and set forth in an Officers' Certificate signed by the chief financial officer and another Officer and meeting the requirements for the Officers' Certificate described in the preceding sentence. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement or Currency Agreement applicable to such Indebtedness if such Interest Rate 114 122 Agreement or Currency Agreement has a remaining term as at the date of determination in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its Consolidated Restricted Subsidiaries plus, to the extent Incurred by the Company and its Restricted Subsidiaries in such period but not included in such interest expense: (1) interest expense attributable to Capitalized Lease Obligations and the interest expense attributable to operating leases constituting part of a Sale/Leaseback Transaction, (2) amortization of debt discount and debt issuance costs, (3) capitalized interest, (4) non-cash interest expense, (5) commissions, discounts and other fees and charges attributable to letters of credit and bankers' acceptance financing, (6) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by the Company or any Restricted Subsidiary, (7) net costs associated with Hedging Obligations (including amortization of fees) provided, however, that if Hedging Obligations result in net benefits rather than costs, such benefits shall be credited in determining Consolidated Interest Expense unless, pursuant to GAAP, such net benefits are otherwise reflected in Consolidated Net Income, (8) dividends and distributions declared in respect of all Disqualified Stock of the Company and dividends and distributions declared and paid in respect of all Preferred Stock of any of the Subsidiaries of the Company that is not a Note Guarantor, to the extent held by Persons other than the Company or a Wholly Owned Subsidiary, (9) interest Incurred in connection with investments in discontinued operations and (10) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. Notwithstanding anything to the contrary contained herein, commissions, discounts, yield and other fees and charges Incurred in connection with any transaction pursuant to which the Company or any Subsidiary of the Company may sell, convey or otherwise transfer or grant a security interest in any accounts receivable or related assets shall be included in Consolidated Interest Expense. "Consolidated Net Income" means, for any period, the net income (loss) of the Company and its Consolidated Subsidiaries for such period; provided, however, that there shall not be included in such Consolidated Net Income: (1) any net income (loss) of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that: (A) subject to the limitations contained in clauses (4), (5) and (6) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution made to a Restricted Subsidiary, to the limitations contained in clause (3) below) and (B) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income to the extent such loss has been funded with cash from the Company or a Restricted Subsidiary; 115 123 (2) other than for purposes of clauses (D) and (E) of the definition of Consolidated Coverage Ratio, any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (3) any net income (or loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions or loans or intercompany advances by such Restricted Subsidiary, directly or indirectly, to the Company, except that: (A) subject to the limitations contained in clauses (4), (5) and (6) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed, loaned or advanced by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend, distribution, loan or advance (subject, in the case of a dividend, distribution, loan or advance made to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (4) any gain (loss) realized upon the sale or other disposition of any asset of the Company or its Consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise disposed of in the ordinary course of business and any gain (loss) realized upon the sale or other disposition of any Capital Stock of any Person; (5) any extraordinary gain or loss; and (6) the cumulative effect of a change in accounting principles. Notwithstanding the foregoing, for the purpose of the covenant described under "-- Certain Covenants -- Limitation on Restricted Payments" only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(4)(C)(vi) thereof. "Consolidation" means the consolidation of the amounts of each of the Restricted Subsidiaries with those of the Company in accordance with GAAP consistently applied; provided, however, that "Consolidation" will not include consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will be accounted for as an investment. The term "Consolidated" has a correlative meaning. "Credit Agreement" means the credit agreement dated as of the Closing Date among the Company, the lenders named therein, Bankers Trust Company, as administrative agent and collateral agent, The Bank of Nova Scotia, as documentation agent, and The Chase Manhattan Bank, as syndication agent, together with related documents thereto including any guarantee agreements and security documents, as amended, modified, supplemented, restated, renewed, refunded, replaced, restructured, repaid or refinanced from time to time (including any agreement extending the maturity thereof or increasing the amount of available borrowings thereunder or adding Restricted Subsidiaries of the Company as additional borrowers or guarantors thereunder) whether with the original agents and lenders or otherwise and whether provided under the original credit agreement or other credit agreements or otherwise. "Currency Agreement" means with respect to any Person any foreign exchange contract, currency swap agreements or other similar agreement or arrangement to which such Person is a party or of which it is a beneficiary. 116 124 "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Senior Indebtedness" of the Company means (1) the Bank Indebtedness and (2) any other Senior Indebtedness of the Company that, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to at least $15.0 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture. "Designated Senior Indebtedness" of a Note Guarantor has a correlative meaning. "Disqualified Stock" means, with respect to any Person, any Capital Stock of such Person which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event: (1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (2) is convertible or exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock convertible or exchangeable solely at the option of the Company or a Restricted Subsidiary, provided, that any such conversion or exchange shall be deemed an issuance of Indebtedness or an issuance of Disqualified Stock, as applicable) or (3) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to 91 days after the Stated Maturity of the Notes; provided, however, that only the portion of Capital Stock that so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date will be deemed Disqualified Stock; provided, further, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock provide that such Person may not repurchase or redeem such Capital Stock pursuant to such provisions unless such Person has first complied with the provisions described under "-- Change of Control" and the provisions of the covenant described under "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock", as applicable; and provided, further that any class of Capital Stock of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or other payment obligations or otherwise by delivery of Capital Stock that is not Disqualified Stock, and that is not convertible, puttable or exchangeable for Disqualified Stock or Indebtedness, shall not be deemed Disqualified Stock so long as such Person satisfies its obligations with respect thereto solely by the delivery of Capital Stock that is not Disqualified Stock. "Domestic Overdraft Facility" means an overdraft line of credit in a maximum principal amount of $10.0 million at any time outstanding. "Domestic Subsidiary" means any Restricted Subsidiary of the Company other than a Foreign Subsidiary. "EBITDA" for any period means the Consolidated Net Income for such period, excluding the following to the extent included in calculating such Consolidated Net Income: (1) income tax expense of the Company and its Consolidated Restricted Subsidiaries, (2) Consolidated Interest Expense, 117 125 (3) depreciation expense of the Company and its Consolidated Restricted Subsidiaries, (4) amortization expense of the Company and its Consolidated Restricted Subsidiaries (but excluding amortization expense attributable to a prepaid cash item that was paid in a prior period), (5) other noncash charges of the Company and its Consolidated Restricted Subsidiaries (excluding any such noncash charge to the extent it represents an accrual of or reserve for cash expenditures in any future period), (6) income or loss from discontinued operations, (7) plant closing costs (as defined by GAAP), and (8) noncash stock-based compensation expense. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and noncash charges of, a Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income (loss) of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended, loaned or advanced to the Company by such Restricted Subsidiary without prior approval of Persons other than the Board of Directors or holders of the Company's Capital Stock (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. "Equity Offering" means any public or private sale of the common stock of the Company, other than any public offering with respect to the Company's common stock registered on Form S-8 or other issuances upon exercise of options by employees of the Company or any of its Restricted Subsidiaries. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange and Registration Rights Agreement" means the Exchange and Registration Rights Agreement dated as of May 31, 2000 among the Company, Chase Securities Inc. and Deutsche Bank Securities Inc., as Initial Purchasers, and the Note Guarantors. "Excluded Contribution" means net cash proceeds received by the Company from (a) contributions to its common equity capital and (b) the sale (other than to a Subsidiary of the Company or to any Company or Subsidiary management equity plan or stock option plan or any other management or employee benefit plan or agreement) of Capital Stock (other than Disqualified Stock) of the Company, in each case designated as Excluded Contributions pursuant to an Officers' Certificate executed on the date such capital contributions are made or the date such Capital Stock is sold, as the case may be, which are excluded from the calculation set forth in clause (a)(4)(C) under "-- Certain Covenants -- Limitation on Restricted Payments." "Existing Management Stockholders" means each of Richard P. Durham, Jack E. Knott, Scott K. Sorensen and Ronald G. Moffitt. "Foreign Subsidiary" means any Restricted Subsidiary of the Company organized and conducting its principal operations outside the United States. "Foreign Subsidiary Asset Disposition" means any direct or indirect sale, issuance, conveyance, transfer, lease, assignment or other transfer for value by the Company or any of its Restricted Subsidiaries (including any Sale/Leaseback Transaction) to any Person other than the Company or a Restricted Subsidiary of the Company of the Capital Stock of any Foreign Subsidiary or any of the property or assets of any Foreign Subsidiary. 118 126 "GAAP" means generally accepted accounting principles in the United States of America as in effect as of May 31, 2000, including those set forth in: (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (2) statements and pronouncements of the Financial Accounting Standards Board, (3) such other statements by such other entities as are approved by a significant segment of the accounting profession, and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. All ratios and computations based on GAAP contained in the Indenture shall be computed in conformity with GAAP. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Commodity Agreement, Interest Rate Agreement or Currency Agreement. "Holder" means the Person in whose name a Note is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Person at the time it becomes a Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. "Indebtedness" means, with respect to any Person on any date of determination (without duplication): (1) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money; (2) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto); (4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables and other accrued liabilities arising in the ordinary 119 127 course of business), which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services; (5) all Capitalized Lease Obligations and all Attributable Debt of such Person; (6) all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person that is not a Note Guarantor, any Preferred Stock (but excluding, in each case, any accrued dividends); (7) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be the lesser of: (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness of such other Persons; (8) to the extent not otherwise included in this definition, the net obligations under Hedging Obligations of such Person; (9) to the extent not otherwise included, the amount then outstanding (i.e., advanced, and received by, and available for use by, such Person) under any receivables financing (as set forth in the books and records of such Person and confirmed by the agent, trustee or other representative of the institution or group providing such receivables financing); and (10) all obligations of the type referred to in clauses (1) through (9) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee. Notwithstanding the foregoing, "Indebtedness" shall not include unsecured indebtedness of the Company and its Restricted Subsidiaries Incurred to finance insurance premiums in a principal amount not in excess of the insurance premiums to be paid by the Company and its Restricted Subsidiaries for a three-year period beginning on the date of Incurrence of any such Indebtedness. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Intangible Assets" means goodwill, patents, trademarks and other intangibles as determined in accordance with GAAP. "Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property (excluding Capital Stock of the Company) to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other 120 128 similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary" and the covenant described under "-- Certain Covenants -- Limitation on Restricted Payments": (1) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to: (A) the Company's "Investment" in such Subsidiary at the time of such redesignation less (B) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; (2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by (i) the senior management of the Company if the amount thereof is less than $2.0 million and (ii) the Board of Directors if in excess thereof; and (3) the amount of any Investment shall be the original cost as of the date of determination of such Investment plus the cost of all additional Investments by the Company or any of its Restricted Subsidiaries, without any adjustments for increases or decreases in value or write-ups, write-downs or write-offs with respect to such Investments. "Legal Holiday" means a Saturday, Sunday or other day on which banking institutions in New York State are authorized or required by law to close. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Material Subsidiary" means, at any date of determination, any Subsidiary of the Company that, together with its Subsidiaries, (i) for the most recent fiscal year of the Company accounted for more than 10.0% of the consolidated revenues of the Company or (ii) as of the end of such fiscal year, was the owner of 10.0% of the consolidated assets of the Company, all as set forth on the most recently available consolidated financial statement of the Company and its consolidated Subsidiaries for such fiscal year prepared in conformity with GAAP. "Net Available Cash" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of: (1) all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition, 121 129 (3) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition, (4) the decrease in proceeds from Qualified Securitization Transactions which results from such Asset Disposition, and (5) appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "Net Cash Proceeds", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees and expenses actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "New Note Guarantees" means the guarantees made by the Note Guarantors pursuant to the Exchange and Registration Rights Agreement. "New Notes" means the senior subordinated debt securities to be issued by the Company pursuant to the Exchange and Registration Rights Agreement. "Note Guarantee" means each Guarantee of the obligations with respect to the Notes issued by a Person pursuant to the terms of the Indenture. "Note Guarantor" means any Person that has issued a Note Guarantee. "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Business" means the design, manufacture and/or marketing of films and flexible packaging products for food, personal care, medical, retail, agricultural, industrial and other applications or any businesses that are reasonably related, ancillary or complementary thereto. "Permitted Holders" means each of (i) Chase Capital Partners and its Affiliates, (ii) Chase Domestic Investments, L.L.C. and its Affiliates, (iii) the Christena Karen H. Durham Trust, (iv) the Existing Management Stockholders and their Related Parties and (v) any Person acting in the capacity of an underwriter in connection with a public or private offering of the Company's Capital Stock. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in: (1) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that after giving effect to such Investment the Company is still in compliance with the covenant under the heading "-- Limitation of Lines of Business"; (2) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that after giving effect to such Investment the Company is still in compliance with the covenant under the heading "-- Limitation of Lines of Business"; (3) Temporary Cash Investments; 122 130 (4) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (5) payroll, travel and similar advances or loans to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (6) loans or advances to officers, directors, consultants or employees made (a) in the ordinary course of business and not exceeding $3.0 million in any year or (b) to fund purchases of stock under the Company's 2000 Stock Incentive Plan and any similar plans or employment arrangements; (7) Capital Stock, obligations or other securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of a debtor; (8) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition that was made pursuant to and in compliance with the covenant described under "-- Certain Covenants -- Limitation on Sale of Assets and Subsidiary Stock"; (9) any Investment by the Company or a Restricted Subsidiary in a Securitization Entity or any Investment by a Securitization Entity in any other Person in connection with a Qualified Securitization Transaction; provided that any Investment in a Securitization Entity is in the form of a purchase money note or an equity interest; (10) Hedging Obligations entered into in the ordinary course of business; (11) endorsements of negotiable instruments and documents in the ordinary course of business; (12) assets or securities of a Person acquired by the Company or a Restricted Subsidiary to the extent the consideration for such acquisition consists of Capital Stock (other than Disqualified Stock) of the Company; (13) Investments in existence on the Closing Date; (14) Investments of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time such Person merges or consolidates with the Company or any of its Restricted Subsidiaries, in either case in compliance with the Indenture, provided that such Investments were not made by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such merger or consolidation; (15) Investments in Unrestricted Subsidiaries or joint ventures not to exceed $30.0 million, plus (A) the aggregate net after-tax amount returned to the Company or any Restricted Subsidiary in cash on or with respect to any Investments made in Unrestricted Subsidiaries and joint ventures whether through interest payments, principal payments, dividends or other distributions or payments (including such dividends, distributions or payments made concurrently with such Investment), (B) the net after-tax cash proceeds received by the Company or any Restricted Subsidiary from the disposition of all or any portion of such Investments (other than to the Company or a Subsidiary of the Company) and (C) upon redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair market value of such Subsidiary; and (16) additional Investments in an aggregate amount not to exceed $15.0 million. 123 131 "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Capital Stock of any other class of such Person. "principal" of a Note means the principal of the Note plus the premium, if any, payable on the Note which is due or overdue or is to become due at the relevant time. "Public Market" means any time after: (1) an Equity Offering has been consummated and (2) at least 15% of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act. "Qualified Securitization Transaction" means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell, convey or otherwise transfer pursuant to customary terms to (a) a Securitization Entity (in the case of a transfer by the Company or any of its Subsidiaries) and (b) any other Person (in the case of transfer by a Securitization Entity), or may grant a security interest in any accounts receivable (whether now existing or arising or acquired in the future) of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable. "Qualified Stock" means any Capital Stock that is not Disqualified Stock. "Recapitalization Agreement" means the Recapitalization Agreement dated as of March 31, 2000, between the Company, the selling stockholders listed therein and Chase Domestic Investments, L.L.C., as amended to and in effect at the Closing Date. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that is Incurred to Refinance any Indebtedness of the Company or any Restricted Subsidiary existing on the Closing Date or Incurred in compliance with the Indenture (including Indebtedness of the Company or a Restricted Subsidiary that Refinances Refinancing Indebtedness); provided, however, that: (1) the Refinancing Indebtedness (if Refinancing any Indebtedness existing on the Closing Date) has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced, (2) the Refinancing Indebtedness (if Refinancing any Indebtedness existing on the Closing Date) has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced, (3) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) (whether in U.S. dollars or a foreign currency) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) (in U.S. dollars or such foreign currency, 124 132 as applicable) then outstanding (plus, without duplication, accrued interest, premium and defeasance costs required to be paid under the terms of the Indebtedness being Refinanced and the fees, expenses, discounts, commissions and other issuance costs incurred in connection with the Refinancing Indebtedness) of the Indebtedness being Refinanced and (4) if the Indebtedness being Refinanced is subordinated in right of payment to the Notes or a Note Guarantee of a Note Guarantor, such Refinancing Indebtedness is subordinated in right of payment to the Notes or the Note Guarantee at least to the same extent as the Indebtedness being Refinanced; provided further, however, that Refinancing Indebtedness shall not include: (A) Indebtedness of a Restricted Subsidiary that is not a Note Guarantor that Refinances Indebtedness of the Company or (B) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary. "Related Parties" means with respect to a Person (a) that is a natural person (1) any spouse, parent or lineal descendant (including adopted children) of such Person or (2) the estate of such Person during any period in which such estate holds Capital Stock of the Company for the benefit of any person referred to in clause (a)(1) and (b) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially owning an interest of more than 50% of which consist of such Person and/or such other Persons referred to in the immediately preceding clause (a). "Representative" means the trustee, agent or representative (if any) for an issue of Senior Indebtedness. "Restricted Investment" means any Investment other than a Permitted Investment. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than (a) leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries or (b) any arrangement whereby the transfer involves fixed or capital assets and is consummated within 120 days after the date the Company or a Restricted Subsidiary acquires or finishes construction of such fixed or capital assets. "SEC" means the Securities and Exchange Commission. "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Secured Indebtedness" of a Note Guarantor has a correlative meaning. "Securitization Entity" means a Wholly Owned Subsidiary of the Company (or another Person in which the Company or any Subsidiary of the Company makes an Investment and to which the Company or any Subsidiary of the Company transfers accounts receivable and related assets) which engages in no activities other than in connection with the financing of accounts receivable or equipment and which is designated by the Board of Directors of the Company (as provided below) as a Securitization Entity (a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any Subsidiary of the Company (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is recourse to or obligates the Company or any Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings or (iii) subjects any property or asset of the Company or any Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than 125 133 pursuant to Standard Securitization Undertakings, (b) with which neither the Company nor any Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Company or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity and (c) to which neither the Company nor any Subsidiary of the Company has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee, by filing with the Trustee a certified copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. "Senior Subordinated Indebtedness" of the Company means the Notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of a Note Guarantor has a correlative meaning. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company which are reasonably customary in an accounts receivable securitization transaction. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Stockholders Agreement" means the Stockholders Agreement among the Company and the holders of the Company's Capital Stock party thereto, as in effect at the Closing Date as amended from time to time, so long as the Permitted Holders own a majority of the Capital Stock subject to such agreement. "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Closing Date or thereafter Incurred) that is subordinate or junior in right of payment to the Notes pursuant to a written agreement. "Subordinated Obligation" of a Note Guarantor has a correlative meaning. "Subsidiary" of any Person means any corporation, association, partnership, limited liability company or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, representatives, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by: (1) such Person, (2) such Person and one or more Subsidiaries of such Person or (3) one or more Subsidiaries of such Person. "Tangible Assets" means Total Assets less Intangible Assets. "Temporary Cash Investments" means any of the following: (1) any investment in direct obligations of the United States of America or any agency or instrumentality thereof or obligations Guaranteed or insured by the United States of America or any agency or instrumentality thereof, 126 134 (2) investments in checking accounts, savings accounts, time deposit accounts, certificates of deposit, bankers' acceptances and money market deposits maturing within 360 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits aggregating in excess of $250,000,000 (or the foreign currency equivalent thereof) and whose long-term debt is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act), (3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above, (4) investments in commercial paper, maturing not more than 270 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc. ("S&P"), (5) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's Investors Service, Inc., and (6) investments in money market funds that invest substantially all of their assets in securities of the types described in clauses (1) through (5) above. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. sec.sec. 77aaa-77bbbb) as in effect on the Closing Date. "Total Assets" means the total consolidated assets of the Company and its Restricted Subsidiaries, as shown on the most recent balance sheet of the Company. "Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services. "Transactions" has the meaning specified in this prospectus. "Trustee" means the party named as such in the Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means the Chairman of the Board, the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Unrestricted Subsidiary" means: (1) HPC Investment, Inc. and any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company), to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock in or Indebtedness of, or owns or holds 127 135 any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either: (A) the Subsidiary to be so designated at the time of designation has total Consolidated assets of $1,000 or less or (B) if such Subsidiary has Consolidated assets greater than $1,000, then such designation would be permitted under the covenant entitled "Limitation on Restricted Payments." The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation: (x) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "-- Certain Covenants -- Limitation on Indebtedness" and (y) no Default shall have occurred and be continuing. Any such designation of a Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all the Capital Stock of which (other than directors' qualifying Capital Stock) is owned by the Company or another Wholly Owned Subsidiary. 128 136 DESCRIPTION OF THE NOTE WARRANTS The Note Warrants were issued pursuant to a note warrant agreement dated May 31, 2000, between us and The Bank of New York, as warrant agent. The following summary of certain provisions of the note warrant agreement does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the note warrant agreement, including the definitions therein of certain terms, a copy of which has been filed as an exhibit to the registration statement of which this prospectus forms a part. Capitalized terms in this "Description of the Note Warrants" not defined in this prospectus have the meanings assigned to them in the note warrant agreement. GENERAL Each Note Warrant, when exercised, entitles the holder thereof to purchase 0.08424 shares of common stock from us at an exercise price of $0.01 per share. The exercise price and the number of shares of common stock issuable upon exercise of a Note Warrant are both subject to adjustment in certain cases. See "-- Adjustments" below. The Note Warrants initially entitle the holders thereof to acquire, in the aggregate, 18,532 shares of our common stock. Each Note Warrant may be exercised on any business day on or after the exercisability date and on or prior to June 1, 2010. The "exercisability date" means the first day that any of the following exercise events has occurred: (1) upon the closing of our initial public equity offering, (2) a class of our equity securities is listed on a national securities exchange or authorized for quotation on the Nasdaq National Market or is otherwise subject to registration under the Securities Exchange Act of 1934, or (3) the earlier of November 27, 2000 or the effective date of the registration statement of which this prospectus forms a part. We will as soon as practicable after the occurrence of an exercise event send to each holder of Note Warrants and to each beneficial owner of the Note Warrants to the extent that the Note Warrants are held of record by a depositary or other agent, by first-class mail, at the addresses appearing on the warrant register, a notice of the exercise event which has occurred, which notice shall describe the type of exercise event and the date of the occurrence thereof and the date of expiration of the right to exercise the Note Warrants prominently set forth on the face of such notice. Unless earlier exercised, the Note Warrants will expire on June 1, 2010. We will give notice of expiration not less than 90 nor more than 120 days prior to June 1, 2010 to the registered holders of the then outstanding Note Warrants. If we fail to give such notice, the Note Warrants will nevertheless expire and become void on June 1, 2010. The Note Warrants will not trade separately from the Notes until the earlier of November 27, 2000 or the effective date of the registration statement of which this prospectus forms a part. At our option, fractional shares of common stock may not be issued upon exercise of the Note Warrants. If any fraction of a share of common stock would, except for the foregoing provision, be issuable upon the exercise of any such Note Warrant (or specified portion thereof), we will pay an amount in cash equal to the Current Market Value per share of common stock, as determined on the day immediately preceding the date the Note Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole cent. CERTAIN TERMS Exercise In order to exercise all or any of the Note Warrants, the holder thereof is required to surrender to the Note Warrant Agent the related Note Warrant Certificate and pay in full the exercise price for 129 137 each share of common stock or other securities issuable upon exercise of such Note Warrants. The exercise price may be paid -- in cash or by certified or official bank check or by wire transfer to an account designated by us for such purpose or -- in a cashless exercise, by reducing the number of shares of common stock that would be obtainable upon the exercise of a Note Warrant and payment of the exercise price in cash so as to yield a number of shares of common stock upon the exercise of such Note Warrant equal to the product of: (a) the number of shares of common stock for which such Note Warrant is exercisable as of the date of exercise (if the exercise price were being paid in cash) and (b) the cashless exercise ratio. The cashless exercise ratio equals a fraction, the numerator of which is the excess of the Current Market Value per share of common stock on the exercise date over the exercise price per share as of the exercise date and the denominator of which is the Current Market Value per share of the common stock on the exercise date. Upon surrender of a Note Warrant certificate representing more than one Note Warrant in connection with the holder's option to elect a cashless exercise, the number of shares of common stock deliverable upon a cashless exercise is equal to the number of shares of common stock issuable upon the exercise of Note Warrants that the holder specifies are to be exercised pursuant to a cashless exercise multiplied by the cashless exercise ratio. All provisions of the Note Warrant Agreement are applicable with respect to a surrender of a Note Warrant certificate pursuant to a cashless exercise for less than the full number of Note Warrants represented thereby. If we have not effected the registration under the Securities Act of the offer and sale of the common stock by us to the holders of the Note Warrants upon the exercise thereof, we may elect to require that holders of the Note Warrants effect the exercise of the Note Warrants solely pursuant to the cashless exercise option and may also amend the Note Warrants to eliminate the requirement for payment of the exercise price with respect to such cashless exercise option. No Rights as Shareholders The holders of unexercised Note Warrants are not entitled, by virtue of being such holders, to receive dividends, to vote, to consent, to exercise any preemptive rights or to receive notice as our shareholders in respect of any shareholders' meeting for the election of our shareholders directors or any other purpose, or to exercise any other rights whatsoever as our shareholders. Mergers, Consolidations, etc. In the event that we consolidate with, merge with or into, or sell all or substantially all of our assets to, another person, each Note Warrant holder thereafter is entitled to receive upon exercise thereof, per share of common stock for which such Note Warrant is exercisable, the number of shares of common stock or other securities or property which the holder of a share of common stock is entitled to receive upon completion of such consolidation, merger or sale of assets. ADJUSTMENTS The number of shares of common stock issuable upon the exercise of the Note Warrants and the Exercise Price are subject to adjustment in certain events, including: (1) the payment by us of certain dividends (or other distributions) on our common stock payable in shares of common stock or other shares of our capital stock, (2) subdivisions, combinations and certain reclassifications to the common stock, 130 138 (3) the issuance to all holders of common stock of rights, options or warrants entitling them to subscribe for shares of common stock, or of securities convertible into or exchangeable or exercisable for shares of common stock, for a consideration per share which is less than the Current Market Value per share of the common stock, (4) the issuance of shares of common stock for a consideration per share which is less than the Current Market Value per share of the common stock, and (5) the distribution to all holders of the common stock of any of our debt securities, capital stock (excluding those referred to in (1)), rights or warrants to purchase securities, cash or other property (excluding those rights and warrants referred to in (3) and cash dividends and other cash distributions from retained earnings). No adjustment to the number of shares of common stock issuable upon the exercise of the Note Warrants and the exercise price is required in certain events including: -- the issuance of shares of common stock in bona fide public offerings that are underwritten, -- the issuance of shares of common stock (including upon exercise of options) to our employees, officers, directors, or consultants, or those of any of our subsidiaries, to the extent that the aggregate amount of all such common stock or common stock which may be acquired upon the exercise of such options exceeds a specified amount and -- the issuance of shares of common stock in connection with acquisitions other than to our affiliates. No adjustment in the exercise price will be required unless such adjustment would require an increase or decrease of at least one percent in the exercise price; provided, however, that any adjustment which is not made as a result of this paragraph will be carried forward and taken into account in any subsequent adjustment. AMENDMENT From time to time, we and the note warrant agent, without the consent of the holders of the Note Warrants, may amend or supplement the note warrant agreement for certain purposes, including curing defects or inconsistencies or making any change that does not adversely affect the rights of any holder. Any amendment or supplement to the note warrant agreement that has an adverse effect on the interests of the holders of the Note Warrants shall require the written consent of the holders of a majority of the then outstanding Note Warrants. The consent of each holder of the Note Warrants affected shall be required for any amendment pursuant to which the exercise price would be increased or the number of shares of common stock issuable upon exercise of Note Warrants would be decreased (other than pursuant to adjustments provided in the note warrant agreement). CERTAIN DEFINITIONS The note warrant agreement contains, among others, the following definitions: "Current Market Value" means, for any security as of any date of determination, the price per share or other applicable unit determined as follows: (a) if such security is Publicly Traded as of the date of determination, the price shall be determined by computing the average, over a period consisting of the most recent twenty-one (21) business days occurring on or prior to the date of determination, of the applicable price set forth below (but excluding any trades or quotations that are not bona fide, arm's length transactions): 131 139 (1) the average of the closing prices for such security on such business day on all domestic national securities exchanges on which such security may be listed if such exchanges are the primary securities markets for such security, or (2) if there have been no sales on any such exchange on such business day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such business day if such exchanges are the primary securities markets for such security, or (3) if on any business day such security is not so listed, the closing sales price on such business day quoted on the Nasdaq National Market or the Nasdaq Small-Cap Market, as applicable, or if there have been no sales on the Nasdaq National Market or the Nasdaq Small-Cap Market, as the case may be, on such business day, the average of the highest bid and lowest asked prices quoted on the Nasdaq National Market or the Nasdaq Small-Cap Market, as the case may be; or (4) if on any business day such security is not quoted in the Nasdaq National Market or Nasdaq Small-Cap Market, the average of the highest bid and lowest asked prices on such Business Day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization; provided, however, that -- for the purposes of any determination of the "Current Market Value" of any share of a security on any day after the "ex" date or any similar date for any dividend or distribution paid or to be paid with respect to such security, any price of such security on a day prior to such "ex" date or similar date shall be reduced by the fair market value of the per share amount of such dividend or distribution as determined in good faith by our board of directors and -- for the purposes of any determination of the "Current Market Value" of any security on any day on or after the effective day of any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of outstanding securities or the "ex" date or any similar date for any dividend or distribution with respect to such securities in shares of that security, any price of such security on a day prior to such effective date or "ex" date or similar date shall be appropriately adjusted to reflect such subdivision, combination, dividend or distribution; and (b) if such security is not Publicly Traded as of the date of determination, the Enterprise Value Per Share and, in the case of any other security, the fair market value of one share or other applicable unit of such security, shall be determined in good faith by our board of directors exercising reasonable business judgement. "Enterprise Value" means the highest price that would be paid for the entire common equity interest in us on a going-concern basis in a single arm's-length transaction between a willing buyer and a willing seller (neither acting under compulsion), using valuation techniques then prevailing in the securities industry and assuming full disclosure of all relevant information and a reasonable period of time for effectuating such sale. For the purposes of determining Enterprise Value, -- the exercise price of options to acquire common stock that are not Out of the Money shall be deemed to have been received by us and -- the liquidation preference or indebtedness, as the case may be, represented by convertible securities that are not Out of the Money shall be deemed to have been eliminated or cancelled. "Enterprise Value Per Share" means the price per share of common stock obtained by dividing (A) the Enterprise Value by (B) the number of shares of common stock outstanding (on a fully diluted basis) at the time of determination. 132 140 "Out of the Money" means, at any date of determination -- in the case of an Option, that the aggregate Current Market Value as of such date of the shares of common stock issuable upon the exercise of such Option is less than the aggregate exercise price payable upon such exercise and -- in the case of a convertible security, that the quotient resulting from dividing the Current Market Value as of such date of such convertible security by the number of shares issuable as of such date upon conversion or exchange of such convertible security is greater than the Current Market Value of a share of common stock. "Publicly Traded" means, with respect to any security, that such security is (a) listed on a domestic securities exchange, (b) quoted on the Nasdaq National Market or the Nasdaq Small-Cap Market or (c) traded in the domestic over-the-counter market, which trades are reported by the National Quotation Bureau, Incorporated. 133 141 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT We, the Initial Purchasers and the Note Guarantors entered into the exchange and registration rights agreement on May 31, 2000. Pursuant to the exchange and registration rights agreement, we and the Note Guarantors agreed to - file with the SEC on or prior to 75 days after the date of issuance of the Old Notes a registration statement on Form S-1 or Form S-4, relating to a registered exchange offer for the Notes under the Securities Act and - use our reasonable best efforts to cause the exchange offer registration statement to be declared effective under the Securities Act within 180 days after the date of issuance of the Old Notes. As soon as practicable after the effectiveness of the exchange offer registration statement, we will offer to the holders of transfer restricted securities (as defined below) who are not prohibited by any law or policy of the SEC from participating in the exchange offer the opportunity to exchange their transfer restricted securities for an issue of a second series of notes that are identical in all material respects to the Old Notes (except that the New Notes will not contain terms with respect to transfer restrictions) and that would be registered under the Securities Act. We and the Note Guarantors will keep the exchange offer open for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the exchange offer is mailed to the holders of the Old Notes. If, - because of any change in law or applicable interpretations thereof by the staff of the SEC, we determine in good faith after consultation with counsel that we are not permitted to effect the exchange offer as contemplated hereby, - any Old Notes validly tendered pursuant to the exchange offer are not exchanged for New Notes within 225 days after the date of issuance of the Old Notes, - the initial purchasers so request with respect to Old Notes not eligible to be exchanged for New Notes in the exchange offer, - any applicable law or interpretations do not permit any holder of Old Notes to participate in the exchange offer, - any holder of Notes that participates in the exchange offer notifies us in writing within 30 days following the consummation of the exchange offer that such holder may not resell the New Notes acquired by it in the exchange offer to the public without delivering a prospectus, and this prospectus which forms a part exchange offer registration statement is not legally available for such resales by such holder, or - we so elect, then we and the Note Guarantors will file with the SEC a shelf registration statement to cover resales of transfer restricted securities by such holders who satisfy certain conditions relating to the provision of information in connection with the shelf registration statement. For purposes of the foregoing, "transfer restricted securities" means each Old Note until (1) the date on which such Note has been exchanged for a freely transferable New Note in the exchange offer; (2) the date on which such Old Note has been effectively registered under the Securities Act and disposed of in accordance with a shelf registration statement; or (3) the date on which such Old Note is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. 134 142 We and the Note Guarantors will use our reasonable best efforts to have the exchange offer registration statement of which this prospectus forms a part or, if applicable, the shelf registration statement declared effective by the SEC as promptly as practicable after the filing thereof. Unless the exchange offer would not be permitted by a policy of the SEC, we will commence the exchange offer and will use our reasonable best efforts to consummate the exchange offer as promptly as practicable, but in any event prior to 225 days after the date of issuance of the Old Notes. If applicable, we and the Note Guarantors will use our reasonable best efforts to keep the shelf registration statement effective for a period of two years after the date of issuance of the Old Notes. If, (1) the exchange offer registration statement or the shelf registration statement, as the case may be, is not declared effective on or prior to the date specified in the exchange and registration rights agreement; (2) the exchange offer is not consummated on or prior to 225 days after the date of issuance of the Old Notes and we did not file a shelf registration statement; or (3) the shelf registration statement is filed and declared effective on or prior to the date specified in the exchange and registration rights agreement but shall thereafter cease to be effective (at any time that we and the Note Guarantors are obligated to maintain the effectiveness thereof) without being succeeded within 60 days by an additional registration statement filed and declared effective (each such event referred to above, a "registration default"), we and the Note Guarantors will be obligated to pay liquidated damages to each holder of transfer restricted securities (but not in respect of any transfer restricted securities for any period after such securities cease to be transfer restricted securities pursuant to clause (3) of the definition thereof set forth above) during the period of one or more such registration defaults, in an amount equal to $0.192 per week per $1,000 principal amount of the Old Notes constituting transfer restricted securities held by such holder until the applicable registration statement is filed, the exchange offer registration statement is declared effective and the exchange offer is consummated or the shelf registration statement is declared effective or again becomes effective, as the case may be. All accrued liquidated damages shall be paid to holders in the same manner as interest payments on the Old Notes on semi-annual payment dates which correspond to interest payment dates for the Old Notes. Following the cure of all registration defaults, the accrual of liquidated damages will cease. The exchange and registration rights agreement also provides that we and the Note Guarantors - will make available for a period of 180 days after the consummation of the exchange offer a prospectus meeting the requirements of the Securities Act to any broker-dealer for use in connection with any resale of any such New Notes and - will pay all expenses incident to the exchange offer, including the expense of one counsel to the holders of the Notes, and will jointly and severally indemnify certain holders of the Notes, including any broker-dealer, against certain liabilities, including liabilities under the Securities Act. A broker-dealer which delivers such a prospectus to purchasers in connection with such resales will be subject to the civil liability provisions under the Securities Act and will be bound by the provisions of the exchange and registration rights agreement, including certain indemnification rights and obligations. The above description of the exchange and registration rights agreement is a summary only, does not purport to be complete and is qualified in its entirety by reference to all provisions of the exchange and registration rights agreement, a copy of which is filed as an exhibit to the registration statement of which this prospectus is a part. 135 143 BOOK-ENTRY; DELIVERY AND FORM The New Notes will initially be represented by one or more permanent global notes in definitive, fully registered book-entry form, without interest coupons that will be deposited with, or on behalf of, DTC and registered in the name of DTC or its nominee, on behalf of the acquirers of New Notes represented thereby for credit to the respective accounts of the acquirers, or to such other accounts as they may direct, at DTC. See "The Exchange Offer -- Book Entry Transfer." Except as set forth below, the global notes may be transferred, in whole and not in part, solely to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the global notes may not be exchanged for notes in physical, certificated form except in the limited circumstances described below. All interests in the global notes may be subject to the procedures and requirements of DTC. CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES The descriptions of the operations and procedures of DTC set forth below are provided solely as a matter of convenience. These operations and procedures are solely within the control of DTC and are subject to change by DTC from time to time. We will take no responsibility for these operations or procedures, and investors are urged to contact DTC or its participants directly to discuss these matters. DTC has advised us that it is (1) a limited purpose trust company organized under the laws of the State of New York, (2) a "banking organization" within the meaning of the New York Banking Law, (3) a member of the Federal Reserve System, (4) a "clearing corporation" within the meaning of the Uniform Commercial Code, as amended, and (5) a "clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitates the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants, thereby eliminating the need for physical transfer and delivery of certificates. DTC's participants include securities brokers and dealers, banks and trust companies, clearing corporations and certain other organizations. Indirect access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Investors who are not participants may beneficially own securities held by or on behalf of DTC only through participants or indirect participants. We expect that pursuant to procedures established by DTC ownership of the New Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interests of participants) and the records of participants and the indirect participants (with respect to the interests of persons other than participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Accordingly, the ability to transfer interests in the New Notes represented by a global note to such persons may be limited. In addition, because DTC can act only on behalf of its participants, who in turn act on behalf of persons who hold interests through participants, the ability of a person having an interest in New Notes represented by a global note to pledge or transfer such interest to persons or entities that do not participate in DTC's system, or to otherwise take actions in respect of such interest, may be affected by the lack of a physical definitive security in respect of such interest. So long as DTC or its nominee is the registered owner of a global note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the notes represented by the 136 144 global note for all purposes under the Indenture. Except as provided below, owners of beneficial interests in a global note - will not be entitled to have New Notes represented by such global note registered in their names, - will not receive or be entitled to receive physical delivery of certificated New Notes, and - will not be considered the owners or holders thereof under the Indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the trustee thereunder. Accordingly, each holder owning a beneficial interest in a global note must rely on the procedures of DTC and, if such holder is not a participant or an indirect participant, on the procedures of the participant through which such holder owns its interest, to exercise any rights of a holder of Notes under the Indenture or such global note. We understand that under existing industry practice, in the event that we request any action of holders of Notes, or a holder that is an owner of a beneficial interest in a global note desires to take any action that DTC, as the holder of such global note, is entitled to take, DTC would authorize the participants to take such action and the participants would authorize holders owning through such participants to take such action or would otherwise act upon the instruction of such holders. Neither we nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of Notes by DTC, or for maintaining, supervising or reviewing any records of DTC relating to such New Notes. Payments with respect to the principal of, and premium, if any, and interest on, any New Notes represented by a global note registered in the name of DTC or its nominee on the applicable record date will be payable by the trustee to or at the direction of DTC or its nominee in its capacity as the registered holder of the global note representing the New Notes under the Indenture. Under the terms of the Indenture, we and the trustee may treat the persons in whose names the New Notes, including the global notes, are registered as the owners thereof for the purpose of receiving payment thereon and for any and all other purposes whatsoever. Accordingly, neither we nor the trustee has or will have any responsibility or liability for the payment of such amounts to owners of beneficial interests in a global note (including principal, premium, if any, liquidated damages, if any, and interest). Payments by the participants and the indirect participants to the owners of beneficial interests in a global note will be governed by standing instructions and customary industry practice and will be the responsibility of the participants or the indirect participants and DTC. Transfers between participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds. CERTIFICATED NOTES If, - we notify the trustee in writing that DTC is no longer willing or able to act as a depositary or DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days of such notice or cessation, - we, at our option, notify the trustee in writing that we elect to cause the issuance of Notes in definitive form under the Indenture or - upon the occurrence of certain other events as provided in the Indenture, then, upon surrender by DTC of the global notes, certificated notes will be issued to each person that DTC identifies as the beneficial owner of the notes represented by the global notes. Upon any such issuance, the trustee is required to register such certificated notes in the name of such person or persons (or the nominee of any thereof) and cause the same to be delivered thereto. Neither we nor the trustee shall be liable for any delay by DTC or any participant or indirect participant in identifying the beneficial owners of the related notes and each such person may conclusively rely on, and shall be protected in relying on, instructions from DTC for all purposes. 137 145 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS GENERAL The following is a summary of material U.S. Federal income tax consequences of the exchange of Old Notes for New Notes pursuant to the exchange offer, but does not address any other aspects of U.S. Federal income tax consequences to holders of Old Notes or New Notes. This summary is based upon the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed regulations thereunder (the "Regulations"), and published rulings and court decisions, all as in effect and existing on the date hereof and all of which are subject to change at any time, which change may be retroactive. This summary is not binding on the Internal Revenue Service or on the courts, and no ruling will be requested from the Internal Revenue Service on any issues described below. There can be no assurance that the Internal Revenue Service will not take a different position concerning the matters discussed below and that such positions of the Internal Revenue Service would not be sustained. Except as expressly stated otherwise, this summary applies only to U.S. Holders (as defined below) that exchange Old Notes for New Notes in the exchange offer and who hold the Old Notes as capital assets. It does not address the tax consequences to taxpayers who are subject to special rules (such as financial institutions, tax-exempt organizations and insurance companies). A "U.S. Holder" means a beneficial owner of a Unit who purchased the Units pursuant to the Offering and is, for U.S. Federal income tax purposes (i) a citizen or resident of the United States; (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof; (iii) an estate the income of which is subject to U.S. Federal income taxation regardless of its source; or (iv) a trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and (B) one or more U.S. fiduciaries have the authority to control all substantial decisions of the trust. PERSONS CONSIDERING THE EXCHANGE OF OLD NOTES FOR NEW NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION. EXCHANGE OF AN OLD NOTE FOR A NEW NOTE PURSUANT TO THE EXCHANGE OFFER The exchange by any holder of an Old Note for a New Note should not constitute a taxable exchange for U.S. federal income tax purposes. Consequently, no gain or loss should be recognized by holders that exchange Old Notes for New Notes pursuant to the exchange offer. For purposes of determining gain or loss upon the subsequent sale or exchange of New Notes, a holder's tax basis in a New Note should be the same as such holder's tax basis in the Old Note exchanged therefor. Holders should be considered to have held the New Notes from the time of their acquisition of the Old Notes. 138 146 PLAN OF DISTRIBUTION Until 90 days after the date of this prospectus, all dealers effecting transactions in the New Notes, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. Each broker-dealer that receives New Notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes only where such Old Notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days from the date on which the exchange offer is consummated, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. We will not receive any proceeds from any sale of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days from the date on which the exchange offer is consummated, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer, including the expenses of one counsel for holders of the Notes, other than commissions or concessions of any broker-dealers and will indemnify the holders of the Notes, including any broker-dealers, against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS Certain legal matters with respect to the New Notes offered hereby and the Guarantees will be passed upon for us by O'Sullivan Graev & Karabell, LLP, New York, New York and Stoel Rives LLP, Salt Lake City, Utah. EXPERTS The financial statements as of December 31, 1999 and 1998 and for the years then ended included in this prospectus and the financial statement schedule for the years ended December 31, 1999 and 1998 included elsewhere in the registration statement, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. The financial statements for the year ended December 31, 1997 included in this prospectus and the related financial statement schedule included elsewhere in the registration statement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein and elsewhere in the registration statement, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 139 147 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES: AS OF DECEMBER 31, 1999 AND 1998 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1999: Report of Management...................................... F-2 Report of Independent Public Accountants -- Arthur Andersen LLP........................................... F-3 Independent Auditors' Report -- Deloitte & Touche LLP..... F-4 Consolidated Balance Sheets as of December 31, 1999 and 1998................................................... F-5 Consolidated Statements of Income for the years ended December 31, 1999, 1998 and 1997....................... F-6 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997........... F-7 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997....................... F-8 Notes to Consolidated Financial Statements................ F-11 AS OF MARCH 31, 2000 AND DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED): Condensed Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999.................................. F-38 Condensed Consolidated Statements of Income for the three months ended March 31, 2000 and 1999................... F-39 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999............. F-40 Notes to Condensed Consolidated Financial Statements...... F-41
F-1 148 REPORT OF MANAGEMENT Huntsman Packaging Corporation's management has prepared the accompanying consolidated financial statements and related notes in conformity with accounting principles generally accepted in the United States. In so doing, management makes informed judgments and estimates of the expected effects of events and transactions. Financial data appearing elsewhere in this report are consistent with these financial statements. Huntsman Packaging Corporation maintains a system of internal controls to provide reasonable, but not absolute, assurance of the reliability of the financial records and the protection of assets. The internal control system is supported by policies and procedures, careful selection and training of qualified personnel, and, beginning in 1999, a formal internal audit program. The accompanying consolidated financial statements have been audited by Arthur Andersen LLP and Deloitte & Touche LLP, independent public accountants, for the specified periods as indicated in their reports. Their audits were made in accordance with auditing standards generally accepted in the United States. They considered Huntsman Packaging Corporation's internal control structure only to the extent necessary to determine the scope of their audit procedures for the purpose of rendering an opinion on the financial statements. Members of the Board of Directors meet with management, the internal auditors and the independent public accountants to review accounting, auditing and financial reporting matters. Subject to stockholder approval, the independent public accountants are appointed by the Board of Directors. Richard P. Durham President and Chief Executive Officer Scott K. Sorensen Executive Vice President and Chief Financial Officer F-2 149 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Huntsman Packaging Corporation: We have audited the accompanying consolidated balance sheets of Huntsman Packaging Corporation and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Huntsman Packaging Corporation and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Salt Lake City, Utah January 28, 2000 F-3 150 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Huntsman Packaging Corporation: We have audited the accompanying consolidated statements of income, stockholders' equity and cash flows of Huntsman Packaging Corporation and subsidiaries for the year ended December 31, 1997. 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 audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the results of Huntsman Packaging Corporation and subsidiaries' operations and their cash flows for the year ended December 31, 1997 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Salt Lake City, Utah February 11, 1998 F-4 151 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 1998
1999 1998 --------- --------- (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 9,097 $ 19,217 Receivables: Trade accounts, net of allowances of $2,115 and $2,570, respectively........................................... 109,768 79,825 Other................................................... 12,866 9,556 Inventories............................................... 78,199 65,892 Prepaid expenses and other................................ 2,644 3,063 Income taxes receivable................................... 2,691 7,365 Deferred income taxes..................................... 5,408 3,605 -------- -------- Total current assets............................... 220,673 188,523 -------- -------- PLANT AND EQUIPMENT: Land and improvements..................................... 7,442 7,442 Buildings and improvements................................ 59,645 54,933 Machinery and equipment................................... 310,232 263,737 Furniture, fixtures and vehicles.......................... 4,501 4,200 Leasehold improvements.................................... 813 521 Construction in progress.................................. 9,412 21,321 -------- -------- 392,045 352,154 Less accumulated depreciation and amortization............ (77,593) (51,820) -------- -------- Plant and equipment, net........................... 314,452 300,334 -------- -------- INTANGIBLE ASSETS, net...................................... 214,956 221,290 -------- -------- OTHER ASSETS................................................ 18,942 24,125 -------- -------- Total assets....................................... $769,023 $734,272 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt......................... $ 17,120 $ 11,406 Trade accounts payable.................................... 60,056 43,186 Accrued liabilities: Customer rebates........................................ 8,910 8,450 Other................................................... 26,026 25,126 Due to affiliates......................................... 4,715 7,000 -------- -------- Total current liabilities.......................... 116,827 95,168 LONG-TERM DEBT, net of current portion...................... 493,262 513,530 OTHER LIABILITIES........................................... 13,983 11,394 DEFERRED INCOME TAXES....................................... 51,363 42,423 -------- -------- Total liabilities.................................. 675,435 662,515 -------- -------- COMMITMENTS AND CONTINGENCIES (Notes 6, 7 and 11) REDEEMABLE COMMON STOCK -- Class C nonvoting, no par value; 60,000 shares authorized, 49,511 and 11,700 shares outstanding in 1999 and 1998, respectively, net of related stockholder notes receivable of $2,795 in 1999............ 2,926 1,170 -------- -------- STOCKHOLDERS' EQUITY: Common stock -- Class A voting, no par value; 1,200,000 shares authorized, 1,000,001 shares outstanding......... 63,161 63,161 Common stock -- Class B voting, no par value; 10,000 shares authorized, 6,999 shares outstanding............. 515 515 Retained earnings......................................... 32,042 13,731 Stockholder note receivable............................... (299) (434) Cumulative foreign currency translation adjustments....... (4,757) (6,386) -------- -------- Total stockholders' equity......................... 90,662 70,587 -------- -------- Total liabilities and stockholders' equity......... $769,023 $734,272 ======== ========
See notes to consolidated financial statements. F-5 152 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998 1997 -------- -------- -------- (DOLLARS IN THOUSANDS) NET SALES............................................... $781,416 $651,957 $447,743 COST OF SALES........................................... 623,438 532,410 389,628 -------- -------- -------- Gross profit.................................. 157,978 119,547 58,115 -------- -------- -------- OPERATING EXPENSES: Administration and other.............................. 48,905 37,383 15,113 Sales and marketing................................... 25,071 24,148 18,143 Research and development.............................. 5,514 3,677 2,507 Plant closing costs................................... 2,497 4,875 9,276 -------- -------- -------- Total operating expenses...................... 81,987 70,083 45,039 -------- -------- -------- OPERATING INCOME........................................ 75,991 49,464 13,076 INTEREST EXPENSE........................................ (44,028) (37,519) (17,000) OTHER INCOME (EXPENSE), net............................. 435 (879) 750 -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS............................................ 32,398 11,066 (3,174) -------- -------- -------- INCOME TAX EXPENSE (BENEFIT): Current............................................... 6,829 1,567 3,679 Deferred.............................................. 7,258 6,966 (4,188) -------- -------- -------- Total income tax expense (benefit)............ 14,087 8,533 (509) -------- -------- -------- INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS............ 18,311 2,533 (2,665) -------- -------- -------- INCOME FROM DISCONTINUED OPERATIONS (net of income tax expense of $387 and $1,348, respectively)............. 582 3,040 GAIN ON SALE OF DISCONTINUED OPERATIONS (net of income tax expense of $6,729)................................ 5,223 -------- -------- -------- NET INCOME.............................................. $ 18,311 $ 8,338 $ 375 ======== ======== ========
See notes to consolidated financial statements. F-6 153 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
CLASS A CLASS B COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL --------------- ---------------- --------------- PAID-IN RETAINED TOTAL SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ------- ------ ------ ------ ------- ------ ------ ---------- -------- (IN THOUSANDS) BALANCE, DECEMBER 31, 1996.... $67,012 1 $ 1 $ 62,975 $ 5,053 ------- Comprehensive loss: Net income.................. 375 375 Other comprehensive loss -- Foreign currency translation adjustments............. (4,378) ------- Comprehensive loss.... (4,003) ------- Recapitalization (Note 1)... (1) (1) 995 $62,661 5 $315 (62,975) Shares issued for note receivable................ 5 500 2 200 Other....................... (35) (35) ------- --- --- ----- ------- --- ---- -------- ------- BALANCE, DECEMBER 31, 1997.... 62,974 1,000 63,161 7 515 5,393 ------- Comprehensive income: Net income.................. 8,338 8,338 Other comprehensive loss -- Foreign currency translation adjustments............. (991) ------- Comprehensive income.............. 7,347 ------- Payments received on stockholder note receivable................ 266 ------- --- --- ----- ------- --- ---- -------- ------- BALANCE, DECEMBER 31, 1998.... 70,587 1,000 63,161 7 515 13,731 ------- Comprehensive income: Net income.................. 18,311 18,311 Other comprehensive income -- Foreign currency translation adjustments............. 1,629 ------- Comprehensive income.............. 19,940 ------- Payments received on stockholder note receivable................ 135 ------- --- --- ----- ------- --- ---- -------- ------- BALANCE, DECEMBER 31, 1999.... $90,662 1,000 $63,161 7 $515 $32,042 ======= === === ===== ======= === ==== ======== ======= CUMULATIVE FOREIGN CURRENCY STOCKHOLDER TRANSLATION RECEIVABLE ADJUSTMENTS ----------- ----------- (IN THOUSANDS) BALANCE, DECEMBER 31, 1996.... $(1,017) Comprehensive loss: Net income.................. Other comprehensive loss -- Foreign currency translation adjustments............. (4,378) Comprehensive loss.... Recapitalization (Note 1)... Shares issued for note receivable................ $(700) Other....................... ----- ------- BALANCE, DECEMBER 31, 1997.... (700) (5,395) Comprehensive income: Net income.................. Other comprehensive loss -- Foreign currency translation adjustments............. (991) Comprehensive income.............. Payments received on stockholder note receivable................ 266 ----- ------- BALANCE, DECEMBER 31, 1998.... (434) (6,386) Comprehensive income: Net income.................. Other comprehensive income -- Foreign currency translation adjustments............. 1,629 Comprehensive income.............. Payments received on stockholder note receivable................ 135 ----- ------- BALANCE, DECEMBER 31, 1999.... $(299) $(4,757) ===== =======
See notes to consolidated financial statements. F-7 154 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998 1997 -------- --------- --------- (DOLLARS IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income.......................................... $ 18,311 $ 8,338 $ 375 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................... 35,019 27,088 16,442 Deferred income taxes............................ 7,137 6,966 (4,188) Increase (decrease) in provision for losses on accounts receivable............................ (455) (1,714) 241 Noncash stock-based compensation expense......... 770 Gain on sale of discontinued operations.......... (5,223) Write-down of goodwill........................... 411 3,286 Write-down of plant and equipment................ 1,370 629 4,262 Loss on disposal of assets....................... 86 305 Changes in operating assets and liabilities -- net of effects of acquisitions: Trade accounts receivable...................... (26,278) 15,041 (6,431) Other receivables.............................. (3,070) (7,526) (1,666) Inventories.................................... (7,829) 14,298 7,961 Prepaid expenses and other..................... 1,411 46 1,758 Other assets................................... 7,145 1,685 (7,621) Trade accounts payable......................... 16,870 1,528 340 Accrued liabilities............................ (4,012) 1,998 (96) Due to affiliates.............................. (2,285) (8,279) 8,839 Income taxes payable/receivable................ 4,674 (9,004) 3,427 Other liabilities.............................. 2,589 (1,097) 1,719 -------- --------- --------- Net cash provided by operating activities... 51,453 45,490 28,648 -------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for plant and equipment........ (35,723) (52,101) (17,861) Payment for purchase of certain net assets of KCL Corporation, net of cash acquired................ (11,498) Proceeds from sale of assets........................ 1,191 33,850 Payment for purchase of Blessings Corporation, net of cash acquired................................. (285,712) Payment for purchase of certain net assets of Ellehammer....................................... (7,877) Payment for purchase of certain assets of Allied Signal........................................... (3,000) Payment for purchase of CT Film, net of cash acquired......................................... (69,366) -------- --------- --------- Net cash used in investing activities....... (46,030) (314,840) (87,227) -------- --------- ---------
See notes to consolidated financial statements. F-8 155 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998 1997 -------- --------- --------- (DOLLARS IN THOUSANDS) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on long-term debt.......................... $(12,125) Principal payments on borrowings.................... (5,725) $ (10,544) $(249,509) Proceeds from issuance of Class C nonvoting common stock............................................ 986 1,170 Payments received from stockholder on note receivable....................................... 135 266 Proceeds from issuance of long-term debt............ 285,000 312,700 -------- --------- --------- Net cash provided by (used in) financing activities................................ (16,729) 275,892 63,191 -------- --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS.................................... 1,186 264 (2,848) -------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......................................... (10,120) 6,806 1,764 CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR...... 19,217 12,411 10,647 -------- --------- --------- CASH AND CASH EQUIVALENTS, END OF THE YEAR............ $ 9,097 $ 19,217 $ 12,411 ======== ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (received) during the year for: Interest......................................... $ 43,179 $ 33,253 $ 27,596 ======== ========= ========= Income taxes..................................... $ (361) $ 5,647 $ 1,614 ======== ========= =========
See notes to consolidated financial statements. F-9 156 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (DOLLARS IN THOUSANDS) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: A capital lease obligation of $353 was incurred during 1999 when we entered into a lease for new equipment. On October 18, 1999, we acquired certain assets and assumed certain liabilities of KCL Corporation for cash of $11,498. As part of the acquisition, liabilities assumed were as follows: Fair value of assets acquired (including goodwill of $2,651)............................................... $ 15,500 Cash paid............................................... (11,498) --------- Liabilities assumed..................................... $ 4,002 =========
On May 19, 1998, we purchased all of the outstanding capital stock of Blessings Corporation for cash of $213,000. As part of the acquisition, liabilities assumed were as follows: Fair value of assets acquired (including goodwill of $168,704)............................................. $ 328,403 Cash paid (including the repayment of Blessings Corporation's debt)................................... (287,499) --------- Liabilities assumed..................................... $ 40,904 =========
On March 12, 1998, we acquired certain assets and assumed certain liabilities of Ellehammer Industries, Ltd. and Ellehammer Packaging, Inc. for cash of $7,877. As part of the acquisition, liabilities assumed were as follows: Fair value of assets acquired........................... $ 8,604 Cash paid............................................... (7,877) --------- Liabilities assumed..................................... $ 727 =========
On September 30, 1997, we purchased all of the assets of CT Film (a division of Huntsman Polymers Corporation, formerly Rexene Corporation) and Rexene Corporation Limited (a wholly owned subsidiary of Huntsman Polymers Corporation) for cash of $70,000. As part of the acquisition, liabilities assumed were as follows: Fair value of assets acquired (including goodwill of $7,763)............................................... $ 87,923 Cash paid............................................... (70,000) --------- Liabilities assumed..................................... $ 17,923 =========
See notes to consolidated financial statements. F-10 157 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Huntsman Packaging Corporation and its subsidiaries (collectively "Huntsman Packaging") produce polymer-based (plastic), value-added films for flexible packaging, personal care, medical, agricultural and industrial applications. Our manufacturing facilities are located in North America, Germany and Australia. RECAPITALIZATION -- Prior to September 30, 1997, Huntsman Packaging was a wholly owned subsidiary of Huntsman Corporation ("HC"). On September 30, 1997, Huntsman Packaging was recapitalized by authorizing two new classes of common stock, Class A Common and Class B Common. The 1,000 shares of previously issued and outstanding common stock were canceled. On September 30, 1997, Huntsman Packaging was separated from HC in a tax free transaction under Section 355 of the Internal Revenue Code (the "Split-Off"), when Jon M. Huntsman and The Christena Karen H. Durham Trust exchanged shares of HC common stock for shares of Huntsman Packaging's newly authorized common stock. Additionally, Richard P. Durham purchased shares of Huntsman Packaging's newly authorized common stock in exchange for a note receivable. PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include the accounts of Huntsman Packaging and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. REVENUE RECOGNITION -- Sales revenue is recognized upon shipment of product in fulfillment of a customer order. INVENTORIES -- Inventories consist principally of finished film products and the raw materials necessary to produce them. Inventories are carried at the lower of cost (on a first-in, first-out basis) or market value. PLANT AND EQUIPMENT -- Plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated economic useful lives of the assets as follows: Land improvements...................................... 20 years Buildings and improvements............................. 20 years Machinery and equipment................................ 7-15 years Furniture, fixtures and vehicles....................... 3-7 years Leasehold improvements................................. 10-20 years
INTANGIBLE ASSETS -- Intangible assets are stated at cost. Amortization is computed using the straight-line method over the estimated economic useful lives of the assets as follows: Cost in excess of fair value of net assets acquired.... 10-40 years Other intangible assets................................ 2-15 years
CARRYING VALUE OF LONG-LIVED ASSETS -- We evaluate the carrying value of long-lived assets, including intangible assets, based upon current and expected undiscounted cash flows, and recognize an impairment when the estimated cash flows are less than the carrying value of the F-11 158 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) asset. Measurement of the amount of impairment, if any, is based upon the difference between the asset's carrying value and fair value. OTHER ASSETS -- Other assets consist primarily of deferred debt issuance costs, deposits, spare parts, and the cash surrender values of key-person life insurance policies. CASH AND CASH EQUIVALENTS -- For the purpose of the consolidated statements of cash flows, we consider cash in checking accounts and in short-term, highly liquid investments with an original maturity of three months or less to be cash and cash equivalents. Cash and cash equivalents generated outside of the United States are generally subject to taxation if repatriated. INCOME TAXES -- We use the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes. Since the Split-Off, we have filed our own consolidated income tax returns. Prior to the Split-Off, our operations were included in the consolidated United States income tax returns of HC. HC's intercompany tax allocation policy provided for each subsidiary to calculate its own provision on a "separate return basis." DERIVATIVE FINANCIAL INSTRUMENTS -- In the normal course of business, we occasionally enter into interest rate collar and swap agreements to manage interest rate risk on long-term debt. These agreements are classified as hedges for matched transactions. The differential to be paid or received as interest rates change is accrued and recognized as an adjustment to interest expense. The related amount payable to or receivable from the counterparties is included in other liabilities or assets. Gains and losses on terminations of interest-rate swap agreements are deferred and amortized as an adjustment to interest expense over the lesser of the remaining term of the original contract or the life of the debt. We also occasionally enter into commodity collar agreements to manage the market risk of our raw material prices. These agreements are classified as hedges. The differential to be paid or received as commodity prices change is accrued and recognized as an adjustment to inventory. The related amount payable to or receivable from the counterparties is included in other liabilities or assets. RECENT ACCOUNTING PRONOUNCEMENT -- In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards that require derivative instruments to be recorded on the balance sheet as either an asset or liability, measured at fair market value, and that changes in the derivative's fair value be recognized currently in earnings, unless specific hedge accounting criteria are met. SFAS No. 133 is effective for fiscal years beginning after June 15, 2000. We expect that the adoption of this statement will not have a material effect on our consolidated financial statements. FOREIGN CURRENCY TRANSLATION -- The accounts of our foreign subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted average exchange rate for each period for revenues, expenses, gains and losses. Transactions are translated using the exchange rate at each transaction date. Where the local currency is the functional currency, translation adjustments are recorded as a separate component of stockholders' equity. Where the U.S. dollar is the functional currency, translation adjustments are recorded in other income within current operations. F-12 159 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. INVENTORIES INVENTORY BALANCES -- Inventories consist of the following at December 31, 1999 and 1998 (in thousands):
1999 1998 ------- ------- Finished goods......................................... $41,408 $37,830 Raw materials.......................................... 28,910 21,318 Work-in-process........................................ 7,881 6,744 ------- ------- Total.................................................. $78,199 $65,892 ======= =======
COMMODITY COLLAR TERMS -- In 1999, we entered into a commodity collar agreement to manage the market risk of one of our major raw materials. The collar agreement entitles us to receive from the counterparty (a major risk management company) the amounts, if any, by which the published market price, as defined in the agreement, of polyvinyl chloride ("PVC") exceeds $0.30 per pound. The collar agreement requires us to pay the counterparty the amounts, if any, by which the published market price of PVC is below $0.23 per pound. The collar ended on December 31, 1999. There was no premium paid for the collar agreement. We realized a reduction in raw material inventory costs of $0.5 million during 1999 from this collar. In 1998, we entered into a separate commodity collar agreement to manage the market risk of one of our other major raw materials. The collar agreement entitles us to receive from the counterparty (a major risk management company) the amounts, if any, by which the published market price, as defined in the agreement, of low density polyethylene ("LDPE") exceeds $0.35 per pound. The collar agreement requires us to pay the counterparty the amounts, if any, by which the published market price of LDPE is below $0.295 per pound. As of December 31, 1999, the defined published market price for LDPE was $0.46 per pound. There was no premium paid for the collar agreement. We realized a reduction in raw material inventory costs of $0.8 million during 1999 from this collar. The notional amount of this contract is 18 million pounds and the maturity date is April 30, 2000. We are exposed to credit losses in the event of nonperformance by the counterparty to the agreement. We anticipate, however, that the counterparty will be able to fully satisfy its obligations under the contract. Market risk arises from changes in commodity prices. 3. SALE OF ASSETS On June 1, 1998, Huntsman Container Corporation International ("HCCI"), a wholly owned subsidiary of Huntsman Packaging, sold its entire interest in the capital stock of Huntsman Container Company Limited ("HCCL") and Huntsman Container Company France SA ("HCCFSA") to Polarcup Limited and Huhtamake Holdings France Sarl, subsidiaries of Huhtamaki Oyj. Together, HCCL and HCCFSA comprised our foam products operations, which were operated exclusively in Europe. Net proceeds from the sale were approximately $28.3 million and a gain of approximately $5.2 million, net of applicable income taxes, was recorded. The financial position and results of operations of this separate business segment are reflected as discontinued operations in the accompanying consolidated financial statements for all years presented. Revenues from the foam products operations for the years ended December 31, 1998 and 1997 amounted to $15.6 million and $43.4 million, respectively. As part of our acquisition of the CT Film Division of Huntsman Polymers (see Note 12), we acquired Huntsman Packaging UK Limited ("HPUK"). HPUK owned CT Film's Scunthorpe, UK F-13 160 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) facility, which manufactured and sold polyethylene film exclusively in Europe. At the time of the CT Film acquisition, we announced our intention to close or sell the Scunthorpe, UK facility. During 1998, we adjusted our preliminary estimate of the fair value of the Scunthorpe, UK facility assets acquired, resulting in an increase of $2.9 million to the associated goodwill recorded. On August 14, 1998, we sold our interest in the capital stock of HPUK to Skymark Packaging International Limited. Net proceeds from the sale were approximately $5.6 million, including a note receivable from the buyer. The note receivable balance was collected at December 31, 1999. 4. PLANT CLOSING COSTS During 1999, we announced our plan to cease operations at one of our facilities located in Mexico City, Mexico. Included in 1999 operating expenses is a $2.3 million charge, comprised of a $1.3 million write-off of impaired plant equipment, and a $1.0 million charge for reduction of work force costs associated with the elimination of 110 full-time equivalent employees. In addition, we announced our plan to cease the production of one of our product lines at our Kent, Washington facility. Included in 1999 operating expenses is a $0.2 million charge for the write-off of impaired plant equipment and for reduction of work force costs associated with the elimination of 36 full-time equivalent employees. In connection with the purchase of KCL Corporation, we announced a plan to eliminate 32 full-time equivalent employees, move certain purchased assets and install them at desired locations, cease certain purchased operations, and write-off related impaired plant equipment and inventory. The purchase price allocation includes $0.7 million for reduction of workforce costs, $0.4 million for asset removal and relocation and $0.1 million for the write-off of inventory. During 1998, we announced our plan to cease operations at our Clearfield, Utah facility. Included in 1998 operating expenses is a $4.9 million charge, comprised of a $0.4 million write-off of impaired goodwill, a $0.6 million write-off of impaired plant equipment associated with the facility, a $0.5 million charge for reduction of work force costs associated with the elimination of 52 full-time equivalent employees, and an accrual of $3.4 million for estimated future net lease and other costs incurred to close the facility. During 1997, we announced our plan to cease operations at our Carrollton, Ohio facility and our intention to relocate certain assets from that facility to other of our facilities. Included in 1997 operating expenses is a $9.3 million charge, comprised of a $3.3 million write-off of impaired goodwill, a $4.2 million write-off of impaired plant equipment associated with the facility, a $1.6 million charge for reduction in work force costs associated with the elimination of 83 full-time equivalent employees, and an accrual of $0.2 million for other costs related to the closure of the facility. As of December 31, 1999, all plant closings announced prior to 1999 were complete and no additional plant closing expenses are anticipated for these closed facilities. As of December 31, 1999, the plant closing accrual is $4.8 million and is included in accrued liabilities. F-14 161 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. INTANGIBLE ASSETS The cost of intangible assets and related accumulated amortization at December 31, 1999 and 1998 is as follows (in thousands):
1999 1998 -------- -------- Goodwill............................................. $216,058 $213,406 Trademarks, patents and technology................... 15,776 15,776 Noncompete agreements................................ 7,283 7,283 Other................................................ 7,455 7,455 -------- -------- 246,572 243,920 Less accumulated amortization........................ (31,616) (22,630) -------- -------- Total................................................ $214,956 $221,290 ======== ========
Amortization expense for intangible assets was approximately $9.0 million, $6.1 million and $3.1 million for the years ended December 31, 1999, 1998 and 1997, respectively. 6. LONG-TERM DEBT Long-term debt as of December 31, 1999 and 1998 consists of the following (in thousands):
1999 1998 -------- -------- Credit Agreement: Revolver, variable interest at a weighted average rate of 8.644% as of December 31, 1999.......... $ 33,000 $ 43,000 Term loans, variable interest at a weighted average rate of 8.272% as of December 31, 1999.......... 345,281 356,687 Senior subordinated notes, interest at 9.125%........ 125,000 125,000 Line of credit agreement, interest at 9.25%, due September 2000..................................... 4,274 Obligations under capital leases (see Note 7)........ 497 249 Insurance financing, interest at 6.62%............... 2,330 -------- -------- Total...................................... 510,382 524,936 Less current portion................................. (17,120) (11,406) -------- -------- Long-term portion.................................... $493,262 $513,530 ======== ========
On September 30, 1997, we entered into a $225 million credit facility (the "Credit Agreement") with various banks. On May 14, 1998, the Credit Agreement was amended and restated as a $510 million facility (the "Amended Credit Agreement"). The Amended Credit Agreement provides for the continuation of a previous term loan (the "Original Term Loan") in the principal amount of $75 million, maturing on September 30, 2005; a Tranche A Term Loan (the "Tranche A Term Loan") in the principal amount of $140 million, maturing on September 30, 2005; a Tranche B Term Loan (the "Tranche B Term Loan") in the principal amount of $100 million, maturing on June 30, 2006; and a term loan (the "Mexico Term Loan") to ASPEN Industrial, S.A., our wholly owned Mexican subsidiary, in the principal amount of $45 million, maturing on September 30, 2005. The Amended Credit Agreement also provides for a $150 million revolving loan facility (the "Revolver") maturing on September 30, 2004. The Original Term Loan, the Tranche A Term Loan and the Mexico Term Loan amortize at an increasing rate on a quarterly basis. The Tranche A Term Loan and the Mexico Term Loan began amortizing on December 31, 1998 and the Original Term Loan begins amortizing F-15 162 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) December 31, 2001. As of September 30, 1998, the Tranche B Term Loan began amortizing at the rate of $1 million per year, with an aggregate of $93 million due in the last four quarterly installments. The term loans described above are required to be prepaid with the proceeds of certain asset sales, with 50% of the proceeds of the sale of certain Huntsman Packaging equity securities, and with the proceeds of certain debt offerings, should such events occur. Loans under the Amended Credit Agreement bear interest at our election, at either (1) zero to 0.75%, depending on certain of our financial ratios, plus the higher of (a) the agent bank's prime rate, (b) the federal funds rate plus 0.50% or (c) the agent bank's base CD rate plus 1%; or (2) the London Interbank Offered Rate plus 1% to 2%, also depending on certain of our financial ratios. We pay a quarterly commitment fee on the unused amount of the Revolver at an annual rate commencing at 0.50%. The interest rate margins and the commitment fee are subject to reduction if we achieve certain ratios. As of December 31, 1999, we had outstanding letters of credit of approximately $1.3 million. Obligations under the Amended Credit Agreement are guaranteed by the assets of all of our domestic subsidiaries (see Note 16). The Amended Credit Agreement does not permit cash dividends and contains covenants customary for transactions of this type, including restrictions on indebtedness, liens, asset sales, capital expenditures, acquisitions, investments, transactions with affiliates, and other restricted payments. The Amended Credit Agreement also contains financial covenants, including a ratio of maximum total debt to EBITDA, a minimum interest coverage ratio, and minimum net worth. As of December 31, 1999, we were in compliance with the covenants of the Amended Credit Agreement and the Notes. On September 30, 1997, we issued $125 million of 9.125% unsecured senior subordinated notes which mature on October 1, 2007 (the "Notes"). Interest on the Notes is payable semi-annually on each April 1 and October 1, commencing April 1, 1998. The Notes are guaranteed by our domestic subsidiaries (see Note 16). The Notes are redeemable, at our option, in whole at any time or in part from time to time, on or after October 1, 2002, at redemption prices decreasing from 104.563% to 100% of the outstanding principal balance after October 2005. Additionally, up to 35% of the Notes may be redeemed prior to October 1, 2000 at a price equal to 109.125% of the principal amount with the proceeds of one or more equity offerings. The Notes are subject to certain covenants customary to this type of transaction, including restrictions on the incurrence of additional indebtedness, certain restricted payments, asset sales, dividend and other payment restrictions affecting subsidiaries, liens, mergers, and transactions with affiliates. During 1999, we entered into a financing agreement to finance insurance premiums. Payments are payable monthly and run through April 2002. The scheduled maturities of long-term debt by year as of December 31, 1999 are as follows (in thousands):
YEAR ENDING DECEMBER 31, - ------------------------ 2000................................................... $ 17,120 2001................................................... 26,009 2002................................................... 51,280 2003................................................... 50,901 2004................................................... 56,248 Thereafter............................................... 308,824 -------- Total.......................................... $510,382 ========
F-16 163 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In 1997, we purchased an interest rate collar agreement to reduce the impact of changes in interest rates on our floating-rate long-term debt. The collar agreement entitles us to receive amounts from the counterparty (a major bank) if the three-month LIBOR interest rate, as defined in the agreement, exceeds 6.25%. The collar agreement requires us to pay amounts to the counterparty if the three-month LIBOR interest rate is less than 5.25%. As of December 31, 1999, the defined three-month LIBOR interest rate was 6.18%. The net premium paid for the collar agreement purchased is included in other assets in the consolidated balance sheets and is amortized to interest expense over the term of the agreement. Amounts receivable or payable under the agreement are recognized as yield adjustments over the life of the related debt. We are exposed to credit losses in the event of nonperformance by the counterparty to the financial instrument. We anticipate, however, that the counterparty will be able to fully satisfy its obligations under the contract. Market risk arises from changes in interest rates. As of December 31, 1999, we had one outstanding interest rate collar agreement. The terms of the agreement are as follows: Notional amount.................................. $20 million Maturity date.................................... November 5, 2001 Cap rate......................................... 6.25% Floor rate....................................... 5.25%
In 1997, we also entered into a series of interest rate swap agreements to hedge the interest rate exposure in anticipation of issuing the Notes. The agreements were accounted for as hedges and were subsequently terminated. Termination costs of approximately $1.2 million are being amortized to interest expense over the life of the Notes. 7. LEASES CAPITAL LEASES -- We have acquired certain land, building, machinery and equipment under capital lease arrangements that expire at various dates through 2007. At December 31, 1999 and 1998, the gross amounts of plant and equipment and related accumulated amortization recorded under capital leases were as follows (in thousands):
1999 1998 ----- ---- Land and building........................................... $ 309 $309 Machinery and equipment..................................... 353 ----- ---- Total assets held under capital leases...................... 662 309 Less accumulated amortization............................... (104) (39) ----- ---- $ 558 $270 ===== ====
OPERATING LEASES -- We have noncancelable operating leases, primarily for vehicles, equipment, warehouse, and office space that expire through 2006, as well as month-to-month leases. The total expense recorded under all operating lease agreements in the accompanying consolidated statements of income is approximately $6.6 million, $5.8 million and $2.9 million for the years ended December 31, 1999, 1998 and 1997, respectively. F-17 164 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Future minimum lease payments under operating leases and the present value of future minimum capital lease payments as of December 31, 1999 are as follows (in thousands):
OPERATING CAPITAL LEASES LEASES --------- ------- Year Ending December 31, 2000................................................ $ 5,589 $ 177 2001................................................ 4,365 177 2002................................................ 3,448 81 2003................................................ 2,872 45 2004................................................ 2,073 45 Thereafter.......................................... 11,145 129 ------- ----- Total minimum lease payments.......................... $29,492 654 ======= Amounts representing interest......................... (157) ----- Present value of net minimum capital lease payments (see Note 6)........................................ $ 497 =====
8. INCOME TAXES The following is a summary of domestic and foreign provisions for current and deferred income taxes and a reconciliation of the U.S. statutory income tax rate to the effective income tax rate. The provisions (benefits) for income taxes for the years ended December 31, 1999, 1998 and 1997 are as follows (in thousands):
1999 1998 1997 ------- ------- ------- Current: Federal........................................... $ 1,581 $(1,877) State............................................. 770 128 $ 1,156 Foreign........................................... 4,478 3,316 2,523 ------- ------- ------- Total current............................. 6,829 1,567 3,679 ------- ------- ------- Deferred: Federal........................................... 6,975 6,960 (4,110) State............................................. 71 793 (470) Foreign........................................... 212 (787) 392 ------- ------- ------- Total deferred............................ 7,258 6,966 (4,188) ------- ------- ------- Total income tax expense (benefit) (excluding income taxes applicable to discontinued operations)...... $14,087 $ 8,533 $ (509) ======= ======= =======
F-18 165 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The effective income tax rate reconciliations for the years ended December 31, 1999, 1998 and 1997 are as follows (in thousands):
1999 1998 1997 ------- ------- ------- Income (loss) before income taxes, discontinued operations and extraordinary item................. $32,398 $11,066 $(3,174) ======= ======= ======= Expected income tax provision (benefit) at U.S. statutory rate of 35%............................. $11,339 $ 3,873 $(1,111) Increase (decrease) resulting from: Goodwill.......................................... 1,625 1,331 1,150 State taxes....................................... 547 353 49 Adjustment of tax attributes...................... (912) 1,361 Foreign rate difference and other, net............ 1,488 1,615 (597) ------- ------- ------- Total income tax expense (benefit) (excluding income taxes applicable to discontinued operations)...... $14,087 $ 8,533 $ (509) ======= ======= ======= Effective income tax rate........................... 43.5% 77.1% 16.0% ======= ======= =======
Components of net deferred income tax assets and liabilities as of December 31, 1999 and 1998 are as follows (in thousands):
1999 1998 -------- -------- Deferred income tax assets: AMT and foreign tax credit carryforwards........... $ 2,867 $ 3,512 Accrued pension costs not deducted for tax......... 5,833 2,522 Accrued employee benefits.......................... 1,372 1,562 Plant closing costs not deducted for tax........... 758 1,024 Allowance for doubtful trade accounts receivable... 340 635 Inventory related costs not deducted for tax....... 476 633 Other.............................................. 1,330 1,084 -------- -------- Total deferred income tax assets........... 12,976 10,972 -------- -------- Deferred income tax liabilities: Tax depreciation in excess of book depreciation.... (52,611) (42,650) Amortization of intangibles........................ (5,365) (6,188) Other.............................................. (955) (952) -------- -------- Total deferred income tax liabilities...... (58,931) (49,790) -------- -------- Net deferred income tax liability.................... $(45,955) $(38,818) ======== ======== As reported on consolidated balance sheets: Net current deferred income tax asset.............. $ 5,408 $ 3,605 Net noncurrent deferred income tax liability....... (51,363) (42,423) -------- -------- Net deferred income tax liability.................. $(45,955) $(38,818) ======== ========
The foreign tax credit carryforwards of approximately $1,405 expire in 2004. F-19 166 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. EMPLOYEE BENEFIT PLANS DEFINED CONTRIBUTION PLAN -- We sponsor a salary deferral plan covering substantially all of our non-union domestic employees. Plan participants may elect to make voluntary contributions to this plan up to 15% of their compensation. We contribute 1% of the participants' compensation and also match employee contributions up to 2% of the participants' compensation. We expensed approximately $7.2 million, $5.0 million and $3.1 million as our contribution to this plan for the years ended December 31, 1999, 1998 and 1997, respectively. DEFINED BENEFIT PLANS -- We sponsor five noncontributory defined benefit pension plans (the "United States Plans") covering domestic employees with 1,000 or more hours of service. We fund the actuarially computed retirement cost. Contributions are intended to not only provide for benefits attributed to service to date but also for those expected to be earned in the future. We also sponsor a defined benefit plan in Germany (the "Germany Plan"). The consolidated accrued net pension expense for the years ended December 31, 1999, 1998 and 1997 includes the following components (in thousands):
1999 1998 1997 ------- ------- ------- UNITED STATES PLANS Service cost -- benefits earned during the period... $ 4,056 $ 3,726 $ 2,299 Interest cost on projected benefit obligation....... 3,659 3,469 1,806 Expected return on assets........................... (3,913) (3,777) (1,886) Other............................................... 100 (3) 17 ------- ------- ------- Total accrued pension expense....................... $ 3,902 $ 3,415 $ 2,236 ======= ======= ======= GERMANY PLAN Service cost -- benefits earned during the period... $ 63 $ 64 $ 58 Interest cost on projected benefit obligation....... 62 66 56 ------- ------- ------- Total accrued pension expense....................... $ 125 $ 130 $ 114 ======= ======= =======
The following table sets forth the funded status of the United States Plans and the Germany Plan as of December 31, 1999, 1998 and 1997 and the amounts recognized in the consolidated balance sheets at those dates (in thousands):
1999 1998 1997 ------- ------- ------- UNITED STATES PLANS Change in benefit obligation: Obligation at January 1........................... $52,348 $27,025 $ 8,237 Service cost...................................... 4,056 3,726 2,299 Interest cost..................................... 3,659 3,469 1,806 Curtailments...................................... (2,137) Settlements....................................... 50 Plan amendments................................... 2,340 Actuarial (gain) loss............................. (7,781) 1,333 2,706 Acquisition....................................... 18,264 12,497 Benefits paid..................................... (1,877) (1,722) (520) ------- ------- ------- Obligation at December 31........................... $50,405 $52,348 $27,025 ======= ======= =======
F-20 167 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1999 1998 1997 ------- ------- ------- Change in plan assets: Fair value of assets at January 1................. $44,001 $24,235 $ 8,555 Actual return on plan assets...................... 6,603 3,941 3,688 Acquisition....................................... 16,143 12,296 Employer contributions............................ 563 1,404 216 Benefit payments.................................. (1,877) (1,722) (520) ------- ------- ------- Fair value of plan assets at December 31............ $49,290 $44,001 $24,235 ======= ======= ======= Underfunded status at December 31................... $ 1,115 $ 8,347 $ 2,790 Unrecognized net actuarial gain..................... 11,103 641 1,853 Unrecognized prior service cost..................... (1,477) (1,586) (299) Additional liability................................ 14 ------- ------- ------- Accrued long-term pension liability included in other liabilities................................. $10,741 $ 7,402 $ 4,358 ======= ======= =======
For the above calculations, increases in future compensation ranging from 4.0% to 4.25% were used for the non-union plans. There was no increase in future compensation used for the three union plans. For the calculations, discount rates ranging from 6.75% to 7.75% and expected rates of return on plan assets of 9.0% were used for all plans.
1999 1998 ------- ------- GERMANY PLAN Change in benefit obligation: Obligation at January 1........................... $ 1,143 $ 956 Service cost...................................... 63 64 Interest cost..................................... 62 66 Benefits paid..................................... (5) (5) Change due to exchange rate....................... (173) 62 ------- ------- Obligation at December 31........................... $ 1,090 $ 1,143 ======= ======= Fair value of plan assets at December 31............ None None ======= ======= Underfunded status at December 31................... $ 1,090 $ 1,143 Unrecognized net actuarial loss..................... 75 81 ------- ------- Accrued long-term pension liability included in other liabilities................................. $ 1,165 $ 1,224 ======= =======
Increases in future compensation ranging from 2.0% to 3.5% and discount rates ranging from 6.0% to 7.0% were used in determining the actuarially computed present value of the projected benefit obligation of the Germany Plan. The cash surrender value of life insurance policies for Germany Plan participants included in other assets is approximately $0.5 million and $0.7 million as of December 31, 1999 and 1998, respectively. FOREIGN PLANS OTHER THAN GERMANY -- Employees in other foreign countries are covered by various post employment arrangements consistent with local practices and regulations. Such obligations are not significant and are included in the consolidated financial statements in other liabilities. F-21 168 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OTHER PLANS -- As part of the acquisition of Blessings Corporation (see Note 12), we assumed two supplemental retirement plans covering certain former employees of Blessings Corporation. The liability for these plans included in other liabilities at December 31, 1999 was approximately $1.7 million. 10. REDEEMABLE COMMON STOCK AND STOCK OPTION PLAN REDEEMABLE COMMON STOCK -- In 1998, our stockholders approved stock purchase agreements for the purchase of 12,200 shares of Class C nonvoting common stock by certain officers. The fair market value purchase price was determined by the Board of Directors to be $100 per share. The shareholders agreement governing the shares contains various restrictions, including a right of first refusal and provisions for Huntsman Packaging to purchase any owned shares from an employee within 180 days after termination of employment. The stockholders have the right, following three years from the purchase date, to put any or all of such shares to Huntsman Packaging for repurchase. When there is a public market for the shares, the redemption value is the average of the high and low reported sale prices per share for the 20 trading days prior to the date the put or call option is exercised. When there is no public market for the shares, the redemption value is the market value of equity, as defined, determined on the last day of the month preceding the date on which the put or call option is made. During 1998, we redeemed 500 shares of Class C common stock from one officer who terminated his employment with us for $100 per share. During early 1999, we sold 38,411 shares of Class C common stock to certain officers for $100 per share, the estimated fair market value of the shares on the date of purchase. Of these 38,411 shares, 26,223 shares are subject to repurchase rights of Huntsman Packaging (the "Restricted Shares"). The repurchase rights for 13,117 of the Restricted Shares lapse on a straight-line basis over a five-year period ending January 1, 2003. The repurchase rights for 13,116 of the Restricted Shares lapse over the same five years, subject to achievement of certain Huntsman Packaging performance criteria, or if the performance criteria are not met, on December 31, 2007. All other terms of and restrictions on the 38,411 shares of Class C common stock sold during 1999 are the same as the original 12,200 shares of Class C common stock. In 1999, we redeemed a total of 600 shares of Class C common stock from an officer for $100 per share. 1998 STOCK OPTION PLAN -- In 1998, our stockholders approved the adoption of the 1998 Huntsman Packaging Corporation Stock Option Plan, which provided for the granting of options to purchase up to 41,956 shares of Class C nonvoting common stock to certain officers at the fair market value of the related stock on the date of grant. All of the options issued under this plan expire on December 31, 2007. In 1999, we canceled options relating to 26,223 shares and issued 26,223 Restricted Shares, as described above. A summary of stock options outstanding at December 31, 1999 and 1998 and changes during the year then ended is presented below:
NUMBER OF SHARES WEIGHTED AVERAGE ----------------- EXERCISE PRICE 1999 1998 PER SHARE ------- ------ ---------------- Outstanding at beginning of year........... 39,334 $100 Granted.................................. 41,956 100 Forfeited or cancelled................... (28,845) (2,622) 100 ------- ------ Outstanding at end of year............... 10,489 39,334 100 ======= ====== Exercisable at end of year............... 4,196 3,933 100 ======= ======
F-22 169 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 1999, 5,245 of the outstanding options are performance-based options and 2,098 are exercisable as result of achieving the performance criteria. The remaining 5,244 options vest in five equal installments on December 31 of each year. At December 31, 1999, 2098 are exercisable. All outstanding options have a weighted average remaining contractual life of approximately 8 years. ACCOUNTING FOR STOCK-BASED COMPENSATION PLANS -- We apply Accounting Principles Board Opinion No. 25 and related interpretations in accounting for stock-based compensation plans as they relate to employees and directors. The performance-based options require variable plan accounting and we estimate compensation expense at each reporting period based upon the expected achievement of the performance criteria and the estimated fair market value of the common stock. For the year ended December 31, 1999, we recorded compensation expense of $770,000. All other options require fixed plan accounting and accordingly, no compensation expense was recognized because the awards were made at the estimated fair market value of Huntsman Packaging's Class C nonvoting common stock at the date of grant. Had compensation cost been determined in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," our income from continuing operations for the years ended December 31, 1999 and 1998 would have changed to the pro forma amounts presented below (in thousands):
1999 1998 ------- ------ Income from continuing operations as reported........... $18,311 $2,533 Pro forma income from continuing operations............. 18,978 2,147
Using the Black-Scholes option-pricing model, the weighted average fair market value of the options was $49 for each share using the following assumptions for the 1998 grants: dividend yield of 0%, average risk free interest rate of 6.75% and expected life of 10 years. The estimated fair market value of the options granted is subject to the assumptions made and if the assumptions were to change, the estimated fair market value amounts could be significantly different. 11. COMMITMENTS AND CONTINGENCIES ENVIRONMENTAL CONTINGENCIES -- Our operations are subject to extensive environmental laws and regulations concerning emissions to the air, discharges to surface and subsurface waters, and the generation, handling, storage, transportation, treatment, and disposal of waste materials, as adopted by various governmental authorities in the jurisdictions in which we operate. We make every reasonable effort to remain in full compliance with existing governmental laws and regulations concerning the environment. As part of a sale of a plant site in 1992, we agreed to indemnify environmental losses of up to $5 million which may have been created at the plant site between January 1, 1988 and May 18, 1992. This indemnity expires on May 8, 2002 and reduces ten percent each year beginning May 12, 1997. We believe that the ultimate liability, if any, resulting from this indemnification will not be material to our financial position or results of operations. ROYALTY AGREEMENTS -- We have entered into royalty agreements (the "Agreements") for the right to use certain patents in the production of our Winwrap stretch film. We paid a fee of $450,000 to the patent holder for the first 2,250,000 pounds of film produced in North America. The Agreements require us to pay the patent holder a fee of $.10 for each pound of Winwrap produced in excess of 2,250,000 pounds but less than 37,500,000 pounds and $.05 per pound for each pound of Winwrap produced in excess of 37,500,000 pounds in North America. The Agreements require us to pay certain fees to obtain the rights to sell Winwrap outside of North America. The Agreements also require us to pay $.075 per pound of Winwrap sold outside of North America. We have the option to F-23 170 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) maintain these rights in subsequent years for certain agreed-upon fees. The Agreements terminate upon the expiration of the related patents in 2009. LITIGATION -- We are subject to litigation and claims arising in the ordinary course of business. We believe, after consulting with legal counsel, that any liabilities arising from such litigation and claims will not have a material adverse effect on our financial position and results of operations. 12. ACQUISITIONS CT FILM -- On September 30, 1997, we acquired all of the assets of CT Film (a division of Huntsman Polymers Corporation, formerly Rexene Corporation) and Rexene Corporation Limited (a wholly owned subsidiary of Huntsman Polymers Corporation) for approximately $70 million in cash. The acquisition was accounted for using the purchase method of accounting. Accordingly, results of operations have been included in the accompanying consolidated financial statements from the date of acquisition. In connection with the acquisition, we planned to exit certain of the activities acquired with the purchase of CT Film, including the film operations at Scunthorpe, UK. During 1998, we sold the Scunthorpe, UK facility acquired from CT Film and adjusted the fair value assigned to the Scunthorpe, UK facility accordingly (see Note 3). We recorded goodwill of approximately $7.8 million in this acquisition, which is being amortized on a straight-line basis over 40 years. ELLEHAMMER INDUSTRIES LTD. AND ELLEHAMMER PACKAGING, INC. -- On March 12, 1998, we acquired certain assets and assumed certain liabilities of Ellehammer Industries Ltd. and Ellehammer Packaging Inc. (collectively, "Ellehammer") for cash of approximately $7.9 million. The acquisition was accounted for using the purchase method of accounting. Accordingly, results of operations are included in the accompanying consolidated financial statements from the date of acquisition. We did not record any goodwill in this acquisition. BLESSINGS CORPORATION -- On May 19, 1998, in accordance with an Agreement and Plan of Merger dated April 1, 1998, we acquired Blessings Corporation ("Blessings") by merging our wholly owned subsidiary, VA Acquisition Corp., with and into Blessings. Blessings then became our wholly owned subsidiary and Blessings changed its name to Huntsman Edison Films Corporation. The aggregate purchase price for Blessings was approximately $270 million (including the assumption of approximately $57 million of Blessings' existing indebtedness). In connection with the Blessings Acquisition, we incurred transaction costs of approximately $17 million. The financing for the Blessings Acquisition was provided under a $510 million Amended and Restated Credit Agreement (see Note 6). The acquisition was accounted for using the purchase method of accounting. Accordingly, results of operations are included in the accompanying consolidated financial statements from the date of acquisition. We recorded goodwill and intangible assets of approximately $168.7 million in this acquisition, which are being amortized on a straight-line basis over 10 to 30 years. KCL CORPORATION -- On October 18, 1999, we acquired certain assets and assumed certain liabilities of KCL Corporation and subsidiaries for cash of approximately $11.5 million. The acquisition was accounted for using the purchase method of accounting. Accordingly, results of operations have been included in the accompanying consolidated financial statements from the date of acquisition. We recorded goodwill of approximately $2.7 million, which is being amortized on a straight-line basis over 10 years. F-24 171 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Our pro forma results of operations for the years ended December 31, 1999, 1998 and 1997 (assuming the significant acquisitions had occurred as of January 1, 1997) are as follows (in thousands):
1999 1998 1997 -------- -------- -------- Revenues........................................ $781,416 $719,242 $745,998 Income (loss) from continuing operations........ 18,311 (1,267) (14,379)
13. OPERATING SEGMENTS Operating segments are components of our business for which separate financial information is available that is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and in assessing performance. This information is reported on the basis that it is used internally for evaluating segment performance. We have three reportable operating segments: design products, industrial films and specialty films. The design products segment produces printed rollstock, bags and sheets used to package products in the food and other industries. The industrial films segment produces stretch films, used for industrial unitizing and containerization, and PVC films, used to wrap meat, cheese and produce. The specialty films segment produces converter films that are sold to other flexible packaging manufacturers for additional fabrication, barrier films that contain and protect food and other products, and other films used in the personal care, medical, agriculture and horticulture industries. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. Sales and transfers between our segments are eliminated in consolidation. We evaluate performance of the operating segments based on profit or loss before income taxes, not including plant closing costs and other nonrecurring gains or losses. Our reportable segments are managed separately with separate management teams, because each segment has differing products, customer requirements, technology and marketing strategies. Segment profit or loss and segment assets as of and for the years ended December 31, 1999, 1998 and 1997 are presented in the following table (in thousands). Certain reclassifications have been made to be consistent with the 1999 presentation.
DESIGN INDUSTRIAL SPECIALTY CORPORATE/ PRODUCTS FILMS FILMS OTHER TOTAL -------- ---------- --------- ---------- -------- 1999 Net sales to customers........ $175,442 $153,265 $452,709 $781,416 Intersegment sales............ 7,189 3,276 6,149 $(16,614) Total net sales............... 182,631 156,541 458,858 (16,614) 781,416 Depreciation and amortization............... 8,095 4,579 19,026 3,319 35,019 Interest expense.............. 3,397 351 13,832 26,448 44,028 Segment profit................ 9,304 16,473 57,564 (48,446) 34,895 Plant closing costs........... 2,497 2,497 Segment total assets.......... 175,924 84,755 446,852 61,492 769,023 Capital expenditures.......... 6,885 6,628 18,779 3,431 35,723
F-25 172 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DESIGN INDUSTRIAL SPECIALTY CORPORATE/ PRODUCTS FILMS FILMS OTHER TOTAL -------- ---------- --------- ---------- -------- 1998 Net sales to customers........ $136,059 $144,736 $371,162 $651,957 Intersegment sales............ 1,671 3,975 1,782 $ (7,428) Total net sales............... 137,730 148,711 372,944 (7,428) 651,957 Depreciation and amortization............... 5,096 4,712 13,211 4,069 27,088 Interest expense.............. 2,108 60 10,219 25,132 37,519 Segment profit................ 12,385 11,027 36,106 (43,577) 15,941 Plant closing costs........... (297) 5,172 4,875 Segment total assets.......... 153,385 82,737 435,075 63,075 734,272 Capital expenditures.......... 18,424 5,734 26,174 1,769 52,101 1997 Net sales to customers........ $ 93,386 $175,438 $178,919 $447,743 Intersegment sales............ 1,212 8,338 312 $ (9,862) Total net sales............... 94,598 183,776 179,231 (9,862) 447,743 Depreciation and amortization............... 2,044 5,295 3,534 5,569 16,442 Interest expense.............. 8 425 116 16,451 17,000 Segment profit................ 11,332 9,538 19,603 (34,371) 6,102 Plant closing costs........... 9,276 9,276 Segment total assets.......... 54,610 96,484 188,114 30,307 369,515 Capital expenditures.......... 5,445 2,912 5,548 3,956 17,861
A reconciliation of the totals reported for the operating segments to the totals reported in the consolidated financial statements is as follows (in thousands):
1999 1998 1997 -------- -------- -------- PROFIT OR LOSS Total profit for reportable segments............ $ 83,341 $ 59,518 $ 40,473 Plant closing costs............................. (2,497) (4,875) (9,276) Unallocated amounts: Corporate expenses............................ (21,998) (18,445) (17,920) Interest expense.............................. (26,448) (25,132) (16,451) -------- -------- -------- Income (loss) before taxes and discontinued operations................................. $ 32,398 $ 11,066 $ (3,174) ======== ======== ======== ASSETS Total assets for reportable segments............ $707,531 $671,197 $339,208 Intangible assets not allocated to segments..... 16,166 17,080 15,565 Net effect of discontinued operations........... 30,878 Other unallocated assets........................ 45,326 45,995 14,741 -------- -------- -------- Total consolidated assets............. $769,023 $734,272 $400,392 ======== ======== ========
F-26 173 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents financial information by country based on the location of production of the product (in thousands).
1999 1998 1997 -------- -------- -------- NET SALES United States................................... $659,582 $563,658 $390,793 Mexico.......................................... 56,422 30,201 Canada.......................................... 36,390 25,770 21,355 Other........................................... 29,022 32,328 35,595 -------- -------- -------- Total................................. $781,416 $651,957 $447,743 ======== ======== ======== LONG-LIVED ASSETS United States................................... $476,344 $475,891 $214,964 Mexico.......................................... 55,970 59,085 Canada.......................................... 10,668 5,547 6,033 Other........................................... 5,368 5,226 5,362 -------- -------- -------- Total................................. $548,350 $545,749 $226,359 ======== ======== ========
Our sales to Kimberly-Clark Corporation and its affiliates represented approximately 13% and 11% of consolidated net sales in 1999 and 1998 and less than 10% of consolidated net sales in 1997. Substantially all of the sales to Kimberly-Clark are from the specialty films and design products operating segments. No other customers accounted for more than 10% of consolidated net sales during 1999, 1998 and 1997. 14. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. In the case of cash and cash equivalents, the carrying amount is considered a reasonable estimate of fair value. The carrying amount of floating rate debt approximates fair value because of the floating interest rates associated with such debt. The fair value of fixed rate debt is estimated by discounting estimated future cash flows through the projected maturity using market discount rates that reflect the approximate credit risk, operating cost, and interest rate risk potentially inherent in fixed rate debt. The estimated fair value of off-balance sheet instruments is obtained from market quotes representing the estimated amount we would receive or pay to terminate the contract, taking into account current interest rates. Fair value estimates are made at a specific point in time. Because no market exists for a significant portion of our financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, interest rate levels, and other factors. These estimates are subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined or relied on with any degree of certainty. Changes in assumptions could significantly affect the estimates. F-27 174 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Below is a summary of our financial instruments' carrying amounts and estimated fair values as of December 31, 1999 and 1998 (in thousands):
1999 1998 ---------------------- ---------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------- ---------- -------- ---------- Financial assets -- cash and cash equivalents....................... $ 9,097 $ 9,097 $ 19,217 $ 19,217 ======== ======== ======== ======== Financial liabilities: Floating rate debt................ $383,054 $383,054 $399,936 $399,936 Fixed rate debt................... 127,328 126,036 125,000 125,000 -------- -------- -------- -------- Total financial liabilities......... $510,382 $509,090 $524,936 $524,936 ======== ======== ======== ======== Off-balance sheet instruments: Interest rate collar.............. $ 69 $ 183 $ 106 $ (214) Commodity collar.................. None 325 None 80
15. RELATED-PARTY TRANSACTIONS The accompanying consolidated financial statements include the following balances and transactions with affiliated companies not disclosed elsewhere for the years ended December 31, 1999, 1998 and 1997 (in thousands). All transactions with affiliated companies have been recorded at estimated fair market values for the related products and services.
1999 1998 1997 ------- ------- ------- With Huntsman Corporation and subsidiaries Inventory purchases............................... $21,124 $27,523 $15,692 Rent expense under operating lease................ 396 392 423 Administrative expenses........................... 2,681 5,599 4,220 Sales of film products............................ 258 With Huntsman Cancer Institute Charitable contribution......................... 1,000 500 With Huntsman Financial Corporation Administrative expenses......................... 150 133
ROYALTY TRANSACTION WITH HUNTSMAN GROUP INTELLECTUAL PROPERTIES HOLDING CO. ("HUNTSMAN INTELLECTUAL") -- During 1996, Huntsman Packaging and other affiliates entered into a royalty agreement (the "Royalty Agreement") with Huntsman Intellectual whereby we paid Huntsman Intellectual a royalty for the use of certain trademarks, etc. Huntsman Intellectual was owned by Huntsman Packaging and certain subsidiaries of Huntsman Corporation ("HC"). During 1997, we paid royalties of approximately $1.9 million to Huntsman Intellectual. Huntsman Intellectual recorded a patronage dividend to us of $1.2 million in 1997. The royalty expense is included in administration and other expense. The dividend is included in other income. Immediately prior to the Split-Off, the patronage dividend receivable from Huntsman Intellectual at the date of the Split-Off was settled in full. Huntsman Packaging's ownership of Huntsman Intellectual and its participation in the Royalty Agreement were terminated. We no longer use the trademarks or other intellectual property covered under the Royalty Agreement. CT FILM EMPLOYEES -- Subsequent to the purchase of CT Film from Huntsman Polymers Corporation (a subsidiary of HC) ("Huntsman Polymers") (see Note 12), employees associated with the CT Film operations remained employed by Huntsman Polymers through December 31, 1997. The total payroll and benefits costs incurred by Huntsman Polymers from September 30, 1997 F-28 175 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) to December 31, 1997 for these employees of approximately $6.2 million was allocated to us and is included in cost of sales and operating expenses in the 1997 consolidated statement of income. The entire amount was paid to Huntsman Polymers in 1998. INSURANCE COVERAGE -- We obtain most of our insurance coverage under policies of HC. Reimbursement payments to HC are based on premium allocations, which are determined in cooperation with an independent insurance broker. ADMINISTRATIVE EXPENSES -- Included in administrative and other expense in the consolidated statements of income are HC administrative expenses allocated to us. Prior to the Split-off, these costs represent the estimated portion of costs incurred by HC to provide services to us. Subsequent to the Split-off, these costs are for certain administrative services provided to us by HC under a cancelable services agreement. OFFICE SPACE -- We are obligated to pay rent calculated as a pro rata portion (based on our percentage occupancy) of the mortgage principal and interest payments related to the HC headquarters facility. Payments under this obligation are included in administrative expenses. INVESTMENT -- On August 7, 1998, Huntsman Packaging made an offer to the Board of Directors of Applied Extrusion Technologies, Inc. ("AET"), a publicly traded company, to purchase all of the outstanding shares of common stock of AET at $10.50 per share in a merger transaction. AET's Board rejected the offer. On September 10, 1998, Huntsman Packaging made another offer to the Board of Directors of AET to purchase all of the outstanding shares of common stock of AET at $12.50 per share in a merger transaction. On September 14, 1998, HPC Investment, Inc., a wholly owned subsidiary of Huntsman Packaging, purchased shares of the common stock of AET from Richard P. Durham, President and Chief Executive Officer of Huntsman Packaging, for an aggregate purchase price of $3.3 million, in an arms-length transaction approved by the Board of Directors of HPC Investment, Inc. AET's Board of Directors subsequently rejected Huntsman Packaging's second offer. At December 31, 1999, we had liquidated our entire investment in AET stock. 16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS The following condensed consolidating financial statements present, in separate columns, financial information for (i) Huntsman Packaging Corporation (on a parent only basis), with its investment in its subsidiaries recorded under the equity method, (ii) guarantor subsidiaries (as specified in the Indenture dated September 30, 1997 (the "Indenture") relating to Huntsman Packaging Corporation's $125 million senior subordinated notes (the "Notes")) on a combined basis, with any investments in non-guarantor subsidiaries specified in the Indenture recorded under the equity method, (iii) direct and indirect non-guarantor subsidiaries on a combined basis, (iv) the eliminations necessary to arrive at the information for Huntsman Packaging Corporation and its subsidiaries on a consolidated basis, and (v) Huntsman Packaging Corporation on a consolidated basis, in each case as of December 31, 1999 and 1998 and for the years ended December 31, 1999, 1998 and 1997. The Notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary and each guarantor subsidiary is wholly owned, directly or indirectly, by Huntsman Packaging Corporation. There are no contractual restrictions limiting transfers of cash from guarantor and non-guarantor subsidiaries to Huntsman Packaging Corporation. The condensed consolidating financial statements are presented herein, rather than separate financial statements for each of the guarantor subsidiaries, because management believes that separate financial statements relating to the guarantor subsidiaries are not material to investors. On January 1, 1999, two of our guarantor subsidiary companies, Huntsman Deerfield Films Corporation and Huntsman United Films Corporation, were merged with and into Huntsman Packaging. Accordingly, these former guarantor subsidiary companies are now included as part of the "Huntsman Packaging Corporation Parent Only" column for all periods presented. F-29 176 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999
HUNTSMAN CONSOLIDATED PACKAGING HUNTSMAN CORPORATION COMBINED COMBINED PACKAGING PARENT ONLY GUARANTORS NON-GUARANTORS ELIMINATIONS CORPORATION ----------- ---------- -------------- ------------ ------------ (IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents................... $ 1,212 $ 536 $ 7,349 $ 9,097 Receivables................................. 75,053 24,211 23,370 122,634 Inventories................................. 56,646 10,067 11,486 78,199 Prepaid expenses and other.................. 2,127 90 427 2,644 Income taxes receivable..................... 3,486 212 (1,007) 2,691 Deferred income taxes....................... 6,715 426 (1,733) 5,408 -------- -------- -------- -------- Total current assets...................... 145,239 35,542 39,892 220,673 PLANT AND EQUIPMENT, net...................... 184,444 78,649 51,359 314,452 INTANGIBLE ASSETS, net........................ 52,676 143,836 18,444 214,956 INVESTMENT IN SUBSIDIARIES.................... 61,533 $(61,533) OTHER ASSETS.................................. 16,593 144 2,205 18,942 -------- -------- -------- -------- -------- TOTAL ASSETS.................................. $460,485 $258,171 $111,900 $(61,533) $769,023 ======== ======== ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Trade accounts payable...................... $ 39,293 $ 9,629 $ 11,134 $ 60,056 Accrued liabilities......................... 25,238 2,833 6,865 34,936 Current portion of long-term debt........... 13,464 3,656 17,120 Due to (from) affiliates.................... (19,737) 17,431 7,021 4,715 -------- -------- -------- -------- Total current liabilities................. 58,258 29,893 28,676 116,827 LONG-TERM DEBT, net of current portion........ 267,107 184,000 42,155 493,262 OTHER LIABILITIES............................. 10,741 1,733 1,509 13,983 DEFERRED INCOME TAXES......................... 30,791 18,465 2,107 51,363 -------- -------- -------- -------- Total liabilities......................... 366,897 234,091 74,447 675,435 -------- -------- -------- -------- COMMITMENTS AND CONTINGENCIES REDEEMABLE COMMON STOCK....................... 2,926 2,926 -------- -------- STOCKHOLDERS' EQUITY: Common stock................................ 63,676 20,377 29,241 $(49,618) 63,676 Retained earnings........................... 32,042 3,696 11,437 (15,133) 32,042 Shareholder note receivable................. (299) (299) Cumulative foreign currency translation adjustments............................... (4,757) 7 (3,225) 3,218 (4,757) -------- -------- -------- -------- -------- Total stockholders' equity................ 90,662 24,080 37,453 (61,533) 90,662 -------- -------- -------- -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................. $460,485 $258,171 $111,900 $(61,533) $769,023 ======== ======== ======== ======== ========
F-30 177 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999
HUNTSMAN CONSOLIDATED PACKAGING HUNTSMAN CORPORATION COMBINED COMBINED PACKAGING PARENT ONLY GUARANTORS NON-GUARANTORS ELIMINATIONS CORPORATION ----------- ---------- -------------- ------------ ------------ (IN THOUSANDS) NET SALES..................................... $524,191 $152,464 $121,375 $(16,614) $781,416 COST OF SALES................................. 436,315 110,074 93,663 (16,614) 623,438 -------- -------- -------- -------- -------- GROSS PROFIT.................................. 87,876 42,390 27,712 157,978 TOTAL OPERATING EXPENSES...................... 47,677 18,137 16,173 81,987 -------- -------- -------- -------- OPERATING INCOME.............................. 40,199 24,253 11,539 75,991 INTEREST EXPENSE.............................. (26,502) (13,805) (3,721) (44,028) EQUITY IN EARNINGS OF SUBSIDIARIES............ 7,747 (7,747) OTHER INCOME (EXPENSE), net................... (150) 129 456 435 -------- -------- -------- -------- -------- INCOME BEFORE INCOME TAXES.................... 21,294 10,577 8,274 (7,747) 32,398 INCOME TAX EXPENSE............................ 2,983 6,626 4,478 14,087 -------- -------- -------- -------- -------- NET INCOME.................................... $ 18,311 $ 3,951 $ 3,796 $ (7,747) $ 18,311 ======== ======== ======== ======== ========
F-31 178 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999
HUNTSMAN CONSOLIDATED PACKAGING HUNTSMAN CORPORATION COMBINED COMBINED PACKAGING PARENT ONLY GUARANTORS NON-GUARANTORS ELIMINATIONS CORPORATION ----------- ---------- -------------- ------------ ------------ (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES:.......................... $ 33,629 $ 16,875 $ 949 $ 51,453 -------- -------- ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of assets......... 98 1,093 1,191 Payments for acquisitions............ (11,812) 314 (11,498) Capital expenditures for plant and equipment......................... (24,302) (6,996) (4,425) (35,723) -------- -------- ------- -------- Net cash used in investing activities...................... (36,016) (6,682) (3,332) (46,030) -------- -------- ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock............................. 986 986 Payments received from stockholder note receivable................... 135 135 Principal payments on borrowings..... 4,475 (10,200) (5,725) Payments on long-term debt........... (9,594) (2,531) (12,125) -------- -------- ------- -------- Net cash provided by (used in) financing activities............ (3,998) (10,200) (2,531) (16,729) -------- -------- ------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS................. 216 18 952 1,186 -------- -------- ------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS.......................... (6,169) 11 (3,962) (10,120) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR.......................... 7,381 525 11,311 19,217 -------- -------- ------- -------- CASH AND CASH EQUIVALENTS AT END OF THE YEAR................................. $ 1,212 $ 536 $ 7,349 $ 9,097 ======== ======== ======= ========
F-32 179 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1998
HUNTSMAN CONSOLIDATED PACKAGING HUNTSMAN CORPORATION COMBINED COMBINED PACKAGING PARENT ONLY GUARANTORS NON-GUARANTORS ELIMINATIONS CORPORATION ----------- ---------- -------------- ------------ ------------ (IN THOUSANDS) ASSETS CURRENT ASSETS: Cash and cash equivalents............ $ 7,381 $ 525 $ 11,311 $ 19,217 Receivables.......................... 59,667 13,650 16,064 89,381 Inventories.......................... 50,243 5,994 9,655 65,892 Income taxes receivable.............. 4,230 1,868 1,267 7,365 Deferred income taxes................ 4,059 803 (1,257) 3,605 Prepaid expenses and other........... 2,090 680 293 3,063 -------- -------- -------- -------- Total current assets......... 127,670 23,520 37,333 188,523 PLANT AND EQUIPMENT, net............... 173,850 73,589 52,895 300,334 INTANGIBLE ASSETS, net................. 55,142 147,140 19,008 221,290 INVESTMENT IN SUBSIDIARIES............. 42,959 $(42,959) OTHER ASSETS........................... 17,582 143 6,400 24,125 -------- -------- -------- -------- -------- TOTAL ASSETS........................... $417,203 $244,392 $115,636 $(42,959) $734,272 ======== ======== ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Trade accounts payable............... $ 26,698 $ 6,760 $ 9,728 $ 43,186 Accrued liabilities.................. 25,064 2,401 6,111 33,576 Current portion of long-term debt.... 8,875 2,531 11,406 Due to (from) affiliates............. (21,224) 18,111 10,113 7,000 -------- -------- -------- -------- Total current liabilities.... 39,413 27,272 28,483 95,168 LONG-TERM DEBT, net of current portion.............................. 273,519 194,200 45,811 513,530 OTHER LIABILITIES...................... 6,740 3,171 1,483 11,394 DEFERRED INCOME TAXES.................. 25,774 13,658 2,991 42,423 -------- -------- -------- -------- Total liabilities............ 345,446 238,301 78,768 662,515 -------- -------- -------- -------- REDEEMABLE COMMON STOCK................................ 1,170 1,170 -------- -------- STOCKHOLDERS' EQUITY: Common stock......................... 63,676 6,357 29,241 $(35,598) 63,676 Retained earnings.................... 13,731 (255) 12,641 (12,386) 13,731 Shareholder note receivable.......... (434) (434) Foreign currency translation adjustments....................... (6,386) (11) (5,014) 5,025 (6,386) -------- -------- -------- -------- -------- Total stockholders' equity... 70,587 6,091 36,868 (42,959) 70,587 -------- -------- -------- -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....... $417,203 $244,392 $115,636 $(42,959) $734,272 ======== ======== ======== ======== ========
F-33 180 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998
HUNTSMAN CONSOLIDATED PACKAGING HUNTSMAN CORPORATION COMBINED COMBINED PACKAGING PARENT ONLY GUARANTORS NON-GUARANTORS ELIMINATIONS CORPORATION ----------- ---------- -------------- ------------ ------------ (IN THOUSANDS) NET SALES.................................. $486,484 $ 82,132 $90,769 $(7,428) $651,957 COST OF SALES.............................. 403,574 64,520 71,744 (7,428) 532,410 -------- -------- ------- ------- -------- GROSS PROFIT............................... 82,910 17,612 19,025 119,547 TOTAL OPERATING EXPENSES................... 52,948 5,403 11,732 70,083 -------- -------- ------- -------- OPERATING INCOME........................... 29,962 12,209 7,293 49,464 INTEREST EXPENSE........................... (25,206) (10,193) (2,120) (37,519) EQUITY IN EARNINGS OF SUBSIDIARIES......... 904 (904) OTHER INCOME (EXPENSE), net................ 1,339 (72) (2,146) (879) -------- -------- ------- ------- -------- INCOME BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS............................... 6,999 1,944 3,027 (904) 11,066 INCOME TAX EXPENSE......................... 3,884 2,120 2,529 8,533 -------- -------- ------- ------- -------- INCOME BEFORE DISCONTINUED OPERATIONS...... 3,115 (176) 498 (904) 2,533 INCOME FROM DISCONTINUED OPERATIONS, net of income taxes............................. 582 582 GAIN ON SALE OF DISCONTINUED OPERATIONS, net of income taxes...................... 5,223 5,223 -------- -------- ------- ------- -------- NET INCOME................................. $ 8,338 $ (176) $ 1,080 $ (904) $ 8,338 ======== ======== ======= ======= ========
F-34 181 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998
HUNTSMAN CONSOLIDATED PACKAGING HUNTSMAN CORPORATION COMBINED COMBINED PACKAGING PARENT ONLY GUARANTORS NON-GUARANTORS ELIMINATIONS CORPORATION ----------- ---------- -------------- ------------ ------------ (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES:..... $ 11,433 $ 26,603 $ 7,454 $ 45,490 --------- -------- ------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of assets............ 33,850 33,850 Payments for acquisitions............... (298,274) 97 1,588 (296,589) Capital expenditures for plant and equipment............................ (40,154) (3,383) (8,564) (52,101) --------- -------- ------- --------- Net cash used in investing activities.................... (304,578) (3,286) (6,976) (314,840) --------- -------- ------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock................................ 1,170 1,170 Payments received from stockholder note receivable........................... 266 266 Principal payments on borrowings........ 12,819 (22,800) (563) (10,544) Proceeds from issuance of long-term debt................................. 285,000 285,000 --------- -------- ------- --------- Net cash provided by (used in) financing activities.......... 299,255 (22,800) (563) 275,892 --------- -------- ------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS.................... 65 (11) 210 264 --------- -------- ------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS............................. 6,175 506 125 6,806 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR................................ 1,206 19 11,186 12,411 --------- -------- ------- --------- CASH AND CASH EQUIVALENTS AT END OF THE YEAR.................................... $ 7,381 $ 525 $11,311 $ 19,217 ========= ======== ======= =========
F-35 182 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997
HUNTSMAN CONSOLIDATED PACKAGING HUNTSMAN CORPORATION COMBINED COMBINED PACKAGING PARENT ONLY GUARANTORS NON-GUARANTORS ELIMINATIONS CORPORATION ----------- ---------- -------------- ------------ ------------ (IN THOUSANDS) NET SALES.................................. $396,814 $2,117 $58,674 $(9,862) $447,743 COST OF SALES.............................. 349,337 2,012 48,141 (9,862) 389,628 -------- ------ ------- ------- -------- GROSS PROFIT............................... 47,477 105 10,533 58,115 TOTAL OPERATING EXPENSES................... 40,493 128 4,418 45,039 -------- ------ ------- -------- OPERATING INCOME........................... 6,984 (23) 6,115 13,076 INTEREST EXPENSE........................... (16,595) (405) (17,000) EQUITY IN EARNINGS OF SUBSIDIARIES......... 4,715 (4,715) OTHER INCOME (EXPENSE), net................ 1,847 (1,097) 750 -------- ------ ------- ------- -------- INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS.................. (3,049) (23) 4,613 (4,715) (3,174) INCOME TAX EXPENSE (BENEFIT)............... (3,424) 2,915 (509) -------- ------ ------- ------- -------- INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS............................... 375 (23) 1,698 (4,715) (2,665) INCOME FROM DISCONTINUED OPERATIONS, net of income taxes............................. 3,040 3,040 -------- ------ ------- ------- -------- NET INCOME................................. $ 375 $ (23) $ 4,738 $(4,715) $ 375 ======== ====== ======= ======= ========
F-36 183 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997
HUNTSMAN CONSOLIDATED PACKAGING HUNTSMAN CORPORATION COMBINED COMBINED PACKAGING PARENT ONLY GUARANTORS NON-GUARANTORS ELIMINATIONS CORPORATION ----------- ---------- -------------- ------------ ------------ (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES:..... $ 21,967 $ 2 $ 6,679 $ 28,648 --------- --- ------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments for acquisitions............... (69,366) (69,366) Capital expenditures for plant and equipment............................ (14,657) (3,204) (17,861) --------- ------- --------- Net cash used in investing activities.................... (84,023) (3,204) (87,227) --------- ------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on borrowings........ (249,509) (249,509) Proceeds from issuance of long-term debt................................. 312,700 312,700 Payment of cash dividend................ 1,900 (1,900) --------- ------- --------- Net cash provided by (used in) financing activities.......... 65,091 (1,900) 63,191 --------- ------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS.................... (518) (2,330) (2,848) --------- ------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................. 2,517 2 (755) 1,764 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR................................ (1,311) 17 11,941 10,647 --------- --- ------- --------- CASH AND CASH EQUIVALENTS AT END OF THE YEAR.................................... $ 1,206 $19 $11,186 $ 12,411 ========= === ======= =========
F-37 184 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2000 AND DECEMBER 31, 1999 (DOLLARS IN THOUSANDS) (UNAUDITED)
MARCH 31, DECEMBER 31, 2000 1999 --------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 12,228 $ 9,097 Receivables, net of allowances of $1,898 and $2,115, respectively........................................... 118,565 122,634 Inventories............................................... 92,348 78,199 Prepaid expenses and other................................ 2,542 2,644 Income taxes receivable................................... 419 2,691 Deferred income taxes..................................... 5,369 5,408 -------- -------- Total current assets.............................. 231,471 220,673 PLANT AND EQUIPMENT, net.................................... 317,880 314,452 INTANGIBLE ASSETS, net...................................... 212,559 214,956 OTHER ASSETS................................................ 18,188 18,942 -------- -------- Total assets...................................... $780,098 $769,023 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Trade accounts payable.................................... $ 69,197 $ 60,056 Accrued liabilities....................................... 36,759 34,936 Current portion of long-term debt......................... 18,295 17,120 Due to affiliates......................................... 4,624 4,715 -------- -------- Total current liabilities......................... 128,875 116,827 LONG-TERM DEBT, net of current portion...................... 488,275 493,262 OTHER LIABILITIES........................................... 15,169 13,983 DEFERRED INCOME TAXES....................................... 51,986 51,363 -------- -------- Total liabilities................................. 684,305 675,435 -------- -------- REDEEMABLE COMMON STOCK -- Class C nonvoting, no par value; 60,000 shares authorized; 49,511 shares outstanding, net of related stockholders' notes receivable of $2,841 and $2,795, respectively...................................... 4,103 2,926 -------- -------- STOCKHOLDERS' EQUITY: Common stock -- Class A voting, no par value; 1,200,000 shares authorized, 1,000,001 shares outstanding........ 63,161 63,161 Common stock -- Class B voting, no par value; 10,000 shares authorized, 6,999 shares outstanding............ 515 515 Retained earnings......................................... 33,443 32,042 Stockholder note receivable............................... (299) (299) Cumulative foreign currency translation adjustment........ (5,130) (4,757) -------- -------- Total stockholders' equity........................ 91,690 90,662 -------- -------- Total liabilities and stockholders' equity........ $780,098 $769,023 ======== ========
See notes to condensed consolidated financial statements. F-38 185 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------- 2000 1999 -------- -------- NET SALES................................................... $212,537 $174,443 COST OF SALES............................................... 169,524 137,616 -------- -------- Gross profit.............................................. 43,013 36,827 -------- -------- OPERATING EXPENSES: Administration and other.................................. 15,264 11,001 Sales and marketing....................................... 6,639 6,186 Research and development.................................. 1,082 1,464 Compensation and transaction costs related to recapitalization....................................... 5,200 -------- -------- Total operating expenses.......................... 28,185 18,651 -------- -------- OPERATING INCOME............................................ 14,828 18,176 INTEREST EXPENSE............................................ (11,558) (10,222) OTHER INCOME (EXPENSE), net................................. 430 (1,984) -------- -------- INCOME BEFORE INCOME TAXES.................................. 3,700 5,970 INCOME TAX EXPENSE.......................................... 2,299 3,699 -------- -------- NET INCOME.................................................. $ 1,401 $ 2,271 ======== ========
See notes to condensed consolidated financial statements. F-39 186 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ------------------- 2000 1999 -------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................ $ 1,401 $ 2,271 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization.......................... 9,515 8,443 Deferred income taxes.................................. 662 1,236 Provision for losses on accounts receivable............ (217) (346) Noncash stock-based compensation expense............... 1,223 Changes in assets and liabilities: Receivables.......................................... 4,286 (5,655) Inventories.......................................... (14,149) (6,305) Prepaid expenses and other........................... 102 1,128 Other assets......................................... 754 2,823 Trade accounts payable............................... 9,141 (9,052) Accrued liabilities.................................. 1,823 (440) Due to affiliates.................................... (91) (5,603) Income taxes receivable.............................. 2,272 2,836 Other liabilities.................................... 1,186 853 -------- ------- Net cash provided by (used in) operating activities...................................... 17,908 (7,811) -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for plant and equipment.............. (10,093) (8,120) -------- ------- Net cash used in investing activities............. (10,093) (8,120) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of Class C nonvoting common stock and net change in related stockholders notes receivable............................................. (46) 1,119 Principal payments on long-term debt...................... (3,469) (2,313) Proceeds (payments) on revolving debt..................... (343) 7,996 -------- ------- Net cash provided by (used in) financing activities...................................... (3,858) 6,802 -------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS............................................... (826) 574 -------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 3,131 (8,555) CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD.......... 9,097 19,217 -------- ------- CASH AND CASH EQUIVALENTS, END OF THE PERIOD................ $ 12,228 $10,662 ======== ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (received) during the period for: Interest............................................... $ 8,411 $ 7,487 ======== ======= Income taxes........................................... $ (1,814) $ (992) ======== =======
See notes to condensed consolidated financial statements. F-40 187 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared, without audit, in accordance with accounting principles generally accepted in the United States and pursuant to the rules and regulations of the Securities and Exchange Commission. The information reflects all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations and financial position of Huntsman Packaging Corporation and subsidiaries ("Huntsman Packaging") for the periods indicated, such adjustments being of a normal recurring nature. Results of operations for interim periods are not necessarily indicative of results of operations to be expected for a full fiscal year. Certain information normally included in footnote disclosures to the financial statements has been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with Huntsman Packaging's Annual Report on Form 10-K for the year ended December 31, 1999. 2. RECAPITALIZATION On March 31, 2000, we, together with our existing stockholders, entered into an agreement (the "Recapitalization Agreement") with Chase Domestic Investments, L.L.C., a newly formed Delaware limited liability company ("Investor L.L.C."), and an affiliate of Chase Capital Partners ("CCP"), whereby Investor L.L.C. will acquire approximately 62% of our total common equity in a recapitalization transaction. The recapitalization is valued at $1.065 billion, including transaction costs, and is subject to purchase price adjustments. Pursuant to the Recapitalization Agreement, we will redeem all of the shares of our common stock held by Jon M. Huntsman, our founder, current majority stockholder and Chairman of the Board (the "Equity Redemption"). Investor L.L.C. will purchase (the "Investor Share Purchase") approximately one-half of the shares of our common stock held collectively by The Christena Karen H. Durham Trust (the "Trust") and by members of our senior management (the "Management Investors"), and will also purchase (the "Investor Common Equity Contribution") shares of common stock directly from us. The Trust and the Management Investors will retain approximately one-half of the shares of our common stock collectively owned by them prior to the recapitalization. In addition, we will issue to Investor L.L.C. a new series of senior cumulative exchangeable redeemable preferred stock (the "New Preferred Stock") and detachable warrants for our common stock (the "Warrants"). The foregoing transactions are collectively referred to as the "Recapitalization". Immediately following the Recapitalization, approximately 62% of our total common equity will be owned by Investor L.L.C. and approximately 38% of our total common equity will be owned by the Trust and the Management Investors. Completion of the Recapitalization is subject to certain conditions, including receipt of U.S. and foreign governmental regulatory approvals, the successful conclusion of the Consent Solicitation and the Tender Offer (as such terms are defined in the following paragraph), the availability of financing and other customary closing conditions. We are offering to purchase (the "Tender Offer") up to all (but not less than a majority) of our outstanding $125.0 million principal amount of 9 1/8% Senior Subordinated Notes due 2007 (the "9 1/8% Notes"). We have also solicited and received the requisite consents (the "Consent Solicitation") from tendering holders of the 9 1/8% Notes to amend the indenture governing the 9 1/8% Notes (the "9 1/8% Indenture") to eliminate many of the restrictive covenants contained in the 9 1/8% Indenture and to permit us to effect the Recapitalization and incur borrowings under the New Credit Facilities (as defined in the following paragraph). As of 5:00 p.m., New York City time on May 10, 2000, holders of all $125.0 million principal amount of the 9 1/8% Notes had delivered consents to the amendments and tendered their 9 1/8% Notes. We have entered into a supplemental indenture, dated F-41 188 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) as of April 25, 2000, which will effect the amendments to the 9 1/8% Notes Indenture upon the acceptance for purchase by us of the 9 1/8% Notes pursuant to the Tender Offer. On the closing date of the Recapitalization, we will refinance all amounts outstanding under our existing credit facility (the "Existing Credit Facility") and will replace the Existing Credit Facility with amended and restated senior secured credit facilities (the "New Credit Facilities"). The New Credit Facilities will consist of a $200.0 million senior secured tranche A facility, $40.0 million of which will be made available to our principal Mexican subsidiary, a $280.0 million senior secured tranche B facility and a $100.0 million revolving credit facility. In connection with the Recapitalization, we also intend to issue $220.0 million aggregate principal amount of new senior subordinated notes (the "New Notes") and warrants to purchase common stock. The offering of the New Notes and warrants will not be registered under the Securities Act of 1933, as amended, and the New Notes and warrants may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. The Recapitalization Agreement constitutes a "change of control" under the long-term incentive plans ("LTIP") of Huntsman Packaging. Upon a change of control, all participants in the LTIP fully vest and all amounts due to the participants are payable within 90 days. As a result, we accrued $5.0 million of compensation expense in the three months ended March 31, 2000 relating to the vesting under the LTIP. In addition, we incurred $0.2 million of fees and expenses in connection with the Recapitalization in the three months ended March 31, 2000. Both the LTIP compensation expense and these fees and expenses are included in "compensation and transaction costs related to recapitalization" in the accompanying condensed consolidated statement of income. The accounting for the Recapitalization will not result in changes to the historical cost presentation of our assets and liabilities. Accordingly, the Equity Redemption will reduce stockholders' equity and no additional goodwill or fair value adjustments will be recorded as a result of the Recapitalization. 3. INVENTORIES Inventories are stated at the lower of cost (on a first-in, first-out basis) or market value. Inventories as of March 31, 2000 and December 31, 1999 consisted of the following (in thousands):
MARCH 31, DECEMBER 31, 2000 1999 --------- ------------ Finished goods.............................................. $46,165 $41,408 Raw materials............................................... 39,259 28,910 Work-in-process............................................. 6,924 7,881 ------- ------- Total....................................................... $92,348 $78,199 ======= =======
4. COMPREHENSIVE INCOME The following table reports comprehensive income for the three months ended March 31, 2000 and 1999 (in thousands).
2000 1999 --------- ------------ Net income.................................................. $ 1,401 $ 2,271 Foreign currency translation adjustments.................... (373) 408 ------- ------- Comprehensive income........................................ $ 1,028 $ 2,679 ======= =======
F-42 189 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 5. OTHER EXPENSE We held investments in marketable securities during 1999 that were designated as trading securities. For the three months ended March 31, 1999, unrealized losses of approximately $2.0 million on these investments are included in other income (expense), net. 6. OPERATING SEGMENTS Operating segments are components of our company for which separate financial information is available that is evaluated regularly by our chief operating decision maker in deciding how to allocate resources and in assessing performance. This information is reported on the basis that it is used internally for evaluating segment performance. We have three reportable operating segments: specialty films, design products, and industrial films. The specialty films segment produces converter films that are sold to other flexible packaging manufacturers for additional fabrication, barrier films that contain and protect food and other products, and other films used in the personal care, medical and agriculture industries. The design products segment produces printed rollstock, bags and sheets used to package products in the food and other industries. The industrial films segment produces stretch films, used for industrial unitizing and containerization, and PVC films, used to wrap meat, cheese and produce. Sales and transfers between our segments are eliminated in consolidation. We evaluate performance of the operating segments based on profit or loss before income taxes, not including nonrecurring gains or losses. Our reportable segments are managed separately with separate management teams, because each segment has differing products, customer requirements, technology and marketing strategies. Segment profit or loss and segment assets as of and for the three months ended March 31, 2000 and 1999 are presented in the following table (in thousands).
SPECIALTY DESIGN INDUSTRIAL CORPORATE/ FILMS PRODUCTS FILMS OTHER TOTAL --------- -------- ---------- ---------- -------- 2000 Net sales to customers........... $121,635 $ 51,623 $39,279 $212,537 Intersegment sales............... 2,154 1,468 1,139 $ (4,761) -------- -------- ------- -------- -------- Total net sales............. 123,789 53,091 40,418 (4,761) 212,537 Depreciation and amortization.... 5,141 2,214 1,281 879 9,515 Interest expense................. 3,821 888 87 6,762 11,558 Segment profit................... 14,468 3,975 4,286 (13,829) 8,900 Compensation and transaction costs related to recapitalization............... 5,200 5,200 Segment total assets............. 460,033 178,353 86,673 55,039 780,098 Capital expenditures............. 4,170 1,361 3,379 1,183 10,093 1999 Net sales to customers........... $102,762 $ 37,934 $33,747 $174,443 Intersegment sales............... 1,367 906 307 $ (2,580) -------- -------- ------- -------- -------- Total net sales............. 104,129 38,840 34,054 (2,580) 174,443 Depreciation and amortization.... 4,574 2,009 1,115 745 8,443 Interest expense................. 3,452 799 87 5,884 10,222 Segment profit................... 13,205 1,855 3,969 (13,059) 5,970 Segment total assets............. 434,344 154,433 84,645 57,273 730,695 Capital expenditures............. 3,132 2,286 1,717 985 8,120
F-43 190 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) A reconciliation of the totals reported for the operating segments to our totals reported in the condensed consolidated financial statements is as follows (in thousands):
2000 1999 -------- -------- PROFIT OR LOSS Total profit for reportable segments........................ $ 22,729 $ 19,029 Unallocated amounts: Corporate expenses........................................ (7,067) (7,175) Interest expense.......................................... (6,762) (5,884) Compensation and transaction costs related to recapitalization....................................... (5,200) -------- -------- Income before income taxes................................ $ 3,700 $ 5,970 ======== ======== ASSETS Total assets for reportable segments........................ $725,059 $673,422 Intangible assets not allocated to segments................. 15,839 17,206 Other unallocated assets.................................... 39,200 40,067 -------- -------- Total consolidated assets......................... $780,098 $730,695 ======== ========
7. REDEEMABLE COMMON STOCK AND STOCK OPTIONS Under the terms of the Option Cancellation and Restricted Stock Purchase Agreements and the 1998 Huntsman Packaging Corporation Stock Option Plan, a "change of control" transaction results in the full vesting of the restricted stock and the options, and all of the outstanding options become exercisable. As a result of the Recapitalization Agreement, a change of control will occur and accordingly, we accrued noncash compensation expense of $1.2 million in the three months ended March 31, 2000 relating to the performance-based stock options. This expense is included in "administration and other expense" in the accompanying condensed consolidated statement of income. Redeemable common stock includes Class C Common and is presented net of related stockholders' notes receivable of $2.8 million. Included in the stockholder notes receivable is accrued interest on the notes of $0.2 million. Redeemable common stock also includes total accrued noncash stock-based compensation expense of $2.0 million relating to performance-based stock options. 8. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS The following condensed consolidating financial statements present, in separate columns, financial information for (i) Huntsman Packaging (on a parent only basis), with its investment in its subsidiaries recorded under the equity method, (ii) guarantor subsidiaries (as specified in the Indenture, dated September 30, 1997 (the "Indenture") relating to Huntsman Packaging's $125 million senior subordinated notes (the "Notes") on a combined basis, with any investments in non-guarantor subsidiaries specified in the Indenture recorded under the equity method, (iii) direct and indirect non-guarantor subsidiaries on a combined basis, (iv) the eliminations necessary to arrive at the information for Huntsman Packaging and its subsidiaries on a consolidated basis, and (v) Huntsman Packaging on a consolidated basis, in each case as of March 31, 2000 and December 31, 1999 and for the three months ended March 31, 2000 and 1999. The Notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary and each guarantor subsidiary is wholly-owned, directly or indirectly, by Huntsman Packaging. There are no contractual restrictions limiting transfers of cash from guarantor and non-guarantor subsidiaries to Huntsman Packaging. The condensed consolidating financial statements are presented herein, rather than separate financial statements for each of the guarantor subsidiaries, because management believes that separate financial statements relating to the guarantor subsidiaries are not material to investors. F-44 191 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET AS OF MARCH 31, 2000 (IN THOUSANDS) (UNAUDITED)
HUNTSMAN COMBINED CONSOLIDATED PACKAGING COMBINED NON- HUNTSMAN CORPORATION GUARANTOR GUARANTOR PACKAGING PARENT ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CORPORATION ----------- ------------ ------------ ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents........ $ 1,719 $ 1,582 $ 8,927 $ 12,228 Receivables...................... 70,756 26,708 21,101 118,565 Inventories...................... 68,260 12,042 12,046 92,348 Prepaid expenses and other....... 1,969 117 456 2,542 Income taxes receivable.......... 1,122 136 (839) 419 Deferred income taxes............ 6,715 426 (1,772) 5,369 -------- -------- -------- -------- Total current assets..... 150,541 41,011 39,919 231,471 PLANT AND EQUIPMENT, net........... 189,121 78,228 50,531 317,880 INTANGIBLE ASSETS, net............. 52,071 142,298 18,190 212,559 INVESTMENT IN SUBSIDIARIES......... 65,688 $(65,688) OTHER ASSETS....................... 15,858 144 2,186 18,188 -------- -------- -------- -------- -------- TOTAL ASSETS....................... $473,279 $261,681 $110,826 $(65,688) $780,098 ======== ======== ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Trade accounts payable........... $ 46,696 $ 10,764 $ 11,737 $ 69,197 Accrued liabilities.............. 28,753 2,075 5,931 36,759 Current portion of long-term debt.......................... 14,358 3,937 18,295 Due to (from) affiliates......... (18,971) 18,025 5,570 4,624 -------- -------- -------- -------- Total current liabilities............ 70,836 30,864 27,175 128,875 LONG-TERM DEBT, net of current portion.......................... 263,244 184,000 41,031 488,275 OTHER LIABILITIES.................. 12,065 1,632 1,472 15,169 DEFERRED INCOME TAXES.............. 31,341 18,465 2,180 51,986 -------- -------- -------- -------- Total liabilities........ 377,486 234,961 71,858 684,305 -------- -------- -------- -------- REDEEMABLE COMMON STOCK............ 4,103 4,103 -------- -------- STOCKHOLDERS' EQUITY: Common stock..................... 63,676 20,377 29,241 $(49,618) 63,676 Retained earnings................ 33,443 6,339 13,195 (19,534) 33,443 Stockholder note receivable...... (299) (299) Foreign currency translation adjustment.................... (5,130) 4 (3,468) 3,464 (5,130) -------- -------- -------- -------- -------- Total stockholders' equity................. 91,690 26,720 38,968 (65,688) 91,690 -------- -------- -------- -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................... $473,279 $261,681 $110,826 $(65,688) $780,098 ======== ======== ======== ======== ========
F-45 192 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (IN THOUSANDS) (UNAUDITED)
HUNTSMAN CONSOLIDATED PACKAGING COMBINED HUNTSMAN CORPORATION COMBINED NON- PACKAGING PARENT ONLY GUARANTORS GUARANTORS ELIMINATIONS CORPORATION ----------- ---------- ---------- ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents.......... $ 1,212 $ 536 $ 7,349 $ 9,097 Receivables........................ 75,053 24,211 23,370 122,634 Inventories........................ 56,646 10,067 11,486 78,199 Prepaid expenses and other......... 2,127 90 427 2,644 Income taxes receivable............ 3,486 212 (1,007) 2,691 Deferred income taxes.............. 6,715 426 (1,733) 5,408 -------- -------- -------- -------- Total current assets....... 145,239 35,542 39,892 220,673 PLANT AND EQUIPMENT, net............. 184,444 78,649 51,359 314,452 INTANGIBLE ASSETS, net............... 52,676 143,836 18,444 214,956 INVESTMENT IN SUBSIDIARIES........... 61,533 $(61,533) OTHER ASSETS......................... 16,593... 144 2,205 18,942 -------- -------- -------- -------- -------- TOTAL ASSETS......................... 4$60,485.. $258,171 $111,900 $(61,533) $769,023 ======== ======== ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Trade accounts payable............. $ 39,293 $ 9,629 $ 11,134 $ 60,056 Accrued liabilities................ 25,238 2,833 6,865 34,936 Current portion of long-term debt............................ 13,464 3,656 17,120 Due to (from) affiliates........... (19,737) 17,431 7,021 4,715 -------- -------- -------- -------- Total current liabilities.............. 58,258 29,893 28,676 116,827 LONG-TERM DEBT, net of current portion............................ 267,107 184,000 42,155 493,262 OTHER LIABILITIES.................... 10,741 1,733 1,509 13,983 DEFERRED INCOME TAXES................ 30,791 18,465 2,107 51,363 -------- -------- -------- -------- Total liabilities.......... 366,897 234,091 74,447 675,435 -------- -------- -------- -------- REDEEMABLE COMMON STOCK.............. 2,926 2,926 -------- -------- STOCKHOLDERS' EQUITY: Common stock....................... 63,676 20,377 29,241 $(49,618) 63,676 Retained earnings.................. 32,042 3,696 11,437 (15,133) 32,042 Shareholder note receivable........ (299) (299) Cumulative foreign currency translation adjustment.......... (4,757) 7 (3,225) 3,218 (4,757) -------- -------- -------- -------- -------- Total stockholders' equity................... 90,662 24,080 37,453 (61,533) 90,662 -------- -------- -------- -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................. $460,485 $258,171 $111,900 $(61,533) $769,023 ======== ======== ======== ======== ========
F-46 193 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2000 (IN THOUSANDS) (UNAUDITED)
HUNTSMAN COMBINED CONSOLIDATED PACKAGING COMBINED NON- HUNTSMAN CORPORATION GUARANTOR GUARANTOR PACKAGING PARENT ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CORPORATION ----------- ------------ ------------ ------------ ------------ NET SALES.......................... $137,526 $49,031 $30,741 $(4,761) $212,537 COST OF SALES...................... 113,951 36,037 24,297 (4,761) 169,524 -------- ------- ------- ------- -------- Gross profit............. 23,575 12,994 6,444 43,013 OPERATING EXPENSES................. 21,670 3,629 2,886 28,185 -------- ------- ------- -------- OPERATING INCOME................... 1,905 9,365 3,558 14,828 INTEREST EXPENSE................... (6,767) (3,813) (978) (11,558) EQUITY IN EARNINGS OF SUBSIDIARIES..................... 4,401 (4,401) OTHER INCOME (EXPENSE), net........ 62 (9) 377 430 -------- ------- ------- ------- -------- INCOME BEFORE INCOME TAXES......... (399) 5,543 2,957 (4,401) 3,700 INCOME TAX EXPENSE................. (1,800) 2,900 1,199 2,299 -------- ------- ------- ------- -------- NET INCOME......................... $ 1,401 $ 2,643 $ 1,758 $(4,401) $ 1,401 ======== ======= ======= ======= ========
F-47 194 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1999 (IN THOUSANDS) (UNAUDITED)
HUNTSMAN COMBINED CONSOLIDATED PACKAGING COMBINED NON- HUNTSMAN CORPORATION GUARANTOR GUARANTOR PACKAGING PARENT ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CORPORATION ----------- ------------ ------------ ------------ ------------ NET SALES.......................... $118,722 $31,622 $26,679 $(2,580) $174,443 COST OF SALES...................... 97,278 22,390 20,528 (2,580) 137,616 -------- ------- ------- ------- -------- Gross profit............. 21,444 9,232 6,151 36,827 OPERATING EXPENSES................. 13,703 2,538 2,410 18,651 -------- ------- ------- -------- OPERATING INCOME................... 7,741 6,694 3,741 18,176 INTEREST EXPENSE................... (5,890) (3,445) (887) (10,222) EQUITY IN EARNINGS OF SUBSIDIARIES..................... 1,403 (1,403) OTHER EXPENSE, net................. (204) (1) (1,779) (1,984) -------- ------- ------- ------- -------- INCOME BEFORE INCOME TAXES......... 3,050 3,248 1,075 (1,403) 5,970 INCOME TAX EXPENSE................. 779 1,863 1,057 3,699 -------- ------- ------- ------- -------- NET INCOME......................... $ 2,271 $ 1,385 $ 18 $(1,403) $ 2,271 ======== ======= ======= ======= ========
F-48 195 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2000 (IN THOUSANDS) (UNAUDITED)
HUNTSMAN CONSOLIDATED PACKAGING COMBINED COMBINED HUNTSMAN CORPORATION GUARANTOR NON-GUARANTOR PACKAGING PARENT ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CORPORATION ----------- ------------ -------------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES.................... $ 12,655 $ 2,046 $3,207 $ 17,908 -------- ------- ------ -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for plant and equipment.............. (8,315) (997) (781) (10,093) -------- ------- ------ -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in stockholders' notes receivable........... (46) (46) Net proceeds from issuance of (principal payments on) long-term debt............. (2,969) (843) (3,812) -------- ------ -------- Net cash used in financing activities................. (3,015) (843) (3,858) -------- ------ -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS................... (818) (3) (5) (826) -------- ------- ------ -------- NET INCREASE IN CASH AND CASH EQUIVALENTS................... 507 1,046 1,578 3,131 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........... 1,212 536 7,349 9,097 -------- ------- ------ -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD..................... $ 1,719 $ 1,582 $8,927 $ 12,228 ======== ======= ====== ========
F-49 196 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (IN THOUSANDS) (UNAUDITED)
HUNTSMAN COMBINED CONSOLIDATED PACKAGING COMBINED NON- HUNTSMAN CORPORATION GUARANTOR GUARANTOR PACKAGING PARENT ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CORPORATION ----------- ------------ -------------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES.......... $(13,326) $ 7,205 $(1,690) $(7,811) -------- ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for plant and equipment.............. (6,603) (836) (681) (8,120) -------- ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock and net change in stockholders' notes receivable................. 1,119 1,119 Net proceeds from issuance of (principal payments on) long-term debt............. 13,045 (6,800) (562) 5,683 -------- ------- ------- ------- Net cash provided by (used in) financing activities....... 14,164 (6,800) (562) 6,802 -------- ------- ------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS................... (1) 575 574 -------- ------- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS................... (5,766) (431) (2,358) (8,555) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........... 7,381 525 11,311 19,217 -------- ------- ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD..................... $ 1,615 $ 94 $ 8,953 $10,662 ======== ======= ======= =======
F-50 197 [HUNTSMAN PACKAGING LOGO] $220,000,000 HUNTSMAN PACKAGING CORPORATION OFFER TO EXCHANGE ALL OUTSTANDING 13% SENIOR SUBORDINATED NOTES DUE 2010 FOR 13% SENIOR SUBORDINATED NOTES DUE 2010, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 198 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. [ALTERNATIVE FRONT COVER FOR MARKET-MAKING PROSPECTUS] Subject to Completion, Dated June 21, 2000 Prospectus [HUNTSMAN PACKAGING LOGO] HUNTSMAN PACKAGING CORPORATION 13% SENIOR SUBORDINATED NOTES DUE 2010 We issued the 13% Senior Subordinated Notes due 2010 which have been registered under the Securities Act of 1933 in exchange for our 13% Senior Subordinated Notes due 2010 in our exchange offer. MATURITY - - The Notes will mature on June 1, 2010. INTEREST - - Interest on the Notes will be payable on June 1 and December 1 of each year, beginning December 1, 2000. REDEMPTION - - We may redeem some or all of the notes at any time on or after June 1, 2005. - - We may also redeem up to $77,000,000 of the Notes using the proceeds of certain equity offerings completed before June 1, 2003. - - The redemption prices are described on page . CHANGE OF CONTROL - - If we experience a change of control, we must offer to purchase the Notes. SECURITY AND RANKING - - The Notes are unsecured. The Notes are subordinated to all of our existing and future senior debt, rank equally with all of our other senior subordinated debt and rank senior to all of our future subordinated debt. GUARANTEES - - If we fail to make payments on the Notes, our guarantor subsidiaries must make them instead. These guarantees are senior subordinated obligations of our guarantor subsidiaries. Not all of our subsidiaries guarantee the Notes. We prepared this prospectus for use by Chase Securities Inc. ("CSI") in connection with offers and sales related to market-making transactions of the New Notes. CSI may act as principal or agent in these transactions. These sales will be made at prices related to prevailing market prices at the time of sale. We will not receive any of the proceeds of these sales. ------------------------- YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE OF THIS PROSPECTUS IN EVALUATING AN INVESTMENT IN THE NEW NOTES. ------------------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------- CHASE SECURITIES INC. ------------------------- The date of this prospectus is , 2000 199 [ALTERNATIVE SECTION FOR MARKET-MAKING PROSPECTUS] TRADING MARKET FOR THE NEW NOTES -- YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NEW NOTES. We do not intend to apply for a listing of the New Notes on a securities exchange or any automated dealer quotation system. We have been advised by CSI that as of the date of this prospectus CSI intends to make a market in the New Notes. CSI is not obligated to do so, however, and any market-making activities with respect to the New Notes may be discontinued at any time without notice. In addition, such market-making activity will be subject to limits imposed by the Securities Act and the Exchange Act. Because CSI is our affiliate, CSI is required to deliver a current "market-making" prospectus and otherwise comply with the registration requirements of the Securities Act in any secondary market sale of the New Notes. Accordingly, the ability of CSI to make a market in the New Notes may, in part, depend on our ability to maintain a current market- making prospectus. The liquidity of the trading market in the New Notes, and the market price quoted for the New Notes, may be adversely affected by changes in the overall market for high yield securities and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a result, you cannot be sure that an active trading market will develop for the New Notes. 200 [ALTERNATIVE SECTION FOR MARKET-MAKING PROSPECTUS] USE OF PROCEEDS This prospectus is delivered in connection with the sale of the New Notes by CSI in market-making transactions. We will not receive any of the proceeds from these transactions. 201 [ALTERNATIVE SECTION FOR MARKET-MAKING PROSPECTUS] PLAN OF DISTRIBUTION This prospectus has been prepared for use by CSI in connection with offers and sales of the New Notes in market-making transactions effected from time to time. CSI may act as a principal or agent in these transactions, including as agent for the counterparty when acting as principal or as agent for both parties, and may receive compensation in the form of discounts and commissions, including from both counterparties when it acts as agent for both. These sales will be made at prevailing market prices at the time of sale, at prices related thereto or at negotiated prices. We will not receive any of the proceeds of these sales. We have agreed to indemnify CSI against certain liabilities, including liabilities under the Securities Act, and to contribute payments which CSI might be required to make in respect thereof. As of June 15, 2000, Chase Domestic Investments, L.L.C., an affiliate of CSI, beneficially owned approximately 60.5% of our common stock. See "Security Ownership of Certain Beneficial Owners and Management." CSI has informed us that it does not intend to confirm sales of the New Notes to any accounts over which it exercises discretionary authority without the prior specific written approval of these transactions by the customer. We have been advised by CSI that, subject to applicable laws and regulations, CSI currently intends to make a market in the New Notes following completion of the exchange offer. However, CSI is not obligated to do so and any such market-making may be interrupted or discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act. There can be no assurance that an active trading market will develop or be sustained. See "Risk Factors - -- Trading Market for the New Notes." 202 [ALTERNATIVE BACK COVER FOR MARKET-MAKING PROSPECTUS] [HUNTSMAN PACKAGING LOGO] HUNTSMAN PACKAGING CORPORATION $220,000,000 PRINCIPAL AMOUNT OF 13% SENIOR SUBORDINATED NOTES DUE 2010 CHASE SECURITIES INC. 203 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Article IV of Huntsman Packaging Corporation's Third Amended and Restated Articles of Incorporation provides that Huntsman Packaging Corporation shall indemnify and advance expenses to its directors and officers and to any person who is or was serving at its request as a director or officer of another domestic or foreign corporation (and their respective estates or personal representatives) to the fullest extent as from time to time permitted by Utah law. In addition, pursuant to Article IV of the Third Amended and Restated Articles of Incorporation, the personal liability of the directors and officers of Huntsman Packaging Corporation to Huntsman Packaging Corporation or its shareholders, or to any third person, is eliminated or limited to the fullest extent as from time to time permitted by Utah law. Sections 16-10a-902 and 16-10a-907 of the Utah Revised Business Corporation Act provide that a corporation may indemnify its directors and officers who are made parties to a legal proceeding because of their positions with the corporation against liability incurred in the proceeding if the individual's conduct was in good faith, the individual reasonably believed that his conduct was in, or not opposed to, the corporation's best interests, and in the case of a criminal proceeding, had no reasonable cause to believe his conduct was unlawful. Under the Utah Revised Business Corporation Act, Huntsman Packaging Corporation may not indemnify its directors or officers in connection with a proceeding by, or in the right of, Huntsman Packaging Corporation in which the individual was adjudged liable to it or in any proceeding in which the individual was adjudged liable on the basis that he derived an improper personal benefit. As authorized by Section16-10a-841(1) of the Utah Revised Business Corporation Act, the Amended and Restated Bylaws of Huntsman Packaging Corporation provide that Huntsman Packaging Corporation's directors shall not be personally liable to Huntsman Packaging Corporation or its shareholders for monetary damages for any action taken or any failure to take any action, as a director, except liability for: (a) the amount of a financial benefit received by a director to which he or she is not entitled; (b) an intentional infliction of harm on Huntsman Packaging Corporation or its shareholders; (c) a violation of Section 16-10a-842 of the Utah Revised Business Corporation Act for unlawful distributions; or (d) an intentional violation of criminal law. The Amended and Restated Bylaws also provide for indemnification of Huntsman Packaging Corporation's director and officers and advancement of their expenses to the fullest extent as from time to time permitted by applicable law, including, without limitation, Section 16-10a-902 of the Utah Revised Business Corporation Act. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) EXHIBITS 2.1 Recapitalization Agreement, dated as of March 31, 2000 (the "Recapitalization Agreement"), among Huntsman Packaging Corporation, Chase Domestic Investments, L.L.C., Richard P. Durham as Representative, and the shareholders of Huntsman Packaging Corporation signatory thereto (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Huntsman Packaging Corporation on April 12, 2000). 2.2 Amendment No. 1, dated as of April 3, 2000, to the Recapitalization Agreement. 2.3 Amendment No. 2, dated as of May 31, 2000, to the Recapitalization Agreement. 3.1 Third Amended and Restated Articles of Incorporation of Huntsman Packaging Corporation.
II-1 204 3.2* Certificate of Incorporation of Edison Plastics International, Inc. 3.3 Articles of Incorporation of Huntsman Bulk Packaging Corporation (incorporated by reference to Exhibit 3.17 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.4 Articles of Incorporation of Huntsman Container Corporation International (incorporated by reference to Exhibit 3.14 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.5* Certificate of Incorporation of Huntsman Edison Films Corporation. 3.6 Articles of Incorporation of Huntsman Film Products of Mexico, Inc. (incorporated by reference to Exhibit 3.16 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.7* Articles of Incorporation of Huntsman KCL Corporation. 3.8 Articles of Incorporation of Huntsman Packaging Georgia, Inc. (incorporated by reference to Exhibit 3.15 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.9* Operating Agreement of Huntsman Packaging of Canada, LLC. 3.10 Amended and Restated Bylaws of Huntsman Packaging Corporation. 3.11* Bylaws of Edison Plastics International, Inc. 3.12 Bylaws of Huntsman Bulk Packaging Corporation (incorporated by reference to Exhibit 3.27 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.13 Bylaws of Huntsman Container Corporation International (incorporated by reference to Exhibit 3.24 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.14* Bylaws of Huntsman Edison Films Corporation. 3.15 Bylaws of Huntsman Film Products of Mexico, Inc. (incorporated by reference to Exhibit 3.26 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.16* Bylaws of Huntsman KCL Corporation. 3.17 Bylaws of Huntsman Packaging Georgia, Inc. (incorporated by reference to Exhibit 3.25 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.18* Bylaws of Huntsman Packaging of Canada, LLC. 4.1 Indenture, dated as of May 31, 2000, among Huntsman Packaging Corporation, the Note Guarantors party thereto and The Bank of New York, as trustee. 4.2 Form of New Note (included as Exhibit B to Exhibit 4.1). 4.3 Exchange and Registration Rights Agreement, dated as of May 31, 2000, among Huntsman Packaging Corporation, the Note Guarantors party thereto, and Chase Securities Inc. and Deutsche Bank Securities Inc., as Initial Purchasers. 5.1* Opinion of Stoel Rives LLP. 5.2* Opinion of O'Sullivan Graev & Karabell, LLP. 10.1 Note Warrant Agreement, dated as of May 31, 2000, among Huntsman Packaging Corporation and The Bank of New York, as Warrant Agent, relating to the 220,000 Note Warrants.
II-2 205 10.2 Stockholders' Agreement, dated as of May 31, 2000, among Huntsman Packaging Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto. 10.3 Registration Rights Agreement, dated as of May 31, 2000 (the"Registration Rights Agreement"), among Huntsman Packaging Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto. 10.4 Amendment No. 1, dated as of June 13, 2000, to the Registration Rights Agreement. 10.5 Securities Purchase Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and each of the purchasers of Huntsman Packaging Corporation's preferred stock listed on the signature pages thereto. 10.6 Warrant Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Chase Domestic Investments, L.L.C. 10.7 Credit Agreement, dated as of September 30, 1997, as amended and restated as of May 31, 2000, among Huntsman Packaging Corporation, the subsidiary guarantors party thereto, the various lenders from time to time party thereto (the "Lenders"), Bankers Trust Company, as Administrative Agent and Collateral Agent, and The Chase Manhattan Bank, as Syndication Agent, and The Bank of Nova Scotia, as the Documentation Agent. 10.8 Guarantee Agreement, dated as of September 30, 1997, as amended and restated as of May 31, 2000, among the subsidiary guarantors party thereto and Bankers Trust Company, as Collateral Agent. 10.9 Security Agreement, dated as of September 30, 1997, as amended and restated as of May 31, 2000, among the subsidiary guarantors party thereto and Bankers Trust Company, as Collateral Agent. 10.10 Pledge Agreement, dated as of September 30, 1997, as amended and restated as of May 31, 2000, among the subsidiary guarantors party thereto and Bankers Trust Company, as Collateral Agent. 10.11 Indemnity, Subrogation and Contribution Agreement, dated as of September 30, 1997, as amended and restated as of May 31, 2000, among the subsidiary guarantors party thereto and Bankers Trust Company, as Collateral Agent. 10.12 Employment Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Richard P. Durham. 10.13 Employment Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Jack E. Knott. 10.14 Employment Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Scott K. Sorensen. 10.15 Employment Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Ronald G. Moffitt. 10.16 Restricted Stock Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Richard P. Durham. 10.17 Restricted Stock Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Jack E. Knott. 10.18 Restricted Stock Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Scott K. Sorensen. 10.19 Restricted Stock Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Ronald G. Moffitt.
II-3 206 10.20 Pledge Agreement, dated as of May 31, 2000, in favor of Huntsman Packaging Corporation made by Richard P. Durham. 10.21 Pledge Agreement, dated as of May 31, 2000, in favor of Huntsman Packaging Corporation made by Jack E. Knott. 10.22 Pledge Agreement, dated as of May 31, 2000, in favor of Huntsman Packaging Corporation made by Scott K. Sorensen. 10.23 Pledge Agreement, dated as of May 31, 2000, in favor of Huntsman Packaging Corporation made by Ronald G. Moffitt. 10.24 1998 Huntsman Packaging Corporation Stock Option Plan (incorporated by reference to Exhibit 10.10 to Huntsman Packaging Corporation's Annual Report on Form 10-K for the year ended December 31, 1998). 10.25 Huntsman Packaging Corporation Management Incentive Plan for Senior Divisional Management (1999) (incorporated by reference to Exhibit 10.1 to Huntsman Packaging Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000). 10.26 Huntsman Packaging Corporation 2000 Stock Incentive Plan. 10.27 Second Amended and Restated Stock Option Agreement, dated as of May 31, 2000 between Huntsman Packaging Corporation and Jack E. Knott. 10.28 Huntsman Packaging Corporation Management Incentive Plan (2000) (incorporated by reference to Exhibit 10.2 to Huntsman Packaging Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000). 12.1 Statement re: computation of ratios of earning to fixed charges. 21.1 Subsidiaries of the Registrants. 23.1* Consent of Stoel Rives LLP (included in Exhibit 5.1). 23.2* Consent of O'Sullivan Graev & Karabell, LLP (included in Exhibit 5.2). 23.3 Consent of Arthur Andersen LLP. 23.4 Consent of Deloitte & Touche LLP. 24.1 Powers of Attorney (included on the signature pages). 25.1 Form T-1 Statement of Eligibility and Qualifications under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee. 27.1 Financial Data Schedule. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. 99.4 Form of Letter to Clients.
- ------------------------- * To be filed by amendment. (b) FINANCIAL STATEMENT SCHEDULES Schedule II -- Valuation and Qualifying Accounts for the years ended December 31, 1999, 1998 and 1997. Schedules other than the above have been omitted because they are either not applicable or the required information has been disclosed in the financial statements or notes thereto. II-4 207 ITEM 22. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrants pursuant to the forgoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants 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 Registrants 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 Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrants hereby undertake: 1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (a) To include any prospectus required by Section 10(a)(3) of the Securities Act; (b) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (c) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; 2. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment 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; and 3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned Registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned Registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-5 208 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, in the State of Utah, on the 20th day of July, 2000. HUNTSMAN PACKAGING CORPORATION By: /s/ RICHARD P. DURHAM ------------------------------------ Richard P. Durham Chairman of the Board of Directors, President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Richard P. Durham and Ronald G. Moffitt his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ RICHARD P. DURHAM Chairman of the Board of Directors, July 20, 2000 - ------------------------------------------ President and Chief Executive Officer Richard P. Durham (Principal Executive Officer) /s/ SCOTT K. SORENSEN Executive Vice President and Chief July 20, 2000 - ------------------------------------------ Financial Officer (Principal Financial Scott K. Sorensen and Accounting Officer), Treasurer, Director /s/ JACK E. KNOTT Director July 20, 2000 - ------------------------------------------ Jack E. Knott /s/ DONALD J. HOFMANN, JR. Director July 20, 2000 - ------------------------------------------ Donald J. Hofmann, Jr. /s/ TIMOTHY J. WALSH Director July 20, 2000 - ------------------------------------------ Timothy J. Walsh /s/ JOHN M.B. O'CONNOR Director July 20, 2000 - ------------------------------------------ John M.B. O'Connor /s/ RICHARD D. WATERS Director July 20, 2000 - ------------------------------------------ Richard D. Waters
II-6 209 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, in the State of Utah, on the 20th day of July, 2000. EDISON PLASTICS INTERNATIONAL, INC. By: /s/ RICHARD P. DURHAM ------------------------------------ Richard P. Durham President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Richard P. Durham and Ronald G. Moffitt his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ RICHARD P. DURHAM President and Chief Executive Officer July 20, 2000 - ------------------------------------------ (Principal Executive Officer), Sole Richard P. Durham Director /s/ SCOTT K. SORENSEN Executive Vice President and Chief July 20, 2000 - ------------------------------------------ Financial Officer, Treasurer (Principal Scott K. Sorensen Financial and Accounting Officer)
II-7 210 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, in the State of Utah, on the 20th day of July, 2000. HUNTSMAN BULK PACKAGING CORPORATION By: /s/ RICHARD P. DURHAM ------------------------------------ Richard P. Durham President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Richard P. Durham and Ronald G. Moffitt his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ RICHARD P. DURHAM President and Chief Executive Officer July 20, 2000 - ------------------------------------------ (Principal Executive Officer), Director Richard P. Durham /s/ SCOTT K. SORENSEN Executive Vice President and Chief July 20, 2000 - ------------------------------------------ Financial Officer (Principal Financial Scott K. Sorensen and Accounting Officer), Treasurer, Director /s/ RONALD G. MOFFITT Director July 20, 2000 - ------------------------------------------ Ronald G. Moffitt
II-8 211 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, in the State of Utah, on the 20th day of July, 2000. HUNTSMAN CONTAINER CORPORATION INTERNATIONAL By: /s/ RICHARD P. DURHAM ------------------------------------ Richard P. Durham President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Richard P. Durham and Ronald G. Moffitt his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ RICHARD P. DURHAM President and Chief Executive Officer July 20, 2000 - ------------------------------------------ (Principal Executive Officer), Director Richard P. Durham /s/ SCOTT K. SORENSEN Executive Vice President and Chief July 20, 2000 - ------------------------------------------ Financial Officer (Principal Financial Scott K. Sorensen and Accounting Officer), Treasurer, Director /s/ RONALD G. MOFFITT Director July 20, 2000 - ------------------------------------------ Ronald G. Moffitt
II-9 212 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, in the State of Utah, on the 20th day of July, 2000. HUNTSMAN EDISON FILMS CORPORATION By: /s/ RICHARD P. DURHAM ------------------------------------ Richard P. Durham President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Richard P. Durham and Ronald G. Moffitt his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ RICHARD P. DURHAM President and Chief Executive Officer July 20, 2000 - ------------------------------------------ (Principal Executive Officer), Sole Richard P. Durham Director /s/ SCOTT K. SORENSEN Executive Vice President and Chief July 20, 2000 - ------------------------------------------ Financial Officer (Principal Financial Scott K. Sorensen and Accounting Officer), Treasurer
II-10 213 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, in the State of Utah, on the 20th day of July, 2000. HUNTSMAN FILM PRODUCTS OF MEXICO, INC. By: /s/ RICHARD P. DURHAM ------------------------------------ Richard P. Durham President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Richard P. Durham and Ronald G. Moffitt his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ RICHARD P. DURHAM President and Chief Executive Officer July 20, 2000 - ------------------------------------------ (Principal Executive Officer), Director Richard P. Durham /s/ SCOTT K. SORENSEN Executive Vice President and Chief July 20, 2000 - ------------------------------------------ Financial Officer (Principal Financial Scott K. Sorensen and Accounting Officer), Treasurer, Director /s/ RONALD G. MOFFITT Director July 20, 2000 - ------------------------------------------ Ronald G. Moffitt
II-11 214 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, in the State of Utah, on the 20th day of July, 2000. HUNTSMAN KCL CORPORATION By: /s/ RICHARD P. DURHAM ------------------------------------ Richard P. Durham President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Richard P. Durham and Ronald G. Moffitt his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ RICHARD P. DURHAM President (Principal Executive Officer), July 20, 2000 - ------------------------------------------ Director Richard P. Durham /s/ SCOTT K. SORENSEN Executive Vice President (Principal July 20, 2000 - ------------------------------------------ Financial and Accounting Officer), Scott K. Sorensen Treasurer, Director /s/ RONALD G. MOFFITT Director July 20, 2000 - ------------------------------------------ Ronald G. Moffitt
II-12 215 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, in the State of Utah, on the 20th day of July, 2000. HUNTSMAN PACKAGING GEORGIA, INC. By: /s/ RICHARD P. DURHAM ------------------------------------ Richard P. Durham President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Richard P. Durham and Ronald G. Moffitt his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ RICHARD P. DURHAM President (Principal Executive Officer), July 20, 2000 - ------------------------------------------ Director Richard P. Durham /s/ SCOTT K. SORENSEN Executive Vice President and July 20, 2000 - ------------------------------------------ Chief Financial Officer Scott K. Sorensen (Principal Financial Officer) /s/ DAREN G. COTTLE Controller, Treasurer (Principal July 20, 2000 - ------------------------------------------ Accounting Officer), Director Daren G. Cottle /s/ RONALD G. MOFFITT Director July 20, 2000 - ------------------------------------------ Ronald G. Moffitt
II-13 216 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Salt Lake City, in the State of Utah, on the 20th day of July, 2000. HUNTSMAN PACKAGING OF CANADA, LLC By: /s/ RICHARD P. DURHAM ------------------------------------ Richard P. Durham President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Richard P. Durham and Ronald G. Moffitt his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the dates indicated:
SIGNATURE TITLE DATE - --------- ----- ---- /s/ RICHARD P. DURHAM President (Principal Executive Officer), July 20, 2000 - ------------------------------------------ Manager Richard P. Durham /s/ SCOTT K. SORENSEN Vice President (Principal Financial and July 20, 2000 - ------------------------------------------ Accounting Officer), Manager Scott K. Sorensen /s/ JACK E. KNOTT Manager July 20, 2000 - ------------------------------------------ Jack E. Knott /s/ RONALD G. MOFFITT Manager July 20, 2000 - ------------------------------------------ Ronald G. Moffitt /s/ DAREN G. COTTLE Manager July 20, 2000 - ------------------------------------------ Daren G. Cottle
II-14 217 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Huntsman Packaging Corporation: We have audited in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of Huntsman Packaging Corporation and subsidiaries as of December 31, 1999 and 1998 and for the years then ended, included in this registration statement, and have issued our report thereon dated January 28, 2000. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. Schedule II for the years ended December 31, 1999 and 1998 has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Salt Lake City, Utah January 28, 2000 S-1 218 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Huntsman Packaging Corporation and Subsidiaries: We have audited the financial statements of Huntsman Packaging Corporation and Subsidiaries for the year ended December 31, 1997, and have issued our report thereon dated February 11, 1998 (included elsewhere in this Registration Statement). Our audit also included the financial statement schedule listed in Item 21(b) of this Registration Statement. This financial statement schedule is the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audit. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Salt Lake City, Utah February 11, 1998 S-2 219 HUNTSMAN PACKAGING CORPORATION AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN THOUSANDS)
ADDITIONS BALANCE AT CHARGED TO CASH BALANCE AT BEGINNING COSTS AND PAYMENTS END DESCRIPTION OF YEAR EXPENSES MADE OTHER OF YEAR ----------- ---------- ---------- -------- ------------ ---------- ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS: 1999.............................. $22,630 $ 9,046 $ -- $ (60)(2) $31,616 1998.............................. 16,819 6,125 -- (314)(2) 22,630 1997.............................. 13,771 3,058 -- (10)(2) 16,819 ALLOWANCE FOR DOUBTFUL ACCOUNTS: 1999.............................. $ 2,570 $ 518 $ -- $ (973)(1) $ 2,115 1998.............................. 3,257 -- -- (687)(1) 2,570 1997.............................. 2,641 241 -- 375(1) 3,257 PLANT CLOSING ACCRUAL: 1999.............................. $ 2,600 $ 2,500 $(1,500) $ 1,200(3) $ 4,800 1998.............................. 1,800 3,900 (3,100) -- 2,600 1997.............................. 2,300 1,800 (2,300) -- 1,800
- --------------- (1) Represents the net of accounts written off against the allowance and recoveries of previous write-offs. (2) Relates to write-down of goodwill. (3) Represents accruals charged to goodwill. S-3 220 INDEX TO EXHIBITS
EXHIBIT NUMBER - ------- EXHIBIT 2.1 Recapitalization Agreement, dated as of March 31, 2000 (the "Recapitalization Agreement"), among Huntsman Packaging Corporation, Chase Domestic Investments, L.L.C., Richard P. Durham as Representative, and the shareholders of Huntsman Packaging Corporation signatory thereto (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Huntsman Packaging Corporation on April 12, 2000). 2.2 Amendment No. 1, dated as of April 3, 2000, to the Recapitalization Agreement. 2.3 Amendment No. 2, dated as of May 31, 2000, to the Recapitalization Agreement. 3.1 Third Amended and Restated Articles of Incorporation of Huntsman Packaging Corporation. 3.2 * Certificate of Incorporation of Edison Plastics International, Inc. 3.3 Articles of Incorporation of Huntsman Bulk Packaging Corporation (incorporated by reference to Exhibit 3.17 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.4 Articles of Incorporation of Huntsman Container Corporation International (incorporated by reference to Exhibit 3.14 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.5 * Certificate of Incorporation of Huntsman Edison Films Corporation. 3.6 Articles of Incorporation of Huntsman Film Products of Mexico, Inc. (incorporated by reference to Exhibit 3.16 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.7 * Articles of Incorporation of Huntsman KCL Corporation. 3.8 Articles of Incorporation of Huntsman Packaging Georgia, Inc. (incorporated by reference to Exhibit 3.15 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.9 * Operating Agreement of Huntsman Packaging of Canada, LLC. 3.10 Amended and Restated Bylaws of Huntsman Packaging Corporation. 3.11 * Bylaws of Edison Plastics International, Inc. 3.12 Bylaws of Huntsman Bulk Packaging Corporation (incorporated by reference to Exhibit 3.27 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.13 Bylaws of Huntsman Container Corporation International (incorporated by reference to Exhibit 3.24 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.14 * Bylaws of Huntsman Edison Films Corporation. 3.15 Bylaws of Huntsman Film Products of Mexico, Inc. (incorporated by reference to Exhibit 3.26 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.16 * Bylaws of Huntsman KCL Corporation. 3.17 Bylaws of Huntsman Packaging Georgia, Inc. (incorporated by reference to Exhibit 3.25 to Huntsman Packaging Corporation's Registration Statement on Form S-4 (File No. 333-40067)). 3.18 * Bylaws of Huntsman Packaging of Canada, LLC. 4.1 Indenture, dated as of May 31, 2000, among Huntsman Packaging Corporation, the Note Guarantors party thereto and The Bank of New York, as trustee. 4.2 Form of New Note (included as Exhibit B to Exhibit 4.1).
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EXHIBIT NUMBER - ------- EXHIBIT 4.3 Exchange and Registration Rights Agreement, dated as of May 31, 2000, among Huntsman Packaging Corporation, the Note Guarantors party thereto, and Chase Securities Inc. and Deutsche Bank Securities Inc., as Initial Purchasers. 5.1 * Opinion of Stoel Rives LLP. 5.2 * Opinion of O'Sullivan Graev & Karabell, LLP. 10.1 Note Warrant Agreement, dated as of May 31, 2000, among Huntsman Packaging Corporation and The Bank of New York, as Warrant Agent, relating to the 220,000 Note Warrants. 10.2 Stockholders' Agreement, dated as of May 31, 2000, among Huntsman Packaging Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto. 10.3 Registration Rights Agreement, dated as of May 31, 2000 (the "Registration Rights Agreement"), among Huntsman Packaging Corporation, Chase Domestic Investments, L.L.C. and each of the stockholders and warrantholders listed on the signature pages thereto. 10.4 Amendment No. 1, dated as of June 13, 2000, to the Registration Rights Agreement. 10.5 Securities Purchase Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and each of the purchasers of Huntsman Packaging Corporation's preferred stock listed on the signature pages thereto. 10.6 Warrant Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Chase Domestic Investments, L.L.C. 10.7 Credit Agreement, dated as of September 30, 1997, as amended and restated as of May 31, 2000, among Huntsman Packaging Corporation, the subsidiary guarantors party thereto, the various lenders from time to time party thereto (the "Lenders"), Bankers Trust Company, as Administrative Agent and Collateral Agent, and The Chase Manhattan Bank, as Syndication Agent, and The Bank of Nova Scotia, as the Documentation Agent. 10.8 Guarantee Agreement, dated as of September 30, 1997, as amended and restated as of May 31, 2000, among the subsidiary guarantors party thereto and Bankers Trust Company, as Collateral Agent. 10.9 Security Agreement, dated as of September 30, 1997, as amended and restated as of May 31, 2000, among the subsidiary guarantors party thereto and Bankers Trust Company, as Collateral Agent. 10.10 Pledge Agreement, dated as of September 30, 1997, as amended and restated as of May 31, 2000, among the subsidiary guarantors party thereto and Bankers Trust Company, as Collateral Agent. 10.11 Indemnity, Subrogation and Contribution Agreement, dated as of September 30, 1997, as amended and restated as of May 31, 2000, among the subsidiary guarantors party thereto and Bankers Trust Company, as Collateral Agent. 10.12 Employment Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Richard P. Durham. 10.13 Employment Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Jack E. Knott. 10.14 Employment Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Scott K. Sorensen. 10.15 Employment Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Ronald G. Moffitt. 10.16 Restricted Stock Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Richard P. Durham. 10.17 Restricted Stock Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Jack E. Knott.
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EXHIBIT NUMBER - ------- EXHIBIT 10.18 Restricted Stock Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Scott K. Sorensen. 10.19 Restricted Stock Agreement, dated as of May 31, 2000, between Huntsman Packaging Corporation and Ronald G. Moffitt. 10.20 Pledge Agreement, dated as of May 31, 2000, in favor of Huntsman Packaging Corporation made by Richard P. Durham. 10.21 Pledge Agreement, dated as of May 31, 2000, in favor of Huntsman Packaging Corporation made by Jack E. Knott. 10.22 Pledge Agreement, dated as of May 31, 2000, in favor of Huntsman Packaging Corporation made by Scott K. Sorensen. 10.23 Pledge Agreement, dated as of May 31, 2000, in favor of Huntsman Packaging Corporation made by Ronald G. Moffitt. 10.24 1998 Huntsman Packaging Corporation Stock Option Plan (incorporated by reference to Exhibit 10.10 to Huntsman Packaging Corporation's Annual Report on Form 10-K for the year ended December 31, 1998). 10.25 Huntsman Packaging Corporation Management Incentive Plan for Senior Divisional Management (1999) (incorporated by reference to Exhibit 10.1 to Huntsman Packaging Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000). 10.26 Huntsman Packaging Corporation 2000 Stock Incentive Plan. 10.27 Second Amended and Restated Stock Option Agreement, dated as of May 31, 2000 between Huntsman Packaging Corporation and Jack E. Knott. 10.28 Huntsman Packaging Corporation Management Incentive Plan (2000) (incorporated by reference to Exhibit 10.2 to Huntsman Packaging Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000).
12.1 Statement re: computation of ratios of earning to fixed charges. 21.1 Subsidiaries of the Registrants. 23.1* Consent of Stoel Rives LLP (included in Exhibit 5.1). 23.2* Consent of O'Sullivan Graev & Karabell, LLP (included in Exhibit 5.2). 23.3 Consent of Arthur Andersen LLP. 23.4 Consent of Deloitte & Touche LLP. 24.1 Powers of Attorney (included on the signature pages). 25.1 Form T-1 Statement of Eligibility and Qualifications under the Trust Indenture Act of 1939 of The Bank of New York, as Trustee. 27.1 Financial Data Schedule. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. 99.4 Form of Letter to Clients.
- ------------------------- * To be filed by amendment. EX-2.2 2 ex2-2.txt AMENDMENT NO. 1 TO THE RECAPITALIZATION AGREEMENT 1 EXHIBIT 2.2 CHASE DOMESTIC INVESTMENTS, L.L.C. CHASE CAPITAL PARTNERS 380 MADISON AVENUE, 12TH FLOOR NEW YORK, NEW YORK 10017 April 3, 2000 Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, Utah 84108 Attn: Richard P. Durham and Ronald G. Moffitt Dear Sirs: Reference is hereby made to (a) the Recapitalization Agreement dated as of March 31, 2000 (the "Recapitalization Agreement"), among Chase Domestic Investments, L.L.C. ("CDI") and the Persons listed on the signature pages thereto and (b) the Letter Agreement dated March 16, 2000 (the "Letter Agreement"), between Chase Capital Partners ("CCP") and Salomon Smith Barney Inc., on behalf of Huntsman Packaging Corporation. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Recapitalization Agreement. Notwithstanding anything to the contrary contained in the Recapitalization Agreement or the Letter Agreement, the confidentiality restrictions set forth in the Recapitalization Agreement and the Letter Agreement shall not prohibit CDI or CCP from disclosing all or any part of the Evaluation Material (as defined in the Letter Agreement) or any information provided under the Recapitalization Agreement to any financing source, or potential financing source, of CDI in connection with the transactions contemplated by the Recapitalization Agreement, including, without limitation, any Person providing financing through bank indebtedness, high-yield indebtedness or the purchase of equity securities. CDI will use its best efforts to cause each financing source or potential financing source receiving any Evaluation Material, or any information provided under the Recapitalization Agreement, to execute a letter substantially in the form of Exhibit A attached hereto. This agreement hereby constitutes a waiver and amendment of the Recapitalization Agreement and the Letter Agreement. This agreement shall be interpreted in accordance with the law of the State of New York. ******** 2 Please indicate your consent to the foregoing by signing below and returning an executed copy of this agreement to CCP. Sincerely, CHASE DOMESTIC INVESTMENTS, L.L.C. By: Chase Financial Investments L.P., its sole member By: Chase Capital Partners, as Investment Manager By: /s/ TIMOTHY J. WALSH ----------------------------- Name: Timothy J. Walsh Title: General Partner CHASE CAPITAL PARTNERS By: /s/ TIMOTHY J. WALSH ----------------------------- Name: Timothy J. Walsh Title: General Partner Acknowledged and agreed to as of the date first written above: HUNTSMAN PACKAGING CORPORATION By: /s/ RICHARD P. DURHAM --------------------------- Name: Richard P. Durham Title: President and CEO /s/ RICHARD P. DURHAM - ----------------------------------------- Richard P. Durham, as Representative 3 cc: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Attn: John L. MacCarthy, Esq. Facsimile No.: 312-558-5700 4 EXHIBIT A [CHASE CAPITAL PARTNERS LETTERHEAD] April [ ], 2000 [Addressee] Ladies and Gentleman: In connection with your consideration of a possible investment (the "Investment") in debt or equity securities of Huntsman Packaging Corporation, a Utah corporation (the "Company"), you have requested the right to review certain information regarding the Company and certain of its affiliates. In consideration of, and as a condition to, furnishing you with such information and any other information concerning the Company and certain of its affiliates delivered to you by Chase Capital Partners or its affiliates, directors, officers, employees, advisors, agents or "controlling persons" (within the meaning of the Securities Exchange Act of 1934, as amended) (such affiliates and other persons being herein referred to collectively as "Its Representatives") in connection with your consideration of the Investment (such information and any other information concerning the Company and its affiliates, regardless of the source, being herein referred to as the "Evaluation Material"), Chase Capital Partners hereby requests your agreement as set forth below. 1. The Evaluation Material will be used solely for the purpose of evaluating a possible Investment in the Company involving you or the investment funds (but not portfolio operating companies) under your control ("Your Affiliates"), and, the Evaluation Material will be kept strictly confidential by you and Your Affiliates, directors, officers, employees, advisors, agents or controlling persons (collectively, "Your Representatives") and shall not be disclosed to any person, except that the Evaluation Material or portions thereof may be disclosed to those of Your Representatives who need to know such information for the purpose of evaluating a possible Investment with the Company (it being understood that prior to such disclosure Your Representatives will be informed of the confidential nature of the Evaluation Material and shall agree to comply with this Agreement) and as otherwise required by law. You agree to be responsible for any breach of this Agreement by Your Representatives. You also agree that you and Your Representatives will take commercially reasonable steps to prevent any Evaluation Material from being lost, stolen or misused. 2. You hereby acknowledge and understand that Chase Capital Partners is subject to certain confidentiality restrictions set forth in letter attached hereto as Exhibit A (the "CCP Confidentiality Agreement"). In addition to the confidentiality restrictions set forth in Paragraphs 1-5 hereof, you hereby covenant and agree not to do, or cause to be done, any act which would cause Chase Capital Partners or Its Representatives to be in violation of the CCP Confidentiality Agreement. 5 3. In making your investment decision, you must rely on your own examination of the Company, including the merits and risks involved. The Evaluation Material includes projections and other forward-looking information. Such projections and information are based on assumptions as to future events that are inherently uncertain and subjective. You recognize that the projections of the Company's future performance are necessarily subject to a high degree of uncertainty, that actual results can be expected to vary from the results projected and that such variances may be material and adverse. You are expected to conduct your own investigation with regard to the Company, its prospects and the Investment. 4. You understand and acknowledge that neither Chase Capital Partners nor Its Representatives are making any representation or warranty, express or implied, as to the accuracy or completeness of the Evaluation Material or any other information provided to you by Chase Capital Partners or Its Representatives. Neither Chase Capital Partners nor Its Representatives shall have any liability to you or any other person (including, without limitation, any of Your Representatives) resulting from your use of the Evaluation Material. 5. This letter agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts to be made and to be performed wholly therein. ******** 6 Please acknowledge your consent to the foregoing by signing below and returning an executed copy of this letter to Chase Capital Partners. CHASE CAPITAL PARTNERS By: ------------------------ Name: Title: Acknowledged and agreed to as of the date first written above: [Addressee] By: ----------------------------- Name: Title: EX-2.3 3 ex2-3.txt AMENDMENT NO. 2 TO THE RECAPITALIZATION AGREEMENT 1 EXHIBIT 2.3 AMENDMENT TO RECAPITALIZATION AGREEMENT This Amendment to Recapitalization Agreement (this "Agreement") is dated this 31st day of May, 2000 by and between Huntsman Packaging Corporation, a Utah corporation (the "Company"), Chase Domestic Investments, L.L.C. (the "Buyer") and the other parties hereto. WHEREAS, reference is hereby made to that certain Recapitalization Agreement dated as of March 31, 2000 by and between the Company, the Buyer and the Shareholders identified therein (as amended, restated, supplemented or otherwise modified from time to time, the "Recapitalization Agreement"); WHEREAS, the parties to the Recapitalization Agreement wish to amend and restate certain provisions of the Recapitalization Agreement; NOW, THEREFORE, in consideration of the mutual covenants contained hereon and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. Amendments. 1.1. Definitions. Article I of the Recapitalization Agreement is hereby amended by: (a) deleting the definition of "Buyer Group" and inserting the following in lieu thereof: "Buyer Group" shall mean the Buyer, its successors and permitted assigns and their respective Affiliates." (b) inserting the following at the end of the definition of "Closing Date Indebtedness:" ";provided, however, that in calculating Closing Date Indebtedness, any indebtedness incurred to finance insurance premiums for insurance carried by the Company shall be disregarded to the extent that the Company has recorded, in accordance with GAAP, an asset resulting from the prepayment of such insurance premiums." 1.2. Section 2.2 of the Recapitalization Agreement. Section 2.2 of the Recapitalization Agreement is hereby amended by inserting the following at the end of such section: "; provided, however, notwithstanding anything in this Agreement to the contrary, Durham Capital, Ltd. shall not be obligated to sell to the Buyer, and the Buyer shall not have any right to purchase from Durham Capital Ltd., any 2 of the shares of Common Stock (received pursuant to Section 2.1(c)) owned and held by Durham Capital, Ltd. and, provided, further, the aggregate number of shares of Common Stock which Durham Capital, Ltd. would have otherwise sold, and which the Buyer would have otherwise purchased from Durham Capital, Ltd., pursuant to this Section 2.2 but for the provisos contained in this Section 2.2 shall be sold by the Christena Karen H. Durham Trust and purchased by the Buyer." 1.3 Schedule 3.1 to the Recapitalization Agreement. Schedule 3.1 of the Recapitalization Agreement is hereby amended by deleting it in its entirety and replacing it in full with Schedule I to this Agreement. 1.4 Section 10.3 of the Recapitalization Agreement. Section 10.3 of the Recapitalization Agreement is hereby amended by inserting the following at the end of such section: "(c) Actions by Permitted Assigns. Notwithstanding anything in this Agreement to the contrary, in no event shall any permitted assign of the Buyer initiate any action or assert, raise or claim any Loss under this Agreement unless the Buyer has consented in writing to such action and has assumed the responsibility for the prosecution thereof." 1.5 Section 12.7 of the Recapitalization Agreement. Section 12.7 of the Recapitalization Agreement is hereby amended by inserting the following immediately following clause (ii) thereof: "or (iii) the Buyer shall be permitted to transfer shares of Common Stock purchased hereunder having an aggregate value of not more than $12,000,000 to The Northwestern Mutual Life Insurance Company, New York Life Capital Partners, L.P. and First Union Capital Partners, LLC, provided that such Persons shall not be bound by the non-solicitation provisions of the Confidentiality Agreement," 1.6 Section 12.11 to the Recapitalization Agreement. Section 12.11 of the Recapitalization Agreement is hereby amended by deleting it in its entirety and inserting the following in lieu thereof: "12.11 Chase Capital Partners Guarantee. Chase Capital Partners hereby guarantees the performance by the Buyer and any permitted assign thereof of all of their respective obligations hereunder." SECTION 2. Miscellaneous. 2.1. Defined Terms. All capitalized and undefined terms used herein shall have the meanings ascribed to such terms in the Recapitalization Agreement. 2.2. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become 2 3 effective when one or more counterparts have been signed by each of the parties and delivered to the other party. 2.3. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without reference to the choice of law principles thereof. 2.4. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that the Buyer, so long as the Buyer remains liable for its obligations under the Recapitalization Agreement, may transfer any of its rights or obligations hereunder to any of its Affiliates. 2.5. Confirmation of the Recapitalization Agreement. Except as expressly modified hereby, the Recapitalization Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects. [signature page follows] 3 4 IN WITNESS WHEREOF the undersigned have entered into this Amendment to the Recapitalization Agreement as of the date first written above. CHASE DOMESTIC INVESTMENTS, L.L.C. By: Chase Capital Investments L.P., its sole Member By: Chase Capital Partners, as Investment Manager By: /s/ DONALD HOFMANN -------------------------------------------- Name: Donald Hofmann ------------------------------------------ Title: General Partner ----------------------------------------- HUNTSMAN PACKAGING CORPORATION By: /s/ RICHARD P. DURHAM -------------------------------------------- Name: Richard P. Durham ------------------------------------------ Title: President and CEO ----------------------------------------- /s/ RICHARD P. DURHAM - ----------------------------------------------- Richard P. Durham, as Representative 5 SCHEDULE I Schedule 3.1 CAPITAL STOCK AND QUALIFICATIONS The Company is qualified to do business as a foreign corporation in the following states: Alabama, California, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Massachusetts, Minnesota, Missouri, New Jersey, New York, Ohio, Pennsylvania, Tennessee, Texas, Washington and Wisconsin SUBSIDIARIES
FOREIGN JURISDICTIONS WHERE QUALIFIED SUBSIDIARY OWNERSHIP OF OUTSTANDING EQUITY TO DO BUSINESS - -------------------------------------------------------------------------------------------------------------------------- Huntsman Film Products of Canada Ltd., Huntsman Packaging Corporation - 100% Quebec, Prince an Ontario, Canada company Edward Island, Nova Scotia, New Brunswick, Manitoba, Alberta, Saskatechewan, Newfoundland and British Columbia - -------------------------------------------------------------------------------------------------------------------------- Huntsman Packaging Georgia, Inc., a Huntsman Packaging Corporation - 100% Georgia corporation - -------------------------------------------------------------------------------------------------------------------------- Huntsman KCL Corporation, a Utah Huntsman Packaging Corporation - 100% Indiana, Ohio and corporation Texas - -------------------------------------------------------------------------------------------------------------------------- Huntsman Film Products of Mexico, Inc., Huntsman Packaging Corporation - 100% a Utah corporation - -------------------------------------------------------------------------------------------------------------------------- Huntsman Container Corporation Huntsman Packaging Corporation - 100% International, a Utah corporation - -------------------------------------------------------------------------------------------------------------------------- Huntsman Film Products, UK, Limited, a Huntsman Container Corporation U.K. company International - 100% - -------------------------------------------------------------------------------------------------------------------------- Huntsman Film Products GmbH, a Huntsman Packaging Corporation - 100% German limited liability company - -------------------------------------------------------------------------------------------------------------------------- Huntsman Film Products Pty. Ltd., a Huntsman Packaging Corporation - 99.99% Victoria, Australia proprietary company Third party holders of statutory shares - 0.01% - -------------------------------------------------------------------------------------------------------------------------- Huntsman Bulk Packaging Corporation, a Huntsman Packaging Corporation - 100% Utah corporation - -------------------------------------------------------------------------------------------------------------------------- Huntsman/IPEX, a Utah general IPEX (U.S.) Pty. Ltd. - 50% partnership Huntsman Bulk Packaging Corporation - 50% - -------------------------------------------------------------------------------------------------------------------------- Huntsman Packaging of Canada, LLC, a Huntsman Packaging Corporation - 100% British Columbia Utah limited liability company - --------------------------------------------------------------------------------------------------------------------------
6
FOREIGN JURISDICTIONS WHERE QUALIFIED SUBSIDIARY OWNERSHIP OF OUTSTANDING EQUITY TO DO BUSINESS - -------------------------------------------------------------------------------------------------------------------------- HPC Investment, Inc., a Utah corporation Huntsman Packaging Corporation - 100% - -------------------------------------------------------------------------------------------------------------------------- Huntsman Edison Films Corporation, a Huntsman Packaging Corporation - 100% Georgia, New Jersey, Delaware corporation Oklahoma and Virginia - ------------------------------------------------------------------------------------------------------------------------- Edison Exports, Inc. FSC Limited, a Edison Plastics International, Inc. - 100% Jamaican corporation - ------------------------------------------------------------------------------------------------------------------------- Edison Plastics International Inc., a Huntsman Edison Films Corporation - 100% Delaware corporation - ------------------------------------------------------------------------------------------------------------------------- Aspen Industrial S.A. de Huntsman Packaging Corporation - 99.99% C.V., a Mexican corporation Huntsman Container Corporation International - 0.01% - ------------------------------------------------------------------------------------------------------------------------- Mexicana de Tintas, S.A., a Mexican Aspen Industrial S.A. de C.V. - 99.99% corporation Huntsman Edison Films Corporation - 0.01% - ------------------------------------------------------------------------------------------------------------------------- NEPSA de Mexico S.A. de C.V., a Aspen Industrial S.A. de C.V. - 99.99% Mexican corporation Huntsman Edison Films Corporation - 0.01% - -------------------------------------------------------------------------------------------------------------------------
EX-3.1 4 ex3-1.txt THIRD AMENDED AND RESTATED ARTICLES OF INCORP. 1 EXHIBIT 3.1 ARTICLES OF RESTATEMENT OF THE ARTICLES OF INCORPORATION OF HUNTSMAN PACKAGING CORPORATION EFFECTIVE MAY 31, 2000 AT 9:00 A.M. MDT In accordance with Section 16-10a-1007 of the Utah Revised Business Corporation Act (the "URBCA"), Huntsman Packaging Corporation, a Utah corporation (the "Corporation"), hereby declares and certifies as follows: 1. The name of the Corporation is Huntsman Packaging Corporation. 2. The text of the Third Amended and Restated Articles of Incorporation of the Corporation (the "Amended and Restated Articles") is attached hereto as Exhibit A and is incorporated herein by this reference. 3. The amendments contained in the Amended and Restated Articles do not provide for a cancellation of issued shares of the Corporation. The amendments contained in the Amended and Restated Articles provide for a reclassification of issued shares of the Corporation. The reclassification shall be as set forth in the Amended and Restated Articles and the reclassification and exchange of issued shares of the Corporation shall be implemented as follows: (a) At the effective time of these Articles of Restatement (the "Effective Time"), each issued share of the Class A Common Stock, the Class B Common Stock and the Class C Common Stock of the Corporation (collectively, the "Prior Common Stock") shall be reclassified into one (1) share of Common Stock of the Corporation, such that (a) the 1,000,001 issued shares of the Class A Common Stock of the Corporation shall be reclassified into the same number of issued shares of Common Stock of the Corporation, (b) the 6,999 issued shares of the Class B Common Stock of the Corporation shall be reclassified into the same number of issued shares of Common Stock of the Corporation, and (c) the 49,511 issued shares of the Class C Common Stock of the Corporation shall be reclassified into the same number of issued shares of Common Stock of the Corporation. (b) At or as soon as practicable following the Effective Time, each holder of the Prior Common Stock shall exchange each certificate evidencing Prior Common Stock with the Corporation for a certificate evidencing the appropriate number of shares of Common Stock of the Corporation. Until the time that any certificate evidencing Prior Common Stock has been exchanged in accordance with the preceding 2 sentence, such certificate shall be deemed, for all purposes, to represent the applicable number of shares of Common Stock of the Corporation. 4. The Amended and Restated Articles were adopted as of May 24, 2000 in accordance with the requirements of the URBCA. 5. The Amended and Restated Articles were approved by the shareholders of the Corporation. The designation, number of outstanding shares, number of votes entitled to be cast by each voting group entitled to vote separately, number of votes of each voting group indisputably represented, and the total number of votes cast for and against the Amended and Restated Articles by each voting group were as follows:
- -------------------------------------------------------------------------------------------------------------- Votes Outstanding Entitled Votes Votes Votes Designation Shares to be Represented For Against ----------- ------ Cast ----------- --- ------- ---- - -------------------------------------------------------------------------------------------------------------- Class A Common Stock, Class B 1,056,511 1,056,511 1,056,511 1,056,511 0 Common Stock and Class C Common Stock - --------------------------------------------------------------------------------------------------------------
The number of votes cast for the Amended and Restated Articles was sufficient for approval. Pursuant to the Second Amended and Restated Articles of Incorporation of the Corporation and Section 16-10a-1004(5) of the URBCA, each of the Class A Common Stock, the Class B Common Stock and the Class C Common Stock of the Corporation was voted together as a single voting group. 6. Pursuant to Sections 16-10a-1007(5) and 16-10a-123 of the URBCA, these Articles of Restatement shall be effective on May 31, 2000 at 9:00 a.m. Mountain Daylight Time. 3 IN WITNESS WHEREOF, these Articles of Restatement have been executed by the Corporation on May 30, 2000. HUNTSMAN PACKAGING CORPORATION, A UTAH CORPORATION /s/ RONALD G. MOFFITT ---------------------------- Ronald G. Moffitt Executive Vice President and General Counsel 4 MAILING ADDRESS If, upon completion of filing of the above Articles of Restatement, the Utah Department of Commerce, Division of Corporations and Commercial Code elects to send a copy of the Articles of Restatement to Huntsman Packaging Corporation by mail, the address to which the copy should be mailed is: Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, Utah 84108 Attention: Legal Department 5 EXHIBIT A THIRD AMENDED AND RESTATED ARTICLES OF INCORPORATION OF HUNTSMAN PACKAGING CORPORATION Pursuant to and in accordance with Section 16-10a-1007 of the Utah Revised Business Corporation Act (the "URBCA"), the following are the Third Amended and Restated Articles of Incorporation of Huntsman Packaging Corporation, a Utah corporation (the "Corporation"): ARTICLE I NAME The name of the Corporation is Huntsman Packaging Corporation. ARTICLE II PURPOSES AND POWERS The Corporation is organized to engage in any and all lawful acts, activities, and/or pursuits for which corporations may presently or hereafter be organized under the URBCA. The Corporation shall have all powers allowed by law, including without limitation those powers described in Section 16-10a-302 of the URBCA. The purposes stated herein shall be construed as powers as well as purposes and the enumeration of a specific purpose or power shall not be construed to limit or restrict the meaning of general terms or the general powers; nor shall the expression of one thing be deemed to exclude another not expressed, although it be of like nature. ARTICLE III AUTHORIZED SHARES 3.1 GENERAL. The Corporation is authorized to issue two classes of shares, and the total number of shares of all classes that the Corporation is authorized to issue is Ten Million Two Hundred Thousand (10,200,000) shares. The capitalized terms used in this Article III have the meanings specified in context or in Section 3.4 below. The number of authorized shares and the designation, preferences, limitations and relative rights of each class of shares of the Corporation are as set forth in the further provisions of this Article III. 6 3.2 COMMON STOCK. (a) Number, Designation and Par Value. The Corporation is authorized to issue Ten Million (10,000,000) shares designated as "Common Stock" (the "Common Stock"). The Common Stock shall have no par value. (b) Voting. All voting rights of the Corporation, subject to any preferences or rights that may be granted to the holders of the Preferred Stock, shall be exercised by the holders of the Common Stock. Each outstanding share of Common Stock shall be entitled to one (1) vote on each matter to be voted upon by the holders of the Common Stock. (c) Net Assets. The holders of the Common Stock, subject to any preferences or rights that may be granted to the holders of the Preferred Stock, shall be entitled to receive the net assets of the Corporation upon the dissolution of the Corporation. (d) Payment. All issued shares the Common Stock shall be fully paid and nonassessable. 3.3 PREFERRED STOCK. (a) Number, Designation and Par Value. The Corporation is authorized to issue Two Hundred Thousand (200,000) shares designated as "Preferred Stock" (the "Preferred Stock") The Preferred Stock shall have no par value. (b) Series A Preferred Stock. The Corporation shall have a series of Preferred Stock that shall consist of One Hundred Thousand (100,000) shares of Preferred Stock and shall be designated as "Series A Cumulative Exchangeable Redeemable Preferred Stock" (the "Series A Preferred Stock"). The preferences, limitations and relative rights of the Series A Preferred Stock are as follows: (i) Dividends. (A) The Corporation shall accrue dividends on each share of Series A Preferred Stock at a rate per annum equal to the Series A Dividend Rate on the Series A Liquidation Amount from time to time for such share. Dividends shall accrue on a daily basis regardless of whether they have been declared and whether there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. Dividends on the Series A Preferred Stock for any period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. All dividends on the Series A Preferred Stock that accrue during any Series A Dividend Period and that remain unpaid on the Series A Dividend Date on which such Series A Dividend Period ends shall cumulate and shall be added to the Series A Liquidation Amount for such share as of such Series A Dividend Date. 2 7 (B) Dividends on the Series A Preferred Stock (when, as and if declared by the Board, out of funds legally available therefor) shall be payable in cash on each Series A Dividend Date. (C) Dividends payable on the Series A Preferred Stock on any Series A Dividend Date pursuant to Section 3.3(b)(i)(B) shall be paid to the Series A Holders as they appear on the stock records of the Corporation on such date (the "Series A Record Date") as shall be fixed by the Board, which Series A Record Date shall not be more than 60 days prior to the applicable Series A Dividend Date and shall not precede the date upon which the resolution fixing such Series A Record Date is adopted. All payments due under this Section 3.3(b)(i) to any Series A Holder shall be made to the nearest cent. (D) So long as any shares of the Series A Preferred Stock are outstanding, the Corporation shall not, directly or indirectly, and whether in cash, securities or other property, pay or declare or set apart for payment any dividend or make any other distribution or other payment on or with respect to any Junior Security (other than dividends or distributions paid solely in additional shares of such Junior Security) or redeem, repurchase or otherwise acquire any Junior Security unless the Corporation has paid, or at the same time pays, all dividends on the Series A Preferred Stock accrued and unpaid since the Original Issuance Date; provided, however, that nothing in this Section 3.3(b)(i)(D) shall prohibit any repurchase of Junior Securities that is otherwise permitted under Section 4.04(b)(vi) of the New Notes Indenture as in effect on the date hereof. (E) Except as otherwise provided herein, if at any time the Corporation pays less than the total amount of dividends on the Series A Preferred Stock accrued and unpaid since the Original Issuance Date, such payment shall be made ratably among the Series A Holders based upon the number of shares of Series A Preferred Stock then held by each Series A Holder. (ii) Liquidation. Upon a Liquidation, after payment or provision for payment in cash or cash equivalents of the debts and other liabilities of the Corporation, the Series A Holders shall be entitled to receive, out of the remaining assets of the Corporation available for distribution to its stockholders, with respect to each share of Series A Preferred Stock, an amount equal to the Series A Liquidation Amount (whether or not there are assets of the Corporation available for the payment of dividends) of such share plus an amount equal to all accrued and unpaid dividends thereon from the last Series A Dividend Date to the date fixed for such Liquidation before any distribution shall be made to the holders of Junior Securities. If, upon any Liquidation, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the Series A Holders the full Series A Liquidation Amount and all such accrued and unpaid dividends to which they shall be entitled, the Series A Holders shall share in any distribution of assets pro rata in accordance with the total Series A Liquidation Amount and all such accrued and unpaid dividends that each such Series A Holder would have 3 8 received had there been such sufficient assets. After payment of the full Series A Liquidation Amount and all such accrued and unpaid dividends to the Series A Holders, the Series A Holders shall not, in their capacity as Series A Holders, be entitled to any further participation in any further distribution of assets by the Corporation. (iii) Mandatory Redemption. (A) Subject to the Corporation having funds legally available for such purpose, the Corporation shall redeem all shares of the Series A Preferred Stock then outstanding on the Mandatory Redemption Date. The per share redemption price at which shares of the Series A Preferred Stock shall be redeemed pursuant to this Section 3.3(b)(iii) shall be an amount in cash equal to the sum of (x) the Series A Liquidation Amount plus (y) an amount equal to all accrued and unpaid dividends thereon from the last Series A Dividend Date to the Mandatory Redemption Date (the "Mandatory Redemption Price"). If the funds of the Corporation legally available for redemption of shares of Series A Preferred Stock shall be insufficient to permit the payment of the Mandatory Redemption Price required to be paid pursuant to this Section 3.3(b)(iii), then the Corporation shall redeem shares of Series A Preferred Stock from the Series A Holders out of funds legally available therefor ratably based upon the number of shares of Series A Preferred Stock that each Series A Holder holds, and the Corporation shall redeem the unredeemed shares of Series A Preferred Stock as soon as practicable after the Corporation has funds legally available therefor. (B) On and after the Mandatory Redemption Date (unless default shall be made by the Corporation in the payment of the Mandatory Redemption Price, in which event such rights shall be exercisable until such default is cured), to the extent permitted by applicable law (x) dividends shall cease to accrue with respect to such shares, (y) all other rights with respect to the Series A Preferred Stock, except the right to receive the Mandatory Redemption Price, shall cease and terminate, and (z) such shares shall no longer be deemed to be outstanding, whether or not the certificates representing such shares have been received by the Corporation. (C) At any time on or after the Mandatory Redemption Date, the Series A Holders of shares of Series A Preferred Stock shall be entitled to receive the Mandatory Redemption Price in cash, by certified or official bank check or wire transfer, upon actual delivery to the Corporation or its agent of the certificates representing shares of Series A Preferred Stock. (iv) Redemption Upon a Change of Control. (A) Not less than ten (10) days and not more than sixty (60) days prior to the proposed Change of Control Payment Date in connection with the Change of Control Offer referred to below, the Corporation shall mail, in accordance with Section 3.3(b)(iv)(B), an offer to redeem the then outstanding 4 9 shares of Series A Preferred Stock at a redemption price per share in cash equal to 103% of the sum of (x) the Series A Liquidation Amount plus (y) an amount equal to all accrued and unpaid dividends thereon from the last Series A Dividend Date to the Change of Control Payment Date (the "Change of Control Redemption Price") in accordance with the procedures set forth in this Section 3.3(b)(iv) (the "Change of Control Offer"); provided that the Series A Holders shall not be entitled to a Change of Control Offer or the payment of the Change of Control Redemption Price until, to the extent necessary, the requirements of Section 3.3(b)(iv)(E) have been satisfied. The Corporation shall not consummate a Change of Control until all the requirements of this Section 3.3(b)(iv), including without limitation the requirements of Section 3.3(b)(iv)(E), have been satisfied. The Corporation shall cause all holders of shares of its capital stock or other voting securities that acquire such shares of capital stock or other voting securities at a time when the Stockholders' Agreement is in effect to enter into an agreement substantially equivalent to Section 5.4 of the Stockholders' Agreement or otherwise reasonably satisfactory to the Requisite Series A Holders not to effect a Change of Control until all such requirements have been satisfied. Notwithstanding anything in this Section 3.3(b)(iv) to the contrary, if the Corporation delivers written notice to the Series A Holders that it intends to consummate an optional redemption pursuant to Section 3.3(b)(v), the Corporation shall not be required to make a Change of Control Offer pursuant to this Section 3.3(b)(iv) for any shares of Series A Preferred Stock actually redeemed pursuant to such optional redemption. No Change of Control Offer shall be considered a redemption under Section 3.3(b)(v). Any Change of Control Offer made prior to the consummation of the related Change of Control may be made contingent upon such consummation. (B) Within the period set forth in Section 3.3(b)(iv) (A), the Corporation shall send by first-class mail, postage prepaid, to each Series A Holder, at the address for such Series A Holder appearing in the register maintained by or on behalf of the Corporation, a notice (a "Change of Control Offer Notice") stating: (1) that a Change of Control Offer is being made pursuant to this Section 3.3(b)(iv) and that all shares of Series A Preferred Stock validly tendered will be accepted for redemption; (2) the Change of Control Redemption Price and the Change of Control Payment Date; (3) that Series A Holders accepting the offer to have their Series A Preferred Stock redeemed pursuant to a Change of Control Offer shall surrender their certificates representing Series A Preferred Stock to the Corporation at the address specified in the Change of Control Offer 5 10 Notice prior to the close of business on the business day immediately preceding the Change of Control Payment Date; (4) that Series A Holders shall be entitled to withdraw their acceptance of the Change in Control Offer if the Corporation receives, not later than the close of business on the third business day preceding the Change of Control Payment Date, a facsimile transmission or letter setting forth the name of the Series A Holder, the number of shares of Series A Preferred Stock delivered for redemption, and a statement that such Series A Holder is withdrawing his, her or its election to have such Series A Preferred Stock redeemed; (5) that, on and after the Change of Control Payment Date (unless the Corporation defaults in the payment of the Change of Control Redemption Price for any shares of Series A Preferred Stock validly tendered pursuant to the Change of Control Offer), to the extent permitted by applicable law, (x) dividends shall cease to accrue with respect to such shares, (y) all other rights with respect to such shares, except the right to receive the Change of Control Redemption Price, shall cease and terminate, and (z) such shares shall no longer be deemed to be outstanding as of the Change of Control Payment Date; (6) that Series A Holders whose shares of Series A Preferred Stock are being redeemed only in part will be issued new certificates representing the number of shares of Series A Preferred Stock equal to the unredeemed portion of the certificates surrendered; and (7) any other procedures that a Series A Holder must follow to accept a Change of Control Offer or effect withdrawal of such acceptance. (C) The Corporation will comply with any securities laws and regulations to the extent such laws and regulations are applicable to the redemption of the Series A Preferred Stock in connection with a Change of Control Offer. Without limiting the foregoing, in the event that a Change of Control occurs and the Series A Holders exercise their right to require the Corporation to redeem Series A Preferred Stock pursuant to this Section 3.3(b)(iv), if such redemption constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act at that time, the Corporation will comply with the requirements of Rule 14e-1 as then in effect with respect to such redemption. (D) On the Change of Control Payment Date, the Corporation shall, to the extent lawful, (i) accept for redemption the number of shares of Series A Preferred Stock validly tendered pursuant to the Change of Control Offer and (ii) promptly mail to each Series A Holder of shares so accepted the Change of Control Redemption Price therefor and execute and issue a new Series A 6 11 Preferred Stock certificate representing the number of shares of Series A Preferred Stock equal to any unredeemed shares of Series A Preferred Stock represented by a certificate so surrendered. On and after the Change of Control Payment Date (unless the Corporation defaults in the payment of the Change of Control Redemption Price for any shares of Series A Preferred Stock validly tendered pursuant to the Change of Control Offer), to the extent permitted by applicable law (x) dividends shall cease to accrue with respect to such shares, (y) all other rights with respect to such shares, except for the right to receive payment of the Change of Control Redemption Price, shall cease and terminate, and (z) such shares shall no longer be deemed to be outstanding as of the Change of Control Payment Date. (E) If the provisions of any agreement or instrument governing any Indebtedness of the Corporation would prohibit the Corporation from making a Change of Control Offer or paying the Change of Control Redemption Price (including any limitations on dividends or distributions), or if immediately after consummating the Change of Control Offer or giving effect to the payment of the Change of Control Redemption Price, a default or event of default under any such agreement or instrument would be caused thereby, then, prior to the mailing of the Change of Control Offer Notice to Series A Holders pursuant to Section 3.3(b)(iv)(B), the Corporation shall, to the extent required to permit the redemption of Series A Preferred Stock pursuant to this Section 3.3(b)(iv), (i) obtain the consent of the requisite holders of such Indebtedness to permit the consummation of the Change of Control Offer or (ii) refinance all such Indebtedness outstanding with the proceeds of other Indebtedness or equity securities that permit the consummation of the Change of Control Offer. (F) (i) If the Corporation has issued any outstanding Preferred Stock (other than the Series A Preferred Stock), and the Corporation is required to make a redemption or repurchase offer or to make a distribution with respect to such other Preferred Stock in the event of a Change of Control, the Corporation shall not consummate any such offer or distribution with respect to such other Preferred Stock until such time as the Corporation shall have paid the Change of Control Redemption Price in full to the Series A Holders that have validly accepted the Change of Control Offer and shall otherwise have consummated the Change of Control Offer made to such Series A Holders and (ii) the Corporation shall not issue any such other Preferred Stock with change of control provisions requiring the redemption or repurchase of such Preferred Stock, or the making of distributions thereon, on a basis senior to, or on parity with, the redemption of the Series A Preferred Stock in the event of a Change of Control. (G) The Corporation will not be required to make a Change of Control Offer upon a Change of Control if a third party makes such Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements of this Section 3.3(b)(iv); provided, however, that, if the Change of 7 12 Control shall be consummated, the Corporation shall be liable to the Series A Holders for any default by such third party to pay the Change of Control Offer Price and otherwise consummate the Change of Control Offer. In the absence of the consummation of a Change of Control Offer by a third party pursuant to this Section 3.3(b)(iv)(G), nothing in this Section 3.3(b)(iv)(G) shall relieve or be deemed to relieve the Corporation from its obligations to consummate a Change of Control Offer pursuant to the provisions of this Section 3.3(b)(iv). (v) Redemption at Option of the Corporation. (A) The Corporation shall have the right but not the obligation, at its sole option, to redeem, out of funds legally available therefor, all or any portion of the shares of Series A Preferred Stock then outstanding, at an amount per share equal to the applicable Optional Redemption Price set forth below: (1) from the Original Issuance Date to, but not including, the third anniversary of the Original Issuance Date, the Optional Redemption Price shall be an amount in cash equal to the higher of (A) the Make Whole Redemption Price and (B) 115% of the sum of (x) the Series A Liquidation Amount determined as of the Optional Redemption Date plus (y) an amount equal to all accrued and unpaid dividends on a share of Series A Preferred Stock from the Series A Dividend Date immediately preceding the Optional Redemption Date to, but not including, the Optional Redemption Date; (2) on or after the third anniversary of the Original Issuance Date to, but not including, the fourth anniversary of the Original Issuance Date, the Optional Redemption Price shall be an amount in cash equal to 107% of the sum of (x) the Series A Liquidation Amount determined as of the Optional Redemption Date plus (y) an amount equal to all accrued and unpaid dividends on a share of Series A Preferred Stock from the Series A Dividend Date immediately preceding the Optional Redemption Date to, but not including, the Optional Redemption Date; (3) on or after the fourth anniversary of the Original Issuance Date to, but not including, the fifth anniversary of the Original Issuance Date, the Optional Redemption Price shall be an amount equal to 103% of the sum of (x) the Series A Liquidation Amount determined as of the Optional Redemption Date plus (y) an amount in cash equal to all accrued and unpaid dividends on a share of Series A Preferred Stock from the Series A Dividend Date immediately preceding the Optional Redemption Date to, but not including, the Optional Redemption Date; and (4) on or after the fifth anniversary of the Original Issuance Date, the Optional Redemption Price shall be an amount equal to 100% of 8 13 the sum of (x) the Series A Liquidation Amount determined as of the Optional Redemption Date plus (y) an amount in cash equal to all accrued and unpaid dividends on a share of Series A Preferred Stock from the Series A Dividend Date immediately preceding the Optional Redemption Date to but not including the Optional Redemption Date. (B) If the Corporation redeems less than all of the outstanding shares of Series A Preferred Stock pursuant to this Section 3.3(b)(v), the Corporation shall redeem shares of Series A Preferred Stock from the Series A Holders out of funds legally available therefor ratably (or as close thereto as possible in order to permit the redemption of whole shares) based on the number of shares of Series A Preferred Stock that each Series A Holder holds. (C) On and after any Optional Redemption Date (unless default shall be made by the Corporation in the payment of the Optional Redemption Price payable on such date, in which event such rights shall be exercisable until such default is cured), to the extent permitted by applicable law (x) dividends shall cease to accrue with respect to the shares of Series A Preferred Stock to be redeemed, (y) all other rights with respect to such shares, except the right to receive the Optional Redemption Price, shall cease and terminate, and (z) such shares shall no longer be deemed to be outstanding, whether or not the certificates representing such shares shall have been received by the Corporation. (D) Any communication or notice relating to redemption delivered pursuant to this Section 3.3(b)(v) shall be sent by first-class certified mail, return receipt requested, postage prepaid, to the Series A Holders, at their respective addresses as the same shall appear on the books of the Corporation, or to the Corporation at the address of its principal or registered office, as the case may be. (E) At any time on or after any Optional Redemption Date, the Series A Holders of shares of Series A Preferred Stock to be redeemed in accordance with this Section 3.3(b)(v) shall be entitled to receive the Optional Redemption Price in cash, by certified or official bank check or wire transfer, upon actual delivery to the Corporation or its agent of the certificates representing the shares to be redeemed. (vi) Voting Rights. (A) The Series A Holders, except as otherwise required under Utah law or as set forth in this Section 3.3(b)(vi), shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Corporation. (B) The Corporation shall not, without first obtaining the affirmative written consent or approval of the Requisite Series A Holders: 9 14 (1) in any manner authorize, create, designate, issue or sell any class or series of capital stock of the Corporation (including any shares of treasury stock) or rights, options, warrants or other securities convertible into or exercisable or exchangeable for capital stock or any debt security which by its terms is convertible into or exchangeable for any equity security or any security that is a combination of debt and equity, which, in each case, as to the payment of dividends, distribution of assets or redemptions, including, without limitation, distributions to be made upon a Liquidation, rank senior to, or on a parity with, the Series A Preferred Stock (it being understood that the Corporation shall be entitled to incur Indebtedness and issue warrants to acquire Common Stock in connection with any such incurrence of Indebtedness); or (2) increase the number of shares of Series A Preferred Stock that the Corporation is authorized to issue; or (3) in any manner alter or change the terms, designations, powers, preferences or relative, participating, optional or other special rights, or the qualifications, limitations or restrictions, of the Series A Preferred Stock in any manner adverse to the Series A Holders; or (4) reclassify the shares of any class or series of capital stock of the Corporation into shares of any class or series of capital stock ranking, as to payment of dividends, distributions of assets or redemptions, including, without limitation, distributions to be made upon a Liquidation, on a basis that is senior to, or on parity with, such Series A Preferred Stock; or (5) amend, alter or repeal any of the provisions of (A) these Amended and Restated Articles (B) the Bylaws of the Corporation (as amended or restated), if such amendment, alteration or repeal would have a material adverse effect on the rights, preferences or privileges of the Series A Holders; provided, however that the affirmative written consent or approval of the Series A Holders holding not less than 90% of the then outstanding shares of Series A Preferred Stock shall be required for any amendment, alteration or repeal of these Amended and Restated Articles that would (i) reduce the amount of Series A Preferred Stock whose Holders must consent to an amendment, alteration or repeal, (ii) reduce the Series A Dividend Rate, (iii) reduce the Series A Liquidation Amount, (iv) extend the Mandatory Redemption Date, (v) reduce any Optional Redemption Price or change the time when any Optional Redemption Price would be payable, (vi) amend, in a manner adverse to the Series A Holders, the definition of the term "Change of Control," eliminate the requirement that the Company (subject to the limitations set forth in Section 3.3(b)(iv)(E)) make a Change 10 15 of Control Offer, reduce the Change of Control Redemption Price or extend by more than 90 days the Change of Control Payment Date or (vii) make any payment on the Series A Preferred Stock payable in money other than that stated in these Amended and Restated Articles. (vii) Exchange. (A) Requirements. On any business day the Corporation may elect to exchange all, but (except as provided in clause (B) of Section 3.3(b)(vii)(B)(4)) not less than all, of the then outstanding shares of Series A Preferred Stock for Exchange Notes (the "Exchange"); provided, however, that the Exchange may be made only if on the Exchange Date, (i) the Exchange would be permitted under restrictions contained in agreements and instruments governing Indebtedness; (ii) there shall be legally available funds sufficient therefor; (iii) immediately after giving effect to the Exchange, no default or event of default under the Exchange Indenture would be caused thereby; and (iv) the Exchange Indenture has been qualified under the Trust Indenture Act, if such qualification is required at the time of the Exchange. In the Exchange, the Corporation shall issue $1.00 principal amount of Exchange Notes in exchange for each $1.00 of Original Cost of the shares of Series A Preferred Stock then outstanding and $1.00 principal amount of Exchange Notes in exchange for each $1.00 of accrued and unpaid dividends from the Original Issuance Date on each such share of Series A Preferred Stock; provided, however, that the Corporation shall have the right, at its option, to pay any such accrued and unpaid dividends on all shares of Series A Preferred Stock in cash in lieu of issuing an Exchange Note for such accrued and unpaid dividends. Exchange Notes shall be issued in principal amounts of $1,000 and integral multiples thereof to the extent possible. To the extent necessary, Exchange Notes shall be issued in principal amounts less than $1,000; provided, however, that the Corporation shall have the right, at its option, to pay cash in an amount equal to the principal amount of that portion of any Exchange Note that would otherwise not be an integral multiple of $1,000 in lieu of delivering an Exchange Note in a denomination other than an integral multiple of $1,000. (B) Procedure for Exchange. (1) Not less than ten (10) days and not more than sixty (60) days prior to the date fixed for the Exchange, written notice (the "Exchange Notice") shall be mailed by the Corporation by first-class mail, postage prepaid, to each Series A Holder of record on the Series A Dividend Date immediately preceding such date at such Series A Holder's address as the same appears on the stock register maintained by the Corporation (or any transfer agent); provided, however, that neither any failure to give such notice nor any deficiency therein shall affect the validity of the procedure for the exchange of shares of Series A Preferred Stock for Exchange Notes. The Exchange Notice shall state: 11 16 (a) the Exchange Date; (b) that the Series A Holder is to surrender to the Corporation, in the manner and at the place or places designated, his, her or its certificate(s) representing all his, her or its shares of Series A Preferred Stock to be exchanged; (c) that dividends on the shares of Series A Preferred Stock to be exchanged shall cease to accrue on the Exchange Date whether or not certificates for shares of Series A Preferred Stock are surrendered for exchange on the Exchange Date unless the Corporation shall default in the delivery of the Exchange Notes; and (d) that interest on the Exchange Notes shall accrue from the Exchange Date whether or not certificates for shares of Series A Preferred Stock are surrendered for exchange on the Exchange Date. (2) On or before the Exchange Date, each Series A Holder shall surrender the certificates representing his, her or its shares of Series A Preferred Stock, in the manner and at the place designated in the Exchange Notice. The Corporation shall cause the Exchange Indenture and the Exchange Notes to be executed on the Exchange Date and, upon surrender in accordance with the Exchange Notice of the certificates for the shares of Series A Preferred Stock so exchanged, duly endorsed (or otherwise in proper form for transfer, as determined by the Corporation), such shares shall be exchanged by the Corporation for Exchange Notes in accordance with Section 3.3(b)(vii)(A). The Corporation shall pay interest on the Exchange Notes at the rate and on the dates specified therein from the Exchange Date. (3) If the Exchange Notice has been mailed as aforesaid, and if before the Exchange Date specified in the Exchange Notice all Exchange Notes necessary for such exchange shall have been duly executed by the Corporation and delivered to the trustee under the Exchange Indenture with irrevocable instructions to authenticate the Exchange Notes necessary for the Exchange, then, to the extent permitted by applicable law, the rights of the Series A Holders as holders of shares of Series A Preferred Stock shall cease (except the right to receive 12 17 Exchange Notes, and, if the Corporation so elects, the right to receive an amount in cash equal to the amount of accrued and unpaid dividends on such Series A Preferred Stock from the Original Issuance Date through the Exchange Date and, if the Corporation so elects, the right to receive cash in lieu of any Exchange Note not an integral multiple of $1,000). To the extent permitted by applicable law, the Person or Persons entitled to receive the Exchange Notes issuable upon the Exchange shall be treated for all purposes as the registered holder or holders of such Exchange Notes as of the Exchange Date. (4) No Exchange in Certain Cases. Notwithstanding the foregoing provisions of this Section 3.3(b)(vii), (A) the Corporation shall not be entitled or required to exchange shares of Series A Preferred Stock for Exchange Notes if the Exchange, or any term or provision of the Exchange Indenture or the Exchange Notes, or the performance of the Corporation's obligations under the Exchange Indenture or the Exchange Notes, would violate applicable law or any agreement or instrument then binding on the Corporation, including agreements and instruments governing Indebtedness, or if, at the time of the Exchange, the Corporation is insolvent or it would be rendered insolvent by the Exchange and (B) no Series A Holder shall be obligated to exchange the shares of Series A Preferred Stock held by such Series A Holder in the Exchange, unless such Series A Holder has consented in writing to the Exchange. (viii) Events of Non-Compliance. (A) Subject to Section 3.3(b)(viii)(B), each of the following shall constitute non-compliance hereunder (each, an "Event of Non-Compliance"): (1) the Corporation fails to pay, in cash, on any Series A Dividend Date that is the last day of a Series A Dividend Period that commenced on or after the fifth anniversary of the Original Issuance Date, all accrued dividends since the previous Series A Dividend Date (regardless of whether such dividends are prohibited by restrictions contained in any agreement or instrument governing Indebtedness, whether such dividends have been declared by the Board or whether the Corporation has legally available funds for the payment of such dividends); (2) the Corporation shall fail to comply with the provisions of Section 3.3(b)(i)(D) or of Section 7.4 of the Purchase Agreement; (3) the Corporation shall fail to comply with any other covenant contained in the Purchase Agreement or these Amended and Restated Articles and such failure continues for forty-five (45) days after 13 18 notice thereof has been delivered to the Corporation by any Series A Holder; (4) the Corporation or any Significant Subsidiary shall (A) voluntarily commence any proceeding, or file any petition seeking relief, under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency or similar law, (B) consent to the institution of, or fail to controvert in a timely manner, any such proceeding or the filing of any such petition, (C) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for any such Person or for any substantial part of its property or assets, (D) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (E) make a general assignment for the benefit of creditors, (F) fail generally to pay its debts as they become due or (G) take any formal corporate or stockholder action in furtherance of any of the foregoing; (5) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (A) relief in respect of the Corporation or any Significant Subsidiary, or of any substantial part of its property or assets, under Title 11 of the United States Code or any other federal, state or foreign bankruptcy, insolvency or similar law, (B) the appointment of a receiver, trustee, custodian, sequestrator or similar official for any such Person or for any substantial part of its property or (C) the winding-up or liquidation of any such Person, and such proceeding or petition shall continue unstayed and in effect for a period of sixty (60) consecutive days; or (6) the Corporation fails to redeem all the shares of the Series A Preferred Stock on or prior to the Mandatory Redemption Date. (B) Upon the occurrence and during the continuation of an Event of Non-Compliance, the Series A Dividend Rate shall increase automatically from 14% per annum to 16% per annum, but no Series A Holder shall have, as a result of such Event of Non-Compliance, any right to require the redemption of the Series A Preferred Stock prior to the Mandatory Redemption Date. The foregoing increase in the Series A Dividend Rate and the right to specific performance of obligations (other than obligations requiring cash payments prior to the Mandatory Redemption Date) shall be the exclusive remedies for the Events of Noncompliance set forth in Sections 3.3(b)(viii)(A)(1), (2) and (3). (ix) Reissuance of Series A Preferred Stock. Shares of Series A Preferred Stock that have been issued and reacquired in any manner, including without limitation shares purchased, redeemed or exchanged, shall (upon compliance with any applicable provisions of the laws of the State of Utah) have the status of authorized and unissued 14 19 shares of Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of Preferred Stock; provided, however, that any issuance of such shares of Preferred Stock must be in compliance with the terms hereof. (c) Other Preferred Stock. The Corporation is authorized to issue shares of one or more additional series of Preferred Stock. The Board of Directors of the Corporation, without shareholder action, may amend these Third Amended and Restated Articles of Incorporation to establish additional terms of such other series of Preferred Stock pursuant to and in accordance with Section 16-10a-602 of the URBCA. All amendments to these Third Amended and Restated Articles of Incorporation pursuant to this Section 3.3(c) shall be made subject to and in accordance with the terms of this Article III. (d) Payment. All issued shares of the Preferred Stock shall be fully paid and nonassessable. 3.4 DEFINITIONS. All references herein to a Section shall refer to the Section hereof, unless otherwise specified. As used herein, the following terms shall have the following meanings: "Board" means the Board of Directors of the Corporation. "Change of Control" means the occurrence of any of the following events: (a) prior to the first public offering of common stock of the Corporation, the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of the Corporation, whether as a result of issuance of securities of the Corporation, any merger, consolidation, liquidation or dissolution of the Corporation, any direct or indirect transfer of securities by any Permitted Holder or otherwise (for purposes of this clause (a) and clause (b) below, the Permitted Holders shall be deemed to beneficially own any Voting Stock of an entity (the "specified entity") held by any other entity (the "parent entity") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent entity); (b) (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in clause (a) above, except that for purposes of this clause (b) a person (including a Permitted Holder) shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately, only after the passage of time, upon the happening of any event or otherwise), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Corporation and (ii) the Permitted Holders "beneficially own" (as defined in clause (a) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Corporation than such other person and do not 15 20 have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Corporation (for the purposes of this clause (b), such other person shall be deemed to beneficially own any Voting Stock of a specified entity held by a parent entity, if such other person is the beneficial owner (as defined in this clause (b)), directly or indirectly, of more than 50% of the voting power of the Voting Stock of such parent entity and the Permitted Holders "beneficially own" (as defined in clause (a) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of such parent entity); (c) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Corporation (together with any new directors (i) selected in accordance with the Stockholders' Agreement so long as such agreement is in effect or otherwise nominated by the Permitted Holders or (ii) whose election by the Board of Directors of the Corporation or whose nomination for election by the stockholders of the Corporation was approved by a vote of at least a majority of the members of the Board of Directors of the Corporation, then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved by the Board of Directors or in accordance with the Stockholders' Agreement or otherwise by the Permitted Holders) cease for any reason to constitute a majority of the Board of Directors of the Corporation then in office; (d) the adoption of a plan relating to the liquidation or dissolution of the Corporation; or (e) the merger or consolidation of the Corporation with or into another Person or the merger of another Person with or into the Corporation, or the sale of all or substantially all the assets of the Corporation to another Person (other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Corporation that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Corporation are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving Person or transferee that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving Person or transferee. "Change of Control Offer" has the meaning set forth in Section 3.3(b)(iv)(A). "Change of Control Offer Notice" has the meaning set forth in Section 3.3(b)(iv)(B). "Change of Control Payment Date" means the redemption date in respect of a Change of Control Offer pursuant to Section 5, which date shall be (a) if any Indebtedness that requires the Issuer to make an offer to purchase upon the occurrence of a change of control or similar event is outstanding (except to the extent the requisite holders of such Indebtedness have waived the right to such offer), the first business day following the completion of such offer in respect of such Indebtedness and (b) if no such Indebtedness is outstanding or if the requisite holders of such 16 21 Indebtedness have waived the right to such offer, a business day on or prior to the date of the consummation of the Change of Control. "Change of Control Redemption Price" shall have the meaning set forth in Section 3.3(b)(iv)(A). "Commission" means the Securities and Exchange Commission or any other Governmental Authority at the time administering the Securities Act "Common Stock" means the Common Stock, no par value, of the Corporation. "Exchange" has the meaning set forth in Section 3.3(b)(vii)(A). "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor Federal statute then in force, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Exchange Date" means the date, if any, on which the shares of Series A Preferred Stock are exchanged by the Corporation for Exchange Notes. "Exchange Notes" mean senior subordinated notes (i) carrying an annual interest rate of 14% and (ii) otherwise having terms and provisions substantially the same as the New Notes. "Exchange Notice" has the meaning set forth in Section 3.3(b)(vii)(B). "Exchange Indenture" means an indenture, to be entered into by the Corporation at the time of the Exchange, governing the Exchange Notes and substantially the same as the New Notes Indenture (except with respect to the interest rate). "Indebtedness" means: (a) indebtedness of the Corporation for borrowed money; (b) obligations of the Corporation evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations of the Corporation in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto); (d) all obligations of the Corporation to pay the deferred and unpaid purchase price of property or services (except trade payables and other accrued liabilities arising in the ordinary course of business), which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services; and (e) all capitalized lease obligations. 17 22 "Junior Security" means any share or other unit of any class or series of equity securities of the Corporation now existing or hereinafter created, including, without limitation, the Common Stock and any other class or series of Preferred Stock but not including the Series A Preferred Stock or any class or series of equity securities of the Corporation created in accordance with these Amended and Restated Articles and ranking pari passu with or senior to the Series A Preferred Stock with respect to dividend rights and rights on Liquidation. "Liquidation" means any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, other than any dissolution, liquidation or winding up in connection with any mere reincorporation of the Corporation in another jurisdiction. The merger or consolidation of the Corporation into or with, or the consummation by the Corporation of a compulsory share exchange under Part 11 of the URBCA with, any other corporation or other entity or the merger or consolidation of any other corporation or other entity into or with the Corporation shall not be deemed a Liquidation within the meaning of this definition. "Make Whole Redemption Price" means the present value of an amount equal to the Optional Redemption Price that would apply on the third anniversary of the Original Issuance Date (assuming that all dividends from the date of calculation of the Make Whole Redemption Price were to accumulate through the Series A Dividend Date immediately preceding such third anniversary and dividends would accrue and be unpaid thereafter), discounted from such third anniversary to the Optional Redemption Date at a discount rate equal to (i) the Treasury Rate plus (ii) one hundred (100) basis points. "Mandatory Redemption Date" means the first to occur of: (i) June 1, 2011 or (ii) the one year anniversary of the final maturity date of the New Notes. "Mandatory Redemption Price" has the meaning set forth in Section 3.3(b)(iii). "New Notes" means the 13% Senior Subordinated Notes due 2010 issued under the New Notes Indenture. "New Notes Indenture" means the Indenture dated on or about May 31, 2000, among the Corporation, as Issuer, the Guarantors party thereto and The Bank of New York, as Trustee. "Optional Redemption Date" means a date on which shares of Series A Preferred Stock are to be redeemed pursuant to Section 3.3(b)(v). "Optional Redemption Price" has the meaning set forth in Section 3.3(b)(v). "Original Cost" means $1,000 per share of Series A Preferred Stock. "Original Issuance Date" means the date of original issuance of the first share of Series A Preferred Stock. "Permitted Holders" means each of (i) Chase Capital Partners and its Affiliates, (ii) Chase Domestic Investments, L.L.C. and its Affiliates, (iii) The Christena Karen H. Durham Trust, (iv) 18 23 each of Richard P. Durham, Jack E. Knott, Scott K. Sorensen and Ronald G. Moffitt and their Related Parties and (v) any Person acting in the capacity of an underwriter in connection with a public or private offering of the Corporation's capital stock. "Person" shall be construed broadly and shall include, without limitation, an individual, a partnership, an investment fund, a limited liability company, a corporation, an association, a joint stock corporation, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "Purchase Agreement" means the Securities Purchase Agreement dated on or about May 31, 2000, among the Corporation and the Purchasers named therein providing for, among other things, the issuance of shares of Series A Preferred Stock. "Related Parties" means with respect to a Person (a) that is a natural person (1) any spouse, parent or lineal descendant of such Person or (2) the estate of such Person during any period in which such estate holds capital stock of the Corporation for the benefit of any person referred to in clause (a)(1) and (b) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially owning an interest of more than 50% of which consist of such Person and/or such other Persons referred to in the immediately preceding clause (a). "Requisite Series A Holders" means, as of any date of determination, the Series A Holders holding not less than sixty percent (60%) of the then outstanding shares of Series A Preferred Stock. "Securities Act" means the Securities Act of 1933, as amended, or any successor Federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Series A Dividend Date" shall mean each March 31, June 30, September 30 and December 31. "Series A Dividend Period" shall mean the period commencing on the day after any Series A Dividend Date and ending on and including the next Series A Dividend Date; provided, that for any share of Series A Preferred Stock issued on a date other than a Series A Dividend Date, the first Series A Dividend Period for such share shall commence on the date of issuance of such share. "Series A Dividend Rate" means 14% per annum (calculated on the basis of a year of 360 days consisting of 12 30-day months); provided, however that the Series A Dividend Rate shall be increased to 16% from time to time to the extent provided in Section 3.3(b)(viii). "Series A Holders" means, at any time of determination, the holders of record of the outstanding shares of Series A Preferred Stock. 19 24 "Series A Liquidation Amount" means, as to each share of Series A Preferred Stock, as of any date of determination, the Original Cost (pro rated for fractional shares of Series A Preferred Stock), plus all accrued and unpaid dividends added to the Series A Liquidation Amount of such share in accordance with Section 3.3(b)(i)(A). "Series A Preferred Stock" shall have the meaning set forth in Section 3.3(b). "Series A Record Date" shall have the meaning set forth in Section 3.3(b)(i)(C). "Significant Subsidiary" has the meaning given to such term in Section 1.02(w) of Regulation S-X, as in effect from time to time, under the Securities Act and the Exchange Act. "Stockholders' Agreement" means the Stockholders' Agreement dated on or about May 31, 2000, among the Corporation and the stockholders and other securityholders of the Corporation party thereto. "Treasury Rate" means the rate borne by direct obligations of the United States maturing on the third anniversary of the Original Issuance Date or, if there are not such obligations, the rate determined by linear interpolation between the rates borne by the two direct obligations of the United States maturing closest to, but straddling, the third anniversary of the Original Issuance Date, in each case as published by the Board of Governors of the Federal Reserve System. "Voting Stock" of a Person means all classes of capital stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. ARTICLE IV OFFICER AND DIRECTOR LIABILITY (a) Except as otherwise required by Utah law, the Corporation shall indemnify and advance expenses to its directors and officers and to any person who is or was serving at the Corporation's request as a director or officer of another domestic or foreign corporation (and their respective estates or personal representatives) to the fullest extent as from time to time permitted by Utah law. (b) The personal liability of the directors and officers of the Corporation to the Corporation or its shareholders, or to any third person, shall be eliminated or limited to the fullest extent as from time to time permitted by Utah law. (c) Any repeal or modification of this Article IV shall not adversely affect any right or protection of any person existing at the time of such repeal or modification. 20 EX-3.10 5 ex3-10.txt AMENDED AND RESTATED BYLAWS 1 EXHIBIT 3.10 AMENDED AND RESTATED BYLAWS OF HUNTSMAN PACKAGING CORPORATION ADOPTED MAY 31, 2000 ARTICLE 1. SHAREHOLDERS Section 1.1. Annual Shareholder Meeting. An annual meeting of the shareholders of Huntsman Packaging Corporation (the "Corporation") shall be held each year on the date, at the time, and at the place, fixed by the Board of Directors. The annual meeting shall be held for the purpose of electing directors and for the transaction of such other business as may properly come before the meeting. (16-10a-701)(1) Section 1.2. Special Shareholder Meetings. Special meetings of the shareholders may be called, for any purposes described in the notice of the meeting, by the President, or by the Board of Directors and shall be called by the President at the request of the holder(s) of not less than ten percent (10%) of all outstanding votes of the Corporation entitled to be cast on any issue at the meeting. (16-10a-702/Shareholders Agreement 16-10a-732) Section 1.3. Place of Shareholder Meetings. The President or the Board of Directors shall designate any place, either within or outside the State of Utah, as the place for any special meeting of the shareholders. If no designation is made regarding the place of the meeting, the meeting shall be held at the principal office of the Corporation. (16-10a-701(2) and 16-10a-702(3)) Section 1.4. Notice of Shareholder Meeting. (a) Required Notice. Whenever shareholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given that shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the Articles of Incorporation or these Bylaws, the written notice of any meeting shall be given not less than twenty-four (24) hours nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United - ------------------------ (1)Citations in parentheses are to Utah Code Annotated. These citations are for reference only and shall not constitute a part of these bylaws. 2 States mail, postage prepaid, directed to the stockholder at his or its address as it appears on the records of the Corporation. (b) Adjourned Meeting. If any shareholder meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, or place, if the new date, time, or place is announced at the meeting before adjournment. However, if the adjournment is for more than thirty (30) days, or if after the adjournment a new record date for the adjourned meeting is or must be fixed (see Section 1.5 of these Bylaws), then notice must be given pursuant to the requirements of paragraph (a) of this Section 1.4 to shareholders of record who are entitled to vote at the meeting. (16-10a-705(4)) Section 1.5. Fixing of Record Date. For the purpose of determining the shareholders of any voting group entitled to notice of or to vote at any meeting of the shareholders, or the shareholders entitled to take action without a meeting or to demand a special meeting, or the shareholders entitled to receive payment of any distribution or dividend, or in order to make a determination of the shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date. Such record date shall not be more than sixty (60) days prior to the date on which the particular action, requiring such determination of the shareholders, is to be taken. If no record date is so fixed by the Board of Directors, the record date shall be at the close of business on the following dates: (a) Annual and Special Meetings. Except as provided in Section (b) of this Section 1.5, with respect to an annual meeting of the shareholders or any special meeting of the shareholders, the day before the first notice is delivered to shareholders. (16-10a-707(2)) (b) Meeting Demanded by Shareholders. With respect to a special shareholder meeting demanded by the shareholders, the earliest date of any of the demands pursuant to which the meeting is called, or sixty (60) days prior to the date the first of the written demands is received by the Corporation, whichever is later. (16-10a-702(1)(b), (2)) (c) Action Without a Meeting. With respect to actions taken in writing without a meeting (pursuant to Section 1.9 of these Bylaws), the date the first shareholder delivers to the Corporation a signed written consent pursuant to which the action is taken. (16-10a-704(6)) (d) Distributions. With respect to a distribution to the shareholders (other than one involving a repurchase or reacquisition of shares), the date the Board of Directors authorizes the distribution. (16-10a-640(2)) (e) Share Dividend. With respect to the payment of a share dividend, the date the Board of Directors authorizes the share dividend. (16-10a-623(3)) When a determination of the shareholders entitled to vote at any meeting of the shareholders has been made as provided in this Section 1.5, such determination shall apply to any adjournment thereof unless the Board of Directors fixes a new record date, which it must do if 2 3 the meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting. (16-10a-707) Section 1.6. Shareholder List. The Secretary shall make a complete record of the shareholders entitled to vote at each meeting of shareholders, arranged in alphabetical order within each class or series, with the address of and the number of shares held by each. The shareholder list must be available for inspection by any shareholder, beginning on the earlier of ten (10) days before the meeting for which the list was prepared or two (2) business days after notice of the meeting is given and continuing through the meeting and any adjournments. The list shall be available at the Corporation's principal office or at a place identified in the notice of the meeting in the city where the meeting is to be held. (16-10a-720) Section 1.7. Shareholder Quorum and Voting Requirements. (a) Quorum. Unless the Articles of Incorporation or the Utah Revised Business Corporation Act provides otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter. (16-10a-725(1)) (b) Approval of Actions. If a quorum exists, action on a matter (other than the election of directors) by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the Articles of Incorporation, a Bylaw adopted by the shareholders pursuant to the Utah Revised Business Corporation Act, or the Utah Revised Business Corporation Act requires a greater number of affirmative votes. (16-10a-725(3)) Section 1.8. Proxies. At all meetings of the shareholders, a shareholder may vote in person or by a proxy executed in any lawful manner. Such proxy shall be filed with the Corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution unless otherwise provided in the proxy. (16-10a-722) Section 1.9. Informal Action by Shareholders. (a) Written Consent. Unless otherwise provided in the Articles of Incorporation, any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice if one or more consents in writing, setting forth the action so taken, are signed by the holders of outstanding shares having not less than the minimum number of votes necessary to authorize or take the action at a meeting at which all shares entitled to vote thereon were present and voted. (16-10a-704(1)) (b) Notice Requirements. Unless written consents of all shareholders entitled to vote have been obtained, the Corporation shall give notice of any shareholder approval without a meeting within ten (10) days of the taking of the corporate action by written consent to: 3 4 (1) Those shareholders entitled to vote who have not consented in writing; and (2) those shareholders not entitled to vote and to whom the Utah Revised Business Corporation Act requires notice be given. Such notice shall contain or be accompanied by the same material that would have been required if a formal meeting had been called to consider the action. (16-10a-704(2)/Shareholders Agreement 16-10a-732) (c) Revocation. Any shareholder giving a written consent, or the shareholders' proxy holder, or a transferee of the shares or a personal representative of the shareholder or their respective proxy holder, may revoke the consent by a signed writing describing the action and stating that the shareholder's prior consent is revoked, if the writing is received by the Corporation prior to the effectiveness of the action. (16-10a-704(3)) (d) Election of Directors. Notwithstanding paragraph (a) of this Section 1.9, directors may not be elected by written consent except by unanimous written consent of all shares entitled to vote for the election of directors. (16-10a-704(5)) (e) Effect of Action Without a Meeting. Action taken under this Section 1.9 has the same effect as action taken at a meeting of shareholders and may be so described in any document. (16-10a-704(7)) Section 1.10. Voting for Directors. At each election of directors, unless otherwise provided in the Articles of Incorporation or the Utah Revised Business Corporation Act, every shareholder entitled to vote at the election has the right to vote, in person or by proxy, all of the votes to which the shareholder's shares are entitled for as many persons as there are directors to be elected and for whose election the shareholder has the right to vote. Unless otherwise provided in the Articles of Incorporation or the Utah Revised Business Corporation Act, directors are elected by a plurality of the votes cast by shares entitled to be voted in the election, at a meeting at which a quorum is present. (16-10a-728(1), (2)) ARTICLE 2. BOARD OF DIRECTORS Section 2.1. General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors, subject to any limitation set forth in the Articles of Incorporation or in any agreement authorized by Section 16-10a-732 of the Utah Revised Business Corporation Act. (16-10a-801) 4 5 Section 2.2. Number, Tenure and Qualifications of Directors. (a) Number. The number of directors of the Corporation shall be not less than three (3) (unless the number of shareholders entitled to vote for the directors of the Corporation is less than three (3), then the number of directors may be equal to or greater than the number of such shareholders) nor more than fifteen (15). The number of directors may be fixed or changed within the range specified in this Section 2.2 by the shareholders or the Board of Directors, but no decrease may shorten the term of any incumbent director. (16-10a-803(1), (2)) (b) Tenure. Each director shall hold office until the next annual meeting of shareholders or until removed. However, if a director's term expires, the director shall continue to serve until the director's successor shall have been elected and qualified, or until there is a decrease in the number of directors. (16-10a-805) (c) Qualifications. Directors need not be residents of the State of Utah or shareholders of the Corporation unless the Articles of Incorporation so prescribe. (16-10a-802) Section 2.3. Regular Meetings of the Board of Directors. A regular meeting of the Board of Directors shall be held without other notice than provided by this Section 2.3 immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution. Section 2.4. Special Meetings of the Board of Directors. Special meetings of the Board of Directors may be called by or at the request of the President or any two (2) directors, who may fix any place, either within or outside the State of Utah, as the place for holding the meeting. Section 2.5. Notice and Waiver of Notice of Special Director Meetings. (a) Notice. Unless the Articles of Incorporation provide for a longer or shorter period, special meetings of the Board of Directors must be preceded by at least twenty four (24) hours notice of the date, time, and place of the meeting. (16-10a-822(2)) Notice may be communicated in person, by telephone, by any form of electronic communication, or by mail or private carrier. (16-10a-103(2)) At the written request of any director, notice of any special meeting of the Board of Directors shall be given to such director by facsimile or telex, as the case may be, at the number designated in writing by such director from time to time. (b) Effective Date. Notice of any meeting of the Board of Directors shall be deemed to be effective at the earliest of the following: (1) when received; (2) five (5) days after it is mailed; (3) the date shown on the return receipt if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the director or (4) when it is sent (with confirmation of sending) to the telecopier number or e-mail address provided by that director to the Corporation. (16-10a-103(5)/Shareholders Agreement 16-10a-732). 5 6 (c) Effect of Attendance. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except when a director attends a meeting for the express purpose of objecting to the transaction of any business and at the beginning of the meeting, or promptly upon arrival, the director objects to holding the meeting or transacting business at the meeting because of lack of notice or defective notice, and does not thereafter vote for or assent to action taken at the meeting. (16-10a-823(2)) Section 2.6. Quorum of Directors. A majority of the number of directors prescribed by resolution (or if no such number is prescribed, the number in office immediately before the meeting begins), shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, unless the Articles of Incorporation require a greater number. (16-10a-824(1)(b)/Shareholders Agreement 16-10a-732) Section 2.7. Manner of Acting. (a) Action by Majority. If a quorum is present when a vote is taken, the affirmative vote of a majority of the entire board of directors (i.e. a majority of the number of directors fixed under Section 2.2 and not a majority of the directors then in office) is the act of the Board of Directors, unless the Corporation's Articles of Incorporation or the Utah Revised Business Corporation Act requires the vote of a greater number of directors. (16-10a-824(3)) (b) Telephonic Meetings. Unless the Articles of Incorporation provide otherwise, any or all directors may participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting. (16-10a-820(2)) Section 2.8. Director Action By Written Consent. Unless the Articles of Incorporation or the Utah Revised Business Corporation Act provide otherwise, any action required or permitted to be taken by the Board of Directors at a meeting may be taken without a meeting if all the directors consent to the action in writing. Action is taken by written consent at the time the last director signs a writing describing the action taken, unless, prior to that time, any director has revoked a consent by a writing signed by the director and received by the Secretary. Action taken by written consent is effective when the last director signs the consent, unless the Board of Directors establishes a different effective date. Action taken by written consent has the same effect as action taken at a meeting of directors and may be described as such in any document. (16-10a-821) Section 2.9. Resignation of Directors. A director may resign at any time by giving a written notice of resignation to the Corporation. A resignation of a director is effective when the notice is received by the Corporation unless the notice specifies a later effective date. A director who resigns may deliver a statement of his resignation pursuant to Section 16-10a-1608 of the Utah Revised Business Corporation Act to the Division for filing. (16-10a-807) 6 7 Section 2.10. Removal of Directors. The shareholders may remove one or more directors at a meeting called for that purpose if notice has been given that a purpose of the meeting is such removal. The removal may be with or without cause, unless the Articles of Incorporation provide that directors may only be removed with cause. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove the director. A director may be removed only if the number of votes cast to remove the director exceeds the number of votes cast against removal of the director. To the extent a director is employed by the Corporation, if such director experiences a termination of his or her employment with the Corporation for any reason, such director shall automatically be removed as a director. (16-10a-808) Section 2.11. Vacancies on the Board of Directors. Unless the Articles of Incorporation provide otherwise, if a vacancy occurs on the Board of Directors, including a vacancy resulting from an increase in the number of directors: (a) The shareholders may fill the vacancy; (b) the Board of Directors may fill the vacancy; or (c) if the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office. (16-10a-810(1)) Section 2.12. Director Committees. Committees of the Board of Directors may be established in accordance with Article 3 of these Bylaws. ARTICLE 3. EXECUTIVE COMMITTEE AND OTHER COMMITTEES Section 3.1. Creation of Committees. Unless the Articles of Incorporation provide otherwise, the Board of Directors may create an Executive Committee and such other committees as it may deem appropriate and appoint members of the Board of Directors to serve on such committees. Each committee must have two (2) or more members, one of whom must be an Investor Director. (16-10a-825(1)) Section 3.2. Approval of Committees and Members. The creation of a committee and appointment of members to it must be approved by the greater of: (a) a majority of all the directors in office when the action is taken; or (b) the number of directors required by the Articles of Incorporation to take such action, or, if not specified in the Articles of Incorporation, the number required by Section 2.7 of these Bylaws to take action. (16-10a-825(2)) 7 8 Section 3.3. Required Procedures. Sections 2.4 through 2.10 of these Bylaws, which govern procedures applicable to the Board of Directors, also apply to committees and their members. (16-10a-825(3)) Section 3.4. Authority of Committees Other Than The Executive Committee. Unless limited by the Articles of Incorporation or the Utah Revised Business Corporation Act, each committee may exercise those aspects of the authority of the Board of Directors which the Board of Directors confers upon such committee in the resolution creating the committee. (16-10a-825(4)) Section 3.5. Authority of Executive Committee. The Executive Committee shall have, and may exercise all powers of the Board of Directors with respect to the management of the business and affairs of the Corporation during the intervals between the meetings of the Board of Directors; provided, however, the Executive Committee shall not have the power to fill vacancies on the Board of Directors or to amend these Bylaws. Section 3.6. Compensation. Unless otherwise provided in the Articles of Incorporation, the Board of Directors may provide for the payment of a fixed sum and/or expenses of attendance to any member of a committee for attendance at each meeting of such committee; provided, however, no such payments of a fixed sum shall be made to committee members who are salaried employees of the Corporation. ARTICLE 4. OFFICERS Section 4.1. Executive Officers; Election; Qualifications; Term of Office; Resignation; Removal; Vacancies. The officers of the Corporation shall be a President, and a Secretary, each of whom shall be appointed by the Board of Directors. Such other officers and assistant officers as may be deemed necessary, including any vice-presidents, may also be appointed by the Board of Directors. The Board of Directors may appoint such officers of the Corporation as its designates. Each such officer shall hold office until the first meeting of the Board of Directors after the annual meeting of shareholders next succeeding his or her appointment, and until his or her successor is appointed or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. The Board of Directors may remove any officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, Any number of offices may be held by the same person. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting. (16-10a-830 and 16-10a-831) Section 4.2. President. The President shall be the chief executive officer and shall have general charge of the business, affairs and property of the Corporation and general supervision over its other officers and agents. In general, he or she shall perform all duties incident to the office of President and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President may sign, with the Secretary, any Assistant Secretary or any other proper 8 9 officer of the Corporation authorized by the Board of Directors, certificates for shares of the Corporation. The President shall have full power and authority on behalf of the Corporation to attend, act and vote at any meeting of security holders of other corporations in which the Corporation may hold securities. At such meeting the President shall possess and may exercise any and all rights and powers incident to the ownership of such securities which the Corporation might have possessed and exercised if it had been present. The Board of Directors may from time to time confer like powers upon any other person or persons. Section 4.3. Chairman of the Board. The Chairman of the Board shall perform such executive, supervisory and management functions and duties as may be assigned to him from time to time by the Board of Directors. He or she shall, if present, preside at all meetings of stockholders and of the Board of Directors. Section 4.4. Vice Presidents. In the absence of the President or in the event of his or her death, inability, or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated at the time of their election, or in the absence of any designation, then in the order of their appointment) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President may sign, with the Secretary, any Assistant Secretary or any other proper officer of the Corporation authorized by the Board of Directors, certificates for shares of the Corporation; and shall perform such other duties as from time to time may be assigned to him or her by the President or by the Board of Directors. Section 4.5. Secretary. The Secretary shall prepare and maintain minutes of directors and shareholders meetings and other records and information required to be kept by the Corporation under the Utah Revised Business Corporation Act and shall authenticate records of the Corporation. The Secretary shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. ARTICLE 5. LIMITATION OF LIABILITY AND INDEMNIFICATION Section 5.1. Limitation of Liability of Directors. Directors shall not be liable to the Corporation or its shareholders for monetary damages for any action taken or any failure to take any action, as a director, except liability for: (a) the amount of a financial benefit received by a director to which he or she is not entitled; (b) an intentional infliction of harm on the Corporation or its shareholders; (c) a violation of Section 16-10a-842 of the Utah Revised Business Corporation Act; 9 10 (d) an intentional violation of criminal law. (16-10a-841(1)) Section 5.2. Indemnification of Directors. The Corporation shall indemnify and advance expenses to the directors and officers of the Corporation to the fullest extent permitted by applicable law. Without limiting the generality of the foregoing, the Corporation shall indemnify the directors and officers of the Corporation in all cases in which a Corporation may indemnify a director under section 16-10a-902 of the Utah Revised Business Corporation Act. The Corporation shall consider and act as expeditiously as possible upon any and all requests by a director or officer for indemnification or advancement of expenses. Section 5.3 Indemnification of Agents, Fiduciaries, and Employees Who Are Not, Directors or Officers. The board of directors may indemnify and advance expenses to any employee, fiduciary or agent of the Corporation who is not a director or officer of the Corporation to any extent consistent with applicable law, as determined by the general or specific actions of the board of directors. Section 5.4 Insurance. By action of the board of directors, notwithstanding any interest of the directors in such action, the Corporation may purchase and maintain liability insurance on behalf of a person who is or was a director, officer, employee, fiduciary or agent of the Corporation, against any liability asserted against or incurred by such person in that capacity or arising from such person's status as a director, officer, employee, fiduciary or agent, whether or not the Corporation would have the power to indemnify such person under the applicable provisions of the Utah Revised Business Corporation Act. ARTICLE 6. STOCK Section 6.1. Certificates. If so determined by the Board of Directors, every holder of stock shall be entitled to have a certificate signed by or in the name of the Corporation by two officers of the Corporation certifying the number of shares owned by him or her in the Corporation. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. (16-10a-625) Section 6.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. (70A-8-405) 10 11 ARTICLE 7. MISCELLANEOUS Section 7.1. Distributions. The Board of Directors may authorize, and the Corporation may make, distributions (including dividends on its outstanding shares) in the manner and upon the terms and conditions provided by law and in the Articles of Incorporation. (16-10a-640). Section 7.2. Corporate Seal. The Board of Directors may provide a corporate seal which may be in such form as determined by the Board of Directors may have inscribed thereon any designation including the name of the Corporation, Utah as the state of incorporation, and the words "Corporate Seal." Section 7.3. Waiver of Notice of Meetings of Shareholders, Directors and Committees. Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of the shareholders, directors, or members of a committee of directors need be specified in any written waiver of notice. (16-10a-706 and 16-10a-823) Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. Section 7.5. Amendments. The Corporation's Board of Directors may amend these Bylaws, except to the extent that the Articles of Incorporation, these Bylaws, or the Utah Revised Business Corporation Act reserve this power exclusively to the shareholders in whole or in part. However, the Board of Directors may not adopt, amend, or repeal a Bylaw that fixes a shareholder quorum or voting requirement that is greater than required by the Utah Revised Business Corporation Act. If authorized by the Articles of Incorporation, the shareholders may adopt, amend, or repeal a Bylaw that fixes a greater quorum or voting requirement for shareholders, or voting groups of shareholders, than is required by the Utah Revised Business Corporation Act. Any such action shall comply with the provisions of the Utah Revised Business Corporation Act. The Corporation's shareholders may amend or repeal the Corporation's Bylaws even though the Bylaws may also be amended or repealed by the Corporation's Board of Directors. (16-10a-1020 to 16-10a-1022) ADOPTED as of May 31, 2000. /s/ RONALD G. MOFFITT --------------------------------- Ronald G. Moffitt Secretary 11 EX-4.1 6 ex4-1.txt INDENTURE 1 1 EXHIBIT 4.1 EXECUTION COPY HUNTSMAN PACKAGING CORPORATION 13% Senior Subordinated Notes due 2010 INDENTURE Dated as of May 31, 2000 THE BANK OF NEW YORK, as Trustee 2 2 TABLE OF CONTENTS
Page ARTICLE 1 Definitions and Incorporation by Reference SECTION 1.01 Definitions 1 SECTION 1.02 Other Definitions 22 SECTION 1.03 Incorporation by Reference of Trust Indenture Act 23 SECTION 1.04 Rules of Construction 23 ARTICLE 2 The Securities SECTION 2.01 Form and Dating 24 SECTION 2.02 Execution and Authentication 24 SECTION 2.03 Registrar and Paying Agent 24 SECTION 2.04 Paying Agent to Hold Money in Trust 25 SECTION 2.05 Holder Lists 25 SECTION 2.06 Transfer and Exchange 26 SECTION 2.07 Replacement Securities 26 SECTION 2.08 Outstanding Securities 27 SECTION 2.09 Temporary Securities 27 SECTION 2.10 Cancelation 27 SECTION 2.11 Defaulted Interest 28 SECTION 2.12 CUSIP and ISIN Numbers 28 ARTICLE 3 Redemption SECTION 3.01 Notices to Trustee 28 SECTION 3.02 Selection of Securities To Be Redeemed 28 SECTION 3.03 Notice of Redemption 29 SECTION 3.04 Effect of Notice of Redemption 29 SECTION 3.05 Deposit of Redemption Price 30 SECTION 3.06 Securities Redeemed in Part 30 ARTICLE 4 Covenants SECTION 4.01 Payment of Securities 30 SECTION 4.02 SEC Reports 30 SECTION 4.03 Limitation on Indebtedness 31 SECTION 4.04 Limitation on Restricted Payments 34 SECTION 4.05 Limitation on Restrictions on Distributions from Restricted Subsidiaries 38 SECTION 4.06 Limitation on Sales of Assets and Subsidiary Stock 39 SECTION 4.07 Limitation on Transactions with Affiliates 42 SECTION 4.08 Change of Control 43
3 3 SECTION 4.09 Compliance Certificate 45 SECTION 4.10 Further Instruments and Acts 45 SECTION 4.11 Future Note Guarantors 45 SECTION 4.12 Limitation on Lines of Business 45 ARTICLE 5 Successor Company SECTION 5.01 46 ARTICLE 6 Defaults and Remedies SECTION 6.01 Events of Default 47 SECTION 6.02 Acceleration 49 SECTION 6.03 Other Remedies 49 SECTION 6.04 Waiver of Past Defaults 49 SECTION 6.05 Control by Majority 50 SECTION 6.06 Limitation on Suits 50 SECTION 6.07 Rights of Holders to Receive Payment 50 SECTION 6.08 Collection Suit by Trustee 50 SECTION 6.09 Trustee May File Proofs of Claim 51 SECTION 6.10 Priorities 51 SECTION 6.11 Undertaking for Costs 51 SECTION 6.12 Waiver of Stay or Extension Laws 51 ARTICLE 7 Trustee SECTION 7.01 Duties of Trustee 52 SECTION 7.02 Rights of Trustee 53 SECTION 7.03 Individual Rights of Trustee 54 SECTION 7.04 Trustee's Disclaimer 54 SECTION 7.05 Notice of Defaults 54 SECTION 7.06 Reports by Trustee to Holders 54 SECTION 7.07 Compensation and Indemnity 54 SECTION 7.08 Replacement of Trustee 55 SECTION 7.09 Successor Trustee by Merger 56 SECTION 7.10 Eligibility; Disqualification 56 SECTION 7.11 Preferential Collection of Claims Against Company 57 ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01 Discharge of Liability on Securities; Defeasance 57 SECTION 8.02 Conditions to Defeasance 58 SECTION 8.03 Application of Trust Money 59 SECTION 8.04 Repayment to Company 59 SECTION 8.05 Indemnity for Government Obligations 59 SECTION 8.06 Reinstatement 60 ARTICLE 9 Amendments
4 4 SECTION 9.01 Without Consent of Holders 60 SECTION 9.02 With Consent of Holders 61 SECTION 9.03 Compliance with Trust Indenture Act 62 SECTION 9.04 Revocation and Effect of Consents and Waivers 62 SECTION 9.05 Notation on or Exchange of Securities 62 SECTION 9.06 Trustee to Sign Amendments 63 ARTICLE 10 Subordination SECTION 10.01 Agreement To Subordinate 63 SECTION 10.02 Liquidation, Dissolution, Bankruptcy 63 SECTION 10.03 Default on Designated Senior Indebtedness 63 SECTION 10.04 Acceleration of Payment of Securities 64 SECTION 10.05 When Distribution Must Be Paid Over 65 SECTION 10.06 Subrogation 65 SECTION 10.07 Relative Rights 65 SECTION 10.08 Subordination May Not Be Impaired by Company 65 SECTION 10.09 Rights of Trustee and Paying Agent 65 SECTION 10.10 Distribution or Notice to Representative 66 SECTION 10.11 Article 10 Not To Prevent Events of Default or Limit Right To Accelerate 66 SECTION 10.12 Trust Monies Not Subordinated 66 SECTION 10.13 Trustee Entitled To Rely 66 SECTION 10.14 Trustee To Effectuate Subordination 67 SECTION 10.15 Trustee Not Fiduciary for Holders of Senior Indebtedness 67 SECTION 10.16 Reliance by Holders of Senior Indebtedness on Subordination Provisions 67 ARTICLE 11 Note Guarantees SECTION 11.01 Note Guarantees 67 SECTION 11.02 Limitation on Liability 69 SECTION 11.03 Successors and Assigns 70 SECTION 11.04 No Waiver 70 SECTION 11.05 Modification 70 SECTION 11.06 Execution of Supplemental Indenture for Future Note Guarantors 71 SECTION 11.07. Non-Impairment 71 ARTICLE 12 Subordination of the Note Guarantees SECTION 12.01 Agreement To Subordinate 71 SECTION 12.02 Liquidation, Dissolution, Bankruptcy 71 SECTION 12.03 Default on Designated Senior Indebtedness of a Note Guarantor 72 SECTION 12.04 Demand for Payment 73 SECTION 12.05 When Distribution Must Be Paid Over 73 SECTION 12.06 Subrogation 73
5 5 SECTION 12.07 Relative Rights 73 SECTION 12.08 Subordination May Not Be Impaired by a Note Guarantor 73 SECTION 12.09 Rights of Trustee and Paying Agent 74 SECTION 12.10 Distribution or Notice to Representative 74 SECTION 12.11 Article 12 Not To Prevent Events of Default or Limit Right To Accelerate 74 SECTION 12.12 Trustee Entitled To Rely 74 SECTION 12.13 Trustee To Effectuate Subordination 75 SECTION 12.14 Trustee Not Fiduciary for Holders of Senior Indebtedness of a Note Guarantor 75 SECTION 12.15 Reliance by Holders of Senior Indebtedness of a Note Guarantor on Subordination Provisions 75 SECTION 12.16 Defeasance 75 ARTICLE 13 Miscellaneous SECTION 13.01 Trust Indenture Act Controls 75 SECTION 13.02 Notices 76 SECTION 13.03 Communication by Holders with Other Holders 76 SECTION 13.04 Certificate and Opinion as to Conditions Precedent 76 SECTION 13.05 Statements Required in Certificate or Opinion 77 SECTION 13.06 When Securities Disregarded 77 SECTION 13.07 Rules by Trustee, Paying Agent and Registrar 77 SECTION 13.08 Legal Holidays 77 SECTION 13.09 GOVERNING LAW 77 SECTION 13.10 No Recourse Against Others 78 SECTION 13.11 Successors 78 SECTION 13.12 Multiple Originals 78 SECTION 13.13 Table of Contents; Headings 78
Appendix A - Provisions Relating to Initial Securities, Private Exchange Notes and Exchange Notes Exhibit A - Form of Initial Security and Private Exchange Note Exhibit B - Form of Exchange Note Exhibit C - Form of Supplemental Indenture Exhibit D - Form of Transferee Letter of Representation 6 6 INDENTURE dated as of May 31, 2000, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), EDISON PLASTICS INTERNATIONAL, INC., a Delaware corporation, HUNTSMAN BULK PACKAGING CORPORATION, a Utah corporation, HUNTSMAN CONTAINER CORPORATION INTERNATIONAL, a Utah corporation, HUNTSMAN EDISON FILMS CORPORATION, a Delaware corporation, HUNTSMAN FILM PRODUCTS OF MEXICO, INC., a Utah corporation, HUNTSMAN KCL CORPORATION, a Utah corporation, HUNTSMAN PACKAGING GEORGIA, INC., a Georgia corporation, and HUNTSMAN PACKAGING OF CANADA, LLC, a Utah limited liability company (collectively, the "Note Guarantors") and THE BANK OF NEW YORK, a New York banking corporation, as trustee (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of (a) the Company's 13% Senior Subordinated Notes due 2010 issued on the date hereof (the "Initial Securities"), (b) if and when issued as provided in the Registration Agreement (as defined in Appendix A hereto (the "Appendix")), the Company's 13% Senior Subordinated Notes due 2010 issued in the Registered Exchange Offer (as defined in the Appendix) in exchange for any Initial Securities (the "Exchange Notes") and (c) if and when issued as provided in the Registration Agreement, the Private Exchange Notes (as defined in the Appendix and, together with the Initial Securities and any Exchange Notes issued hereunder, the "Securities") issued in the Private Exchange. Except as otherwise provided herein, the Securities will be limited to $220,000,000 in aggregate principal amount outstanding. ARTICLE 1 Definitions and Incorporation by Reference SECTION 1.01. Definitions. "Additional Assets" means (a) any property or assets (other than Indebtedness and Capital Stock) to be used by the Company or a Restricted Subsidiary in a Permitted Business or any improvements to any property or assets that are used by the Company or a Restricted Subsidiary in a Permitted Business; (b) Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (c) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that any such Restricted Subsidiary described in clauses (b) or (c) above is primarily engaged in a Permitted Business. "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 the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such 7 7 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. For purposes of Sections 4.06 and 4.07 only, "Affiliate" shall also mean any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease (other than an operating lease entered into in the ordinary course of business), transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of (a) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Restricted Subsidiary), (b) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary or (c) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary (other than, in the case of (a), (b) and (c) above, (i) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, (ii) for purposes of Section 4.06 only, the making of a Permitted Investment or a disposition that constitutes a Restricted Payment permitted by Section 4.04, (iii) sales of accounts receivable and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" to a Securitization Entity for the fair market value thereof, (iv) a disposition of obsolete or worn out property or equipment or property or equipment that is no longer used or useful in the conduct of business of the Company and its Restricted Subsidiaries, (v) any other disposition of assets with a fair market value, as conclusively determined by senior management of the Company in good faith, of less than $1.0 million, (vi) sales or grants of licenses to use the Company's or any Restricted Subsidiary's patents, trade secrets, know-how and technology to the extent that such license does not prohibit the licensor from using the patent, trade secret, know-how or technology or require the licensor to pay any fees for such use, (vii) the disposition of all or substantially all of the assets of the Company in compliance with Section 5.01 and (viii) the disposition of any Capital Stock or other ownership interest in or assets or property of an Unrestricted Subsidiary. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (a) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (b) the sum of all such payments. 8 8 "Bank Indebtedness" means any and all amounts payable under or in respect of the Credit Agreement and any Refinancing Indebtedness with respect thereto, as amended from time to time, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of the Board of Directors of the Company. "Business Day" means each day which is not a Legal Holiday. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Capitalized Lease Obligations" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty. "Change of Control" means the occurrence of any of the following events: (a) prior to the first public offering of common stock of the Company, the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by any Permitted Holder or otherwise (for purposes of this clause (a) and clause (b) below, the Permitted Holders shall be deemed to beneficially own any Voting Stock of an entity (the "specified entity") held by any other entity (the "parent entity") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent entity); (b) (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in clause (a) above, except that for purposes of this clause (b) a person (including a Permitted Holder) shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, 9 9 whether such right is exercisable immediately, only after the passage of time, upon the happening of any event or otherwise), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company and (ii) the Permitted Holders "beneficially own" (as defined in clause (a) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of the Company (for the purposes of this clause (b), such other person shall be deemed to beneficially own any Voting Stock of a specified entity held by a parent entity, if such other person is the beneficial owner (as defined in this clause (b)), directly or indirectly, of more than 50% of the voting power of the Voting Stock of such parent entity and the Permitted Holders "beneficially own" (as defined in clause (a) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of such parent entity); (c) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors (i) selected in accordance with the Stockholders Agreement so long as such agreement is in effect or otherwise nominated by the Permitted Holders or (ii) whose election by the Board of Directors of the Company or whose nomination for election by the stockholders of the Company was approved by a vote of at least a majority of the members of the Board of Directors of the Company, then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved by the Board of Directors or in accordance with the Stockholders Agreement or otherwise by the Permitted Holders) cease for any reason to constitute a majority of the Board of Directors of the Company then in office; (d) the adoption of a plan relating to the liquidation or dissolution of the Company; or (e) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving Person or transferee that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving Person or transferee. "Closing Date" means the date of this Indenture. 10 10 "Code" means the Internal Revenue Code of 1986, as amended. "Commodity Agreement" means any commodity futures contract, commodity option or other similar agreement or arrangement entered into by the Company or any of its Subsidiaries designed to protect the Company or any of its Subsidiaries against fluctuations in the price of commodities actually at the time used in the ordinary course of business of the Company or its Subsidiaries. "Company" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (a) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters for which financial statements are publicly available ending prior to the date of such determination to (b) Consolidated Interest Expense for such four fiscal quarters; provided, however, that (i) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, (ii) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness, (iii) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition in excess of $10.0 million which constitutes all or substantially all of an operating unit of a business, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Disposition for such period or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted 11 11 Subsidiaries are no longer liable for such Indebtedness after such sale), (iv) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary or is merged with and into the Company) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period and (v) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (iii) or (iv) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition of assets occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an Investment or acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. Any such pro forma calculations may include operating expense reductions for such period resulting from the acquisition which is being given pro forma effect that (a) would be permitted pursuant to Article 11 of Regulation S-X under the Securities Act or (b) have been realized or for which the steps necessary for realization have been taken or are reasonably expected to be taken within six months following any such acquisition, including, but not limited to, the execution or termination of any contracts, the termination of any personnel or the closing (or approval by the Board of Directors of any closing) of any facility, as applicable, provided that, such adjustments are set forth in an Officers' Certificate signed by the Company's chief financial officer and another Officer which states (i) the amount of such adjustment or adjustments, (ii) that such adjustment or adjustments are based on the reasonable good faith beliefs of the officers executing such Officers' Certificate at the time of such execution and (iii) that any related Incurrence of Indebtedness is permitted pursuant to this Indenture. In addition, to the extent not covered by the foregoing, if the Transactions have occurred in the four quarter period used to determine the Consolidated Coverage Ratio, then the Consolidated Coverage Ratio shall be determined giving pro forma effect on the basis given in the Offering Memorandum, with all calculations relating thereto to be made at the date of determination by the Company's chief financial officer, and set forth in an Officers' Certificate signed by the chief financial officer and another Officer and meeting the requirements for the Officers' Certificate described in the preceding sentence. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest expense on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement or Currency Agreement applicable to such Indebtedness if such Interest Rate Agreement or Currency Agreement has a remaining term as at the date of determination in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its Consolidated Restricted Subsidiaries plus, to the extent 12 12 Incurred by the Company and its Restricted Subsidiaries in such period but not included in such interest expense, (a) interest expense attributable to Capitalized Lease Obligations and the interest expense attributable to operating leases constituting part of a Sale/Leaseback Transaction, (b) amortization of debt discount and debt issuance costs, (c) capitalized interest, (d) non-cash interest expense, (e) commissions, discounts and other fees and charges attributable to letters of credit and bankers' acceptance financing, (f) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by the Company or any Restricted Subsidiary, (g) net costs associated with Hedging Obligations (including amortization of fees), provided, however, that if Hedging Obligations result in net benefits rather than costs, such benefits shall be credited in determining Consolidated Interest Expense unless, pursuant to GAAP, such net benefits are otherwise reflected in Consolidated Net Income, (h) dividends and distributions declared in respect of all Disqualified Stock of the Company and dividends and distributions declared and paid in respect of all Preferred Stock of any of the Subsidiaries of the Company that is not a Note Guarantor, to the extent held by Persons other than the Company or a Wholly Owned Subsidiary, (i) interest Incurred in connection with investments in discontinued operations and (j) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. Notwithstanding anything to the contrary contained herein, commissions, discounts, yield and other fees and charges Incurred in connection with any transaction pursuant to which the Company or any Subsidiary of the Company may sell, convey or otherwise transfer or grant a security interest in any accounts receivable or related assets shall be included in Consolidated Interest Expense. "Consolidated Net Income" means, for any period, the net income (loss) of the Company and its Consolidated Subsidiaries for such period; provided, however, that there shall not be included in such Consolidated Net Income: (a) any net income (loss) of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that (i) subject to the limitations contained in clauses (d), (e) and (f) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution made to a Restricted Subsidiary, to the limitations contained in clause (c) below) and (ii) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income to the extent such loss has been funded with cash from the Company or a Restricted Subsidiary; (b) other than for purposes of clauses (iv) and (v) of the definition of Consolidated Coverage Ratio any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (c) any net income (or loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the 13 13 payment of dividends or the making of distributions or loans or intercompany advances by such Restricted Subsidiary, directly or indirectly, to the Company, except that (i) subject to the limitations contained in clauses (d), (e) and (f) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed, loaned or advanced by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend, distribution, loan or advance (subject, in the case of a dividend, distribution, loan or advance made to another Restricted Subsidiary, to the limitation contained in this clause) and (ii) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (d) any gain (loss) realized upon the sale or other disposition of any asset of the Company or its Consolidated Subsidiaries (including pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise disposed of in the ordinary course of business and any gain (loss) realized upon the sale or other disposition of any Capital Stock of any Person; (e) any extraordinary gain or loss; and (f) the cumulative effect of a change in accounting principles. Notwithstanding the foregoing, for the purposes of Section 4.04 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under such Section pursuant to clause (a)(iv)(3)(F) thereof. "Consolidation" means the consolidation of the amounts of each of the Restricted Subsidiaries with those of the Company in accordance with GAAP consistently applied; provided, however, that "Consolidation" shall not include consolidation of the accounts of any Unrestricted Subsidiary, but the interest of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary shall be accounted for as an investment. The term "Consolidated" has a correlative meaning. "Corporate Trust Office" means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention: Corporate Trust Administration, or such other address as the Trustee may designate from time to time by notice to the Holders and the Issuer, or the principal corporate trust office of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Holders and the Company). "Credit Agreement" means the credit agreement dated as of the Closing Date among the Company, the lenders named therein, Bankers Trust Company, as administrative agent and collateral agent, The Bank of Nova Scotia, as documentation agent, and The Chase Manhattan Bank, as syndication agent, together with related documents thereto including any guarantee agreements and security documents, as 14 14 amended, modified, supplemented, restated, renewed, refunded, replaced, restructured, repaid or refinanced from time to time (including any agreement extending the maturity thereof or increasing the amount of available borrowings thereunder or adding Restricted Subsidiaries of the Company as additional borrowers or guarantors thereunder) whether with the original agents and lenders or otherwise and whether provided under the original credit agreement or other credit agreements or otherwise. "Currency Agreement" means with respect to any Person any foreign exchange contract, currency swap agreements or other similar agreement or arrangement to which such Person is a party or of which it is a beneficiary. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Senior Indebtedness" of the Company means (a) the Bank Indebtedness and (b) any other Senior Indebtedness of the Company that, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $15.0 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture. "Designated Senior Indebtedness" of a Note Guarantor has a correlative meaning. "Disqualified Stock" means, with respect to any Person, any Capital Stock of such Person which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event (a) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b) is convertible or exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock convertible or exchangeable solely at the option of the Company or a Restricted Subsidiary, provided, that any such conversion or exchange shall be deemed an issuance of Indebtedness or an issuance of Disqualified Stock, as applicable) or (c) is redeemable at the option of the holder thereof, in whole or in part, in the case of clauses (a), (b) and (c), on or prior to 91 days after the Stated Maturity of the Securities; provided, however, that only the portion of Capital Stock that so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date will be deemed Disqualified Stock; provided further, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock provide that such Person may not repurchase or redeem such Capital Stock pursuant to such provisions unless such Person has first complied with the provisions of Sections 4.06 and 4.08, as applicable; and provided further that any class of Capital Stock of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or other payment obligations or otherwise by delivery of Capital Stock that is not Disqualified Stock, and that is not convertible, puttable or exchangeable for Disqualified Stock or Indebtedness, shall not be deemed Disqualified Stock so long as such Person satisfies its obligations with respect thereto solely by the delivery of Capital Stock that is not Disqualified Stock. 15 15 "Domestic Overdraft Facility" means an overdraft line of credit in a maximum principal amount of $10.0 million at any time outstanding. "Domestic Subsidiary" means any Restricted Subsidiary of the Company other than a Foreign Subsidiary. "EBITDA" for any period means the Consolidated Net Income for such period, excluding the following to the extent included in calculating such Consolidated Net Income: (a) income tax expense of the Company and its Consolidated Restricted Subsidiaries, (b) Consolidated Interest Expense, (c) depreciation expense of the Company and its Consolidated Restricted Subsidiaries, (d) amortization expense of the Company and its Consolidated Restricted Subsidiaries (but excluding amortization expense attributable to a prepaid cash item that was paid in a prior period), (e) other noncash charges of the Company and its Consolidated Restricted Subsidiaries (excluding any such noncash charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period), (f) income or loss from discontinued operations, (g) plant closing costs (as defined by GAAP) and (h) noncash stock-based compensation expense. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization and noncash charges of, a Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income (loss) of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended, loaned or advanced to the Company by such Restricted Subsidiary without prior approval of Persons other than the Board of Directors or holders of the Company's Capital Stock (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. "Equity Offering" means any public or private sale of the common stock of the Company, other than any public offering with respect to the Company's common stock registered on Form S-8 or other issuances upon exercise of options by employees of the Company or any of its Restricted Subsidiaries. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Note Guarantees" means the guarantees made by the Note Guarantors pursuant to the Registration Agreement. "Exchange Notes" means the senior subordinated debt securities to be issued by the Company pursuant to the Registration Agreement. "Excluded Contribution" means net cash proceeds received by the Company from (a) contributions to its common equity capital and (b) the sale (other than to a Subsidiary of the Company or to any Company or Subsidiary management equity plan or stock option plan or any other management or employee benefit plan or agreement) of Capital Stock (other than Disqualified Stock) of the Company, in each case designated as Excluded Contributions pursuant to an Officers' Certificate executed on the 16 16 date such capital contributions are made or the date such Capital Stock is sold, as the case may be, which are excluded from the calculation set forth in Section 4.04(a)(iv)(3). "Existing Management Stockholders" means each of Richard P. Durham, Jack E. Knott, Scott K. Sorensen and Ronald G. Moffitt. "Foreign Subsidiary" means any Restricted Subsidiary of the Company organized, and conducting its principal operations, outside the United States of America. "Foreign Subsidiary Asset Disposition" means any direct or indirect sale, issuance, conveyance, transfer, lease, assignment or other transfer for value by the Company or any of its Restricted Subsidiaries (including any Sale/Leaseback Transaction) to any Person other than the Company or a Restricted Subsidiary of the Company of the Capital Stock of any Foreign Subsidiary or any of the property or assets of any Foreign Subsidiary. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including those set forth in (a) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) statements and pronouncements of the Financial Accounting Standards Board, (c) such other statements by such other entities as are approved by a significant segment of the accounting profession and (d) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP, unless expressly provided otherwise. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (b) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Commodity Agreement, Interest Rate Agreement or Currency Agreement. "Holder" means the Person in whose name a Security is registered on the Registrar's books. 17 17 "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. "Indebtedness" means, with respect to any Person on any date of determination (without duplication): (a) the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money; (b) the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto); (d) all obligations of such Person to pay the deferred and unpaid purchase price of property or services (except Trade Payables and other accrued liabilities arising in the ordinary course of business), which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services; (e) all Capitalized Lease Obligations and all Attributable Debt of such Person; (f) all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person that is not a Note Guarantor, any Preferred Stock (but excluding, in each case, any accrued dividends); (g) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of Indebtedness of such Person shall be the lesser of (i) the fair market value of such asset at such date of determination and (ii) the amount of such Indebtedness of such other Persons; (h) to the extent not otherwise included in this definition, the net obligations under Hedging Obligations of such Person; (i) to the extent not otherwise included, the amount then outstanding (i.e., advanced, and received by, and available for use by, such Person) under any receivables financing (as set forth in the books and records of such Person and confirmed by the agent, trustee or other representative of the institution or group providing such receivables financing); and (j) all obligations of the type referred to in clauses (a) through (i) of other Persons and all dividends of other Persons for the payment of which, in either 18 18 case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee. Notwithstanding the foregoing, "Indebtedness" shall not include unsecured indebtedness of the Company and its Restricted Subsidiaries Incurred to finance insurance premiums in a principal amount not in excess of the insurance premiums to be paid by the Company and its Restricted Subsidiaries for a three-year period beginning on the date of Incurrence of any such Indebtedness. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Indenture" means this Indenture as amended or supplemented from time to time. "Intangible Assets" means goodwill, patents, trademarks and other intangibles as determined in accordance with GAAP. "Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender) or other extension of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property (excluding Capital Stock of the Company) to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (a) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to (i) the Company's "Investment" in such Subsidiary at the time of such redesignation less (ii) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; (b) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by (x) the senior management of the Company if the amount thereof is less than $2.0 million and (y) the Board of Directors if in excess thereof; and (c) the amount of any Investment shall be the original cost as of the date of determination of such Investment plus the cost of all additional Investments by the Company or any of its Restricted Subsidiaries, without any adjustments for increases or decreases in value or write-ups, write-downs or write-offs with respect to such Investments. 19 19 "Issue Date" means the date on which the Initial Securities are originally issued. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "liquidated damages" means any liquidated damages payable under the Registration Agreement. "Material Subsidiary" means, at any date of determination, any Subsidiary of the Company that, together with its Subsidiaries, (a) for the most recent fiscal year of the Company accounted for more than 10.0% of the consolidated revenues of the Company or (b) as of the end of such fiscal year, was the owner of 10.0% of the consolidated assets of the Company, all as set forth on the most recently available consolidated financial statement of the Company and its consolidated Subsidiaries for such fiscal year prepared in conformity with GAAP. "Net Available Cash" from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of (a) all legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, (b) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition, (c) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition, (d) the decrease in proceeds from Qualified Securitization Transactions which results from such Asset Disposition and (e) appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "Net Cash Proceeds", with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees and expenses actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Note Guarantee" means each Guarantee of the obligations with respect to the Securities issued by a Person pursuant to the terms of this Indenture. "Note Guarantor" means any Person that has issued a Note Guarantee. 20 20 "Offering Memorandum" means the Offering Memorandum dated May 25, 2000 relating to the Securities. "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company. "Permitted Business" means the design, manufacture and/or marketing of films and flexible packaging products for food, personal care, medical, retail, agricultural, industrial and other applications or any businesses that are reasonably related, ancillary or complementary thereto. "Permitted Holders" means each of (i) Chase Capital Partners and its Affiliates, (ii) Chase Domestic Investments, L.L.C. and its Affiliates, (iii) the Christena Karen H. Durham Trust, (iv) the Existing Management Stockholders and their Related Parties and (v) any Person acting in the capacity of an underwriter in connection with a public or private offering of the Company's Capital Stock. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in: (a) the Company, a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that after giving effect to such Investment the Company is still in compliance with Section 4.12; (b) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that after giving effect to such Investment the Company is still in compliance with Section 4.12; (c) Temporary Cash Investments; (d) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (e) payroll, travel and similar advances or loans to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (f) loans or advances to officers, directors, consultants or employees made (A) in the ordinary course of business and not exceeding $3.0 million in any year or (B) to fund purchases of stock under the Company's 2000 Stock Incentive Plan and any similar plans or employment arrangements; (g) Capital Stock, obligations or other securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of a debtor; (h) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition that was made pursuant to and in compliance with Section 4.06; (i) any Investment by the Company or a 21 21 Restricted Subsidiary in a Securitization Entity or any Investment by a Securitization Entity in any other Person in connection with a Qualified Securitization Transaction; provided that any Investment in a Securitization Entity is in the form of a purchase money note or an equity interest; (j) Hedging Obligations entered into in the ordinary course of business; (k) endorsements of negotiable instruments and documents in the ordinary course of business; (l) assets or securities of a Person acquired by the Company or a Restricted Subsidiary to the extent the consideration for such acquisition consists of Capital Stock (other than Disqualified Stock) of the Company; (m) Investments in existence on the Closing Date; (n) Investments of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time such Person merges or consolidates with the Company or any of its Restricted Subsidiaries, in either case in compliance with this Indenture, provided that such Investments were not made by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such merger or consolidation; (o) Investments in Unrestricted Subsidiaries or joint ventures not to exceed the sum of $30.0 million plus (A) the aggregate net after-tax amount returned to the Company or any Restricted Subsidiary in cash on or with respect to any Investments made in Unrestricted Subsidiaries and joint ventures whether through interest payments, principal payments, dividends or other distributions or payments (including such dividends, distributions or payments made concurrently with such Investment), (B) the net after-tax cash proceeds received by the Company or any Restricted Subsidiary from the disposition of all or any portion of such Investments (other than to the Company or a Subsidiary of the Company), and (C) upon redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair market value of such Subsidiary, provided that any amounts included pursuant to the foregoing clauses (A), (B) and (C) are excluded from the calculation set forth in clause (a)(iv)(3) under Section 4.04; and (p) additional Investments in an aggregate amount not to exceed $15.0 million. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Capital Stock of any other class of such Person. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. "Public Market" means any time after (a) an Equity Offering has been consummated and (b) at least 15% of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act. "Qualified Securitization Transaction" means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant 22 22 to which the Company or any of its Subsidiaries may sell, convey or otherwise transfer pursuant to customary terms to (a) a Securitization Entity (in the case of a transfer by the Company or any of its Subsidiaries) and (b) any other Person (in the case of a transfer by a Securitization Entity), or may grant a security interest in any accounts receivable (whether now existing or arising or acquired in the future) of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable. "Qualified Stock" means any Capital Stock that is not Disqualified Stock. "Recapitalization Agreement" means the Recapitalization Agreement dated as of March 31, 2000, between the Company, the selling stockholders listed therein and Chase Domestic Investments, L.L.C., as amended to and in effect at the Closing Date. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that is Incurred to Refinance any Indebtedness of the Company or any Restricted Subsidiary existing on the Closing Date or Incurred in compliance with the Indenture (including Indebtedness of the Company or a Restricted Subsidiary that Refinances Refinancing Indebtedness); provided, however, that: (a) the Refinancing Indebtedness (if Refinancing any Indebtedness existing on the Closing Date) has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced, (b) the Refinancing Indebtedness (if Refinancing any Indebtedness existing on the Closing Date) has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced, (c) such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) (whether in U.S. dollars or a foreign currency) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) (in U.S. dollars or such foreign currency, as applicable) then outstanding (plus, without duplication, accrued interest, premium and defeasance costs required to be paid under the terms of the Indebtedness being Refinanced and the fees, expenses, discounts, commissions and other issuance costs incurred in connection with the Refinancing Indebtedness) of the Indebtedness being Refinanced and (d) if the Indebtedness being Refinanced is subordinated in right of payment to the Securities or a Note Guarantee of a Note Guarantor, such Refinancing Indebtedness is subordinated in right of payment to the Securities or the Note Guarantee at least to the same extent as the Indebtedness being Refinanced; provided further, however, that Refinancing Indebtedness shall not include: (i) Indebtedness of a Restricted Subsidiary that is not a Note Guarantor that Refinances Indebtedness of the Company or (ii) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary. 23 23 "Related Parties" means with respect to a Person (a) that is a natural person (1) any spouse, parent or lineal descendant (including adopted children) of such Person or (2) the estate of such Person during any period in which such estate holds Capital Stock of the Company for the benefit of any person referred to in clause (a)(1) and (b) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially owning an interest of more than 50% of which consist of such Person and/or such other Persons referred to in the immediately preceding clause (a). "Representative" means the trustee, agent or representative (if any) for an issue of Senior Indebtedness. "Restricted Investment" means any Investment other than a Permitted Investment. "Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or such Restricted Subsidiary leases it from such Person, other than (a) leases between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries or (b) any arrangement whereby the transfer involves fixed or capital assets and is consummated within 120 days after the date the Company or a Restricted Subsidiary acquires or finishes construction of such fixed or capital assets. "SEC" means the Securities and Exchange Commission. "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Secured Indebtedness" of a Note Guarantor has a correlative meaning. "Securities" means the Securities issued under this Indenture. "Securities Act" means the Securities Act of 1933, as amended. "Securitization Entity" means a Wholly Owned Subsidiary of the Company (or another Person in which the Company or any Subsidiary of the Company makes an Investment and to which the Company or any Subsidiary of the Company transfers accounts receivable and related assets) which engages in no activities other than in connection with the financing of accounts receivable or equipment and which is designated by the Board of Directors of the Company (as provided below) as a Securitization Entity (a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any Subsidiary of the Company (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is recourse to or obligates the Company or any Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings or (iii) subjects any property or asset of the Company or any Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard 24 24 Securitization Undertakings, (b) with which neither the Company nor any Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Company or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity and (c) to which neither the Company nor any Subsidiary of the Company has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee, by filing with the Trustee a certified copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. "Senior Indebtedness" of the Company or any Note Guarantor, as the case may be, means the principal of, premium (if any) and accrued and unpaid interest on (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization of the Company or any Note Guarantor, as applicable, regardless of whether or not a claim for post-filing interest is allowed in such proceedings), and fees and all other amounts owing in respect of, Bank Indebtedness and all other Indebtedness of the Company or any Note Guarantor, as applicable, whether outstanding on the Closing Date or thereafter Incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is provided that such obligations are not superior in right of payment to the Securities or such Note Guarantor's Note Guarantee, provided, however, that Senior Indebtedness shall not include: (a) any obligation of the Company to any Subsidiary of the Company or of any Note Guarantor to the Company or any other Subsidiary of the Company, (b) any liability for Federal, state, local or other taxes owed or owing by the Company or any Note Guarantor, (c) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), (d) any Indebtedness or obligation of the Company or any Note Guarantor (and any accrued and unpaid interest in respect thereof) that by its terms is subordinate or junior in right of payment to any other Indebtedness or obligation of the Company or such Note Guarantor, as applicable, including any Senior Subordinated Indebtedness and any Subordinated Obligations, (e) any obligations with respect to any Capital Stock or (f) any Indebtedness Incurred in violation of this Indenture, unless such Indebtedness was Incurred based on an Officers' Certificate of the Company (delivered in good faith after reasonable investigation) to the effect that the Incurrence of such Indebtedness did not violate the provisions of this Indenture. "Senior Subordinated Indebtedness" of the Company means the Securities and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Securities in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of a Note Guarantor has a correlative meaning. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. 25 25 "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company which are reasonably customary in an accounts receivable securitization transaction. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Stockholders Agreement" means the Stockholders Agreement among the Company and the holders of the Company's Capital Stock party thereto, as in effect at the Closing Date and as amended from time to time, so long as the Permitted Holders own a majority of the Capital Stock subject to such agreement. "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Closing Date or thereafter Incurred) that is subordinate or junior in right of payment to the Securities pursuant to a written agreement. "Subordinated Obligation" of a Note Guarantor has a correlative meaning. "Subsidiary" of any Person means any corporation, association, partnership, limited liability company or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, representatives, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (a) such Person, (b) such Person and one or more Subsidiaries of such Person or (c) one or more Subsidiaries of such Person. "Tangible Assets" means Total Assets less Intangible Assets. "Temporary Cash Investments" means any of the following: (a) any investment in direct obligations of the United States of America or any agency or instrumentality thereof or obligations Guaranteed or insured by the United States of America or any agency or instrumentality thereof, (b) investments in checking accounts, savings accounts, time deposit accounts, certificates of deposit, bankers' acceptances and money market deposits maturing within 360 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits aggregating in excess of $250,000,000 (or the foreign currency equivalent thereof) and whose long-term debt is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act), (c) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above, (d) investments in commercial paper, maturing not more than 270 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of 26 26 America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc. ("S&P"), (e) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's Investors Service, Inc. and (f) investments in money market funds that invest substantially all of their assets in securities of the types described in clauses (a) through (e) above. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa- 77bbbb) as in effect on the Closing Date. "Total Assets" means the total consolidated assets of the Company and its Restricted Subsidiaries, as shown on the most recent balance sheet of the Company. "Trade Payables" means, with respect to any Person, any accounts payable or any indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person arising in the ordinary course of business in connection with the acquisition of goods or services. "Transactions" has the meaning specified in the Offering Memorandum. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means (a) HPC Investment, Inc. and any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (b) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock in or Indebtedness of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either (i) the Subsidiary to be so designated at the time of designation has total Consolidated assets of $1,000 or less or (ii) if such Subsidiary has Consolidated assets greater than $1,000, then such designation would be permitted under Section 4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (a) the Company could Incur 27 27 $1.00 of additional Indebtedness under Section 4.03(a) and (b) no Default shall have occurred and be continuing. Any such designation of a Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all the Capital Stock of which (other than directors' qualifying Capital Stock) is owned by the Company or another Wholly Owned Subsidiary. SECTION 1.02. Other Definitions.
- ------------------------------------------------------------------------------------ Defined in Term Section - ---- ------- - ------------------------------------------------------------------------------------ "Affiliate Transaction" 4.07(a) - ------------------------------------------------------------------------------------ "Appendix" Preamble - ------------------------------------------------------------------------------------ "Bankruptcy Law" 6.01 - ------------------------------------------------------------------------------------ "Blockage Notice" 10.03 - ------------------------------------------------------------------------------------ "Change of Control Offer" 4.08(b) - ------------------------------------------------------------------------------------ "covenant defeasance option" 8.01(b) - ------------------------------------------------------------------------------------ "Custodian" 6.01 - ------------------------------------------------------------------------------------ "Definitive Securities" Appendix A - ------------------------------------------------------------------------------------ "Event of Default" 6.01 - ------------------------------------------------------------------------------------ "Exchange Notes" Preamble - ------------------------------------------------------------------------------------ "Global Securities" Appendix A - ------------------------------------------------------------------------------------ "Guarantee Blockage Notice" 12.03 - ------------------------------------------------------------------------------------ "Guarantee Payment Blockage Period" 12.03 - ------------------------------------------------------------------------------------ "Guaranteed Obligations" 11.01 - ------------------------------------------------------------------------------------ "incorporated provision" 13.01 - ------------------------------------------------------------------------------------ "Initial Securities" Preamble - ------------------------------------------------------------------------------------ "legal defeasance option" 8.01(b) - ------------------------------------------------------------------------------------ "Legal Holiday" 13.08 - ------------------------------------------------------------------------------------ "Notice of Default" 6.01 - ------------------------------------------------------------------------------------ "Offer" 4.06(b) - ------------------------------------------------------------------------------------ "Offer Amount" 4.06(c)(ii) - ------------------------------------------------------------------------------------ "Offer Period" 4.06(c)(ii) - ------------------------------------------------------------------------------------
28 28 - ------------------------------------------------------------------------------------ "pay its Guarantee" 12.03 - ------------------------------------------------------------------------------------ "pay the Securities" 10.03 - ------------------------------------------------------------------------------------ "Paying Agent" 2.03 - ------------------------------------------------------------------------------------ "Payment Blockage Period" 10.03 - ------------------------------------------------------------------------------------ "Private Exchange" Appendix A - ------------------------------------------------------------------------------------ "Private Exchange Notes" Appendix A - ------------------------------------------------------------------------------------ "protected purchaser" 2.07 - ------------------------------------------------------------------------------------ "Purchase Date" 4.06(c)(i) - ------------------------------------------------------------------------------------ "Registration Agreement" Appendix A - ------------------------------------------------------------------------------------ "Registered Exchange Offer" Appendix A - ------------------------------------------------------------------------------------ "Registrar" 2.03 - ------------------------------------------------------------------------------------ "Restricted Payment" 4.04(a) - ------------------------------------------------------------------------------------ "Securities Custodian" Appendix A - ------------------------------------------------------------------------------------ "Successor Company" 5.01(a)
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA, which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities and the Note Guarantees. "indenture security holder" means a Holder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company, the Note Guarantors and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not exclusive; (d) "including" means including without limitation; 29 29 (e) words in the singular include the plural and words in the plural include the singular; (f) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; (g) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; and (h) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price (not including, in either case, any redemption or repurchase premium) with respect to such Preferred Stock, whichever is greater. ARTICLE 2 The Securities SECTION 2.01. Form and Dating. Provisions relating to the Initial Securities, the Private Exchange Notes and the Exchange Notes are set forth in the Appendix, which is hereby incorporated in and expressly made a part of this Indenture. The (a) Initial Securities and the Trustee's certificate of authentication, and (b) Private Exchange Notes and the Trustee's certificate of authentication shall each be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Notes and the Trustee's certificate of authentication, shall be substantially in the form of Exhibit B hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company or any Note Guarantor is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Security shall be dated the date of its authentication. The Securities shall be issuable only in registered form without interest coupons and only in denominations of $1,000 and integral multiples thereof. The Initial Securities, the Private Exchange Notes and the Exchange Notes shall vote and consent together on all matters (as to which any of the Securities may vote or consent) as one class and shall be treated as a single class of Securities issued under this Indenture. SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. 30 30 The Trustee shall authenticate and make available for delivery Securities as set forth in the Appendix. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Any such appointment shall be evidenced by an instrument signed by a Trust Officer, a copy of which shall be furnished to the Company. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.03. Registrar and Paying Agent. (a) The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent, and the term "Registrar" includes any co-registrars. The Company initially appoints the Trustee as (i) Registrar and Paying Agent in connection with the Securities and (ii) the Securities Custodian with respect to the Global Securities. (b) The Company shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically organized Wholly Owned Subsidiaries may act as Paying Agent or Registrar. (c) The Company may remove any Registrar or Paying Agent upon written notice to such Registrar or Paying Agent and to the Trustee; provided, however, that no such removal shall become effective until (i) acceptance of an appointment by a successor as evidenced by an appropriate agreement entered into by the Company and such successor Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (i) above. The Registrar or Paying Agent may resign at any time upon written notice to the Company and the Trustee. SECTION 2.04. Paying Agent to Hold Money in Trust. Prior to each due date of the principal of and interest and liquidated damages (if any) on any Security, the Company shall deposit with the Paying Agent (or if the Company or a Wholly Owned Subsidiary is acting as Paying Agent, segregate and hold in trust for the benefit of the Persons entitled thereto) a sum sufficient to pay such principal, interest and liquidated damages (if any) when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment 31 31 of principal of and interest and liquidated damages (if any) on the Securities, and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish, or cause the Registrar to furnish, to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders. SECTION 2.06. Transfer and Exchange. The Securities shall be issued in registered form and shall be transferable only upon the surrender of a Security for registration of transfer and in compliance with the Appendix. When a Security is presented to the Registrar with a request to register a transfer, the Registrar shall register the transfer as requested if its requirements therefor are met. When Securities are presented to the Registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's request. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section. The Company shall not be required to make and the Registrar need not register transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities for a period of 15 days before a selection of Securities to be redeemed. Prior to the due presentation for registration of transfer of any Security, the Company, the Note Guarantors, the Trustee, the Paying Agent, and the Registrar may deem and treat the Person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and (subject to paragraph 2 of the Securities) interest, if any, on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, any Note Guarantor, the Trustee, the Paying Agent, or the Registrar shall be affected by notice to the contrary. Any Holder of a Global Security shall, by acceptance of such Global Security, agree that transfers of beneficial interest in such Global Security may be effected only through a book-entry system maintained by (a) the Holder of such Global Security (or its agent) or (b) any Holder of a beneficial interest in such Global Security, and that ownership of a beneficial interest in such Global Security shall be required to be reflected in a book entry. 32 32 All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary Participants or beneficial owners of interests in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the Holder (a) satisfies the Company or the Trustee within a reasonable time after such Holder has notice of such loss, destruction or wrongful taking and the Registrar does not register a transfer prior to receiving such notification, (b) makes such request to the Company or the Trustee prior to the Security being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code (a "protected purchaser") and (c) satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Trustee to protect the Company, the Trustee, the Paying Agent and the Registrar from any loss that any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. In the event any such mutilated, lost, destroyed or wrongfully taken Security has become or is about to become due and payable, the Company in its discretion may pay such Security instead of issuing a new Security in replacement thereof. Every replacement Security is an additional obligation of the Company. The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Securities. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancelation and those described in this Section as not outstanding. Subject to Section 13.06, a Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a protected purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal, 33 33 interest and liquidated damages, if any, payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Temporary Securities. In the event that Definitive Securities are to be issued under the terms of this Indenture, until such Definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of Definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Securities and deliver them in exchange for temporary Securities upon surrender of such temporary Securities at the office or agency of the Company, without charge to the Holder. SECTION 2.10. Cancelation. The Company at any time may deliver Securities to the Trustee for cancelation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Securities surrendered for registration of transfer, exchange, payment or cancelation and shall dispose of canceled Securities in accordance with its customary procedures or deliver canceled Securities to the Company pursuant to written direction by an Officer. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancelation. The Trustee shall not authenticate Securities in place of canceled Securities other than pursuant to the terms of this Indenture. SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, the Company shall pay the defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the Persons who are Holders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail or cause to be mailed to each Holder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.12. CUSIP and ISIN Numbers. The Company in issuing the Securities may use "CUSIP" and "ISIN" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" and "ISIN" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE 3 Redemption 34 34 SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date and the principal amount of Securities to be redeemed. The Company shall give each notice to the Trustee provided for in this Section at least 60 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate from the Company to the effect that such redemption will comply with the conditions herein. Any such notice may be canceled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that the Trustee in its sole discretion shall deem to be fair and appropriate. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the method it has chosen for the selection of Securities or portions of Securities to be called for redemption. SECTION 3.03. Notice of Redemption. (a) At least 30 days but not more than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed at such Holder's registered address. The notice shall identify the Securities to be redeemed and shall state: (i) the redemption date; (ii) the redemption price and the amount of accrued interest and liquidated damages (if any) to the redemption date; (iii) the name and address of the Paying Agent; (iv) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (v) if fewer than all the outstanding Securities are to be redeemed, the certificate numbers and principal amounts of the particular Securities to be redeemed; (vi) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; 35 35 (vii) the CUSIP or ISIN number, if any, printed on the Securities being redeemed; and (viii) that no representation is made as to the correctness or accuracy of the CUSIP or ISIN number, if any, listed in such notice or printed on the Securities. (b) At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest and liquidated damages, if any, to the redemption date; provided, however, that if the redemption date is after a regular record date and on or prior to the interest payment date, the accrued interest and liquidated damages, if any, shall be payable to the Holder of the redeemed Securities registered on the relevant record date. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to 11:00 a.m., New York City time, on the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Wholly Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest and liquidated damages, if any, on all Securities or portions thereof to be redeemed on that date other than Securities or portions of Securities called for redemption that have been delivered by the Company to the Trustee for cancelation. Concurrently with such deposit, the Company shall deliver an Officers' Certificate and an Opinion of Counsel to the effect that the redemption complies with the conditions contained in this Indenture. On and after the redemption date, interest and liquidated damages (if any) shall cease to accrue on Securities or portions thereof called for redemption so long as the Company has deposited with the Paying Agent funds sufficient to pay the principal of, plus accrued and unpaid interest and liquidated damages, if any, on, the Securities to be redeemed, unless the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE 4 Covenants SECTION 4.01. Payment of Securities. The Company shall promptly pay the principal of and interest and liquidated damages, if any, on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal, interest and 36 36 liquidated damages, if any, shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate borne by the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02. SEC Reports. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC (if permitted by SEC practice and applicable law and regulations) and provide the Trustee and Holders and prospective Holders (upon request) within 15 days after it files them with the SEC (or if not permitted, within 15 days after it would have otherwise been required to file them with the SEC), copies of the Company's annual report and the information, documents and other reports that are specified in Sections 13 and 15(d) of the Exchange Act. In addition, following the existence of a Public Market, the Company shall furnish to the Trustee and the Holders, promptly upon their becoming available, copies of the annual report to shareholders and any other information provided by the Company to its shareholders generally. The Company also shall comply with the other provisions of Section 314(a) of the TIA. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided, however, that the Company or any Restricted Subsidiary that is a Note Guarantor may Incur Indebtedness if on the date of such Incurrence and after giving effect thereto the Consolidated Coverage Ratio would be greater than 2.00:1.00 if such Indebtedness is Incurred on or prior to December 31, 2002 and 2.25:1.00 if such Indebtedness is Incurred thereafter. (b) Notwithstanding Section 4.03(a), the Company and its Restricted Subsidiaries may Incur the following Indebtedness: (i) Indebtedness Incurred pursuant to the Credit Agreement in an aggregate principal amount not to exceed $580.0 million at any one time outstanding less the aggregate amount of all repayments of principal of such Indebtedness pursuant to Section 4.06; (ii) Indebtedness of the Company owed to and held by any Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the Company or any Restricted Subsidiary; provided, however, that (1) any subsequent issuance or transfer of any Capital Stock or any other event that results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or 37 37 any subsequent transfer of any such Indebtedness (except to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof, (2) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Securities, (3) if a Restricted Subsidiary is the obligor on such Indebtedness, such Indebtedness is made pursuant to an intercompany note and (4) if a Note Guarantor is the obligor on such Indebtedness and the Company is not the obligee, such Indebtedness is subordinated in right of payment to the Note Guarantee of such Note Guarantor; (iii) Indebtedness (1) represented by the Securities, the Note Guarantees, the Exchange Notes and the Exchange Note Guarantees, (2) outstanding on the Closing Date (other than the Indebtedness described in clauses (i) and (ii) above), (3) consisting of Refinancing Indebtedness Incurred in respect of any Indebtedness described in this clause (iii) (including Refinancing Indebtedness) or Section 4.03(a) and (4) consisting of Guarantees of any Indebtedness otherwise permitted by the terms of this Indenture; (iv) (1) Indebtedness of a Restricted Subsidiary Incurred and outstanding on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Subsidiary of or was otherwise acquired by the Company) and (2) Refinancing Indebtedness Incurred by a Restricted Subsidiary in respect of Indebtedness Incurred by such Restricted Subsidiary pursuant to this clause (iv); (v) Indebtedness of the Company or a Restricted Subsidiary (1) in respect of performance bonds, bankers' acceptances, letters of credit and surety or appeal bonds provided by the Company and the Restricted Subsidiaries in the ordinary course of their business, and (2) under Commodity Agreements, Interest Rate Agreements and Currency Agreements entered into for bona fide hedging purposes of the Company or any Restricted Subsidiary in the ordinary course of business; provided, however, that such Interest Rate Agreements or Currency Agreements do not increase the principal amount of Indebtedness of the Company and its Restricted Subsidiaries outstanding at any time other than as a result of fluctuations in interest rates or foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (vi) Indebtedness (including Capitalized Lease Obligations and Attributable Debt) Incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal), equipment or other assets (in each case whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount which, when aggregated with the principal amount of all other Indebtedness then outstanding and Incurred pursuant to this clause (vi) and all Refinancing Indebtedness Incurred to refund, refinance or replace any Indebtedness Incurred pursuant to this clause (vi), does not exceed the greater of (x) 5.0% of Tangible Assets and (y) $30.0 million; 38 38 (vii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course, provided that such Indebtedness is extinguished within five Business Days of Incurrence; (viii) Indebtedness of the Company and its Restricted Subsidiaries arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case incurred or assumed in connection with the disposition of any business, assets or a Subsidiary of the Company in accordance with the terms of the Indenture, other than Guarantees by the Company or any Restricted Subsidiary of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary of the Company for the purpose of financing such acquisition; provided, however, that the maximum aggregate liability in respect of all such Indebtedness shall not exceed the gross proceeds, including the fair market value as determined in good faith by a majority of the Board of Directors of noncash proceeds (the fair market value of such noncash proceeds being measured at the time it is received and without giving effect to any subsequent changes in value), actually received by the Company and its Restricted Subsidiaries in connection with such disposition; (ix) the Incurrence by a Securitization Entity of Indebtedness in a Qualified Securitization Transaction that is not recourse to the Company or any Restricted Subsidiary of the Company (except for Standard Securitization Undertakings); (x) Indebtedness of Foreign Subsidiaries to the extent that the aggregate outstanding amount of Indebtedness incurred by such Foreign Subsidiaries under this clause (x) does not exceed at any one time an amount equal to the sum of (1) 80% of the consolidated book value of the accounts receivable of all Foreign Subsidiaries and (2) 60% of the consolidated book value of the inventory of all Foreign Subsidiaries; (xi) Indebtedness under any Domestic Overdraft Facility; or (xii) Indebtedness of the Company and its Restricted Subsidiaries (in addition to Indebtedness permitted to be Incurred pursuant to Section 4.03(a) or any other clause of this Section 4.03(b)) in an aggregate principal amount on the date of Incurrence that, when added to all other Indebtedness Incurred pursuant to this clause (xii) and then outstanding, shall not exceed $20.0 million. (c) Notwithstanding the foregoing, the Company shall not Incur any Indebtedness pursuant to Section 4.03(b) above if the proceeds thereof are used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated Obligations unless such Indebtedness shall be subordinated to the Securities to at least the same extent as such Subordinated Obligations. The Company shall not Incur any Indebtedness pursuant to Section 4.03(a) or 4.03(b) if such Indebtedness is subordinate or junior in right of payment to any Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of 39 39 payment to Senior Subordinated Indebtedness. In addition, the Company shall not Incur any Secured Indebtedness which is not Senior Indebtedness unless contemporaneously therewith effective provision is made to secure the Securities equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to the Securities) such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien, except for Senior Subordinated Indebtedness and Subordinated Obligations secured by Liens on the assets of any entity existing at the time such entity is acquired by, and becomes a Restricted Subsidiary of, the Company, whether by merger, consolidation, purchase of assets or otherwise, provided that such Liens (x) are not created, incurred or assumed in connection with, or in contemplation of such entity being acquired by the Company and (y) do not extend to any other assets of the Company or any of its Subsidiaries. A Note Guarantor may not Incur any Indebtedness if such Indebtedness is by its terms expressly subordinate or junior in right of payment to any Senior Indebtedness of such Note Guarantor unless such Indebtedness is Senior Subordinated Indebtedness of such Note Guarantor or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Note Guarantor. In addition, a Note Guarantor shall not Incur any Secured Indebtedness that is not Senior Indebtedness of such Note Guarantor unless contemporaneously therewith effective provision is made to secure the Note Guarantee of such Note Guarantor equally and ratably with (or on a senior basis to, in the case of Indebtedness subordinated in right of payment to such Note Guarantee) such Secured Indebtedness for as long as such Secured Indebtedness is secured by a Lien, except for Senior Subordinated Indebtedness and Subordinated Obligations of such Note Guarantor secured by Liens on the assets of any entity existing at the time such entity is acquired by such Note Guarantor, whether by merger, consolidation, purchase of assets or otherwise, provided that such Liens (x) are not created, incurred or assumed in connection with or in contemplation of such assets being acquired by such Note Guarantor and (y) do not extend to any other assets of the Company or any of its Subsidiaries. (d) Notwithstanding any other provision of this Section 4.03, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may Incur pursuant to this Section shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rates of currencies. For purposes of determining the outstanding principal amount of any particular Indebtedness Incurred pursuant to this Section 4.03, (i) Indebtedness Incurred pursuant to the Credit Agreement prior to or on the Closing Date shall be treated as Incurred pursuant to Section 4.03(b)(i), (ii) Guarantees of, or obligations in respect of letters of credit relating to, Indebtedness which is otherwise included in the determination of a particular amount of Indebtedness shall not be included, (iii) if obligations in respect of letters of credit are Incurred pursuant to the Credit Agreement and are being treated as Incurred pursuant to Section 4.03(b)(i) and the letters of credit relate to other Indebtedness, then such other Indebtedness shall not be included, (iv) the principal amount of any Disqualified Stock of the Company or a Restricted Subsidiary or Preferred Stock of a Restricted Subsidiary that is not a Note Guarantor will be equal to the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) or the maximum liquidation preference, (v) the principal amount of Indebtedness, Disqualified Stock of the Company or a Restricted Subsidiary or Preferred Stock of a Restricted Subsidiary that is not a Note Guarantor issued at a price less than the principal amount thereof, the maximum fixed redemption or repurchase price thereof or liquidation preference thereof, as applicable, will be equal to the amount of the liability or obligation 40 40 in respect thereof determined in accordance with GAAP, (vi) if such Indebtedness is denominated in a currency other than U.S. dollars, the U.S. dollar equivalent principal amount thereof shall be calculated based on the relevant currency exchange rates in effect on the date such Indebtedness was Incurred, (vii) the accrual of interest, accrual of dividends, the accretion of accreted value, the payment of interest in the form of additional Indebtedness and the payment of dividends or distributions in the form of additional Capital Stock shall not be deemed an Incurrence of Indebtedness for purposes of this Section 4.03, (viii) Indebtedness permitted by this Section 4.03 need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this Section permitting such Indebtedness, and (ix) in the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in this Section 4.03, the Company, in its sole discretion, shall classify (or later reclassify) such Indebtedness and only be required to include the amount of such Indebtedness in one of such clauses. SECTION 4.04. Limitation on Restricted Payments. (a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay any dividend or make any distribution of any kind on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) or similar payment to the holders (solely in their capacities as such) of its Capital Stock except dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and except dividends or distributions payable to the Company or another Restricted Subsidiary (and, if such Restricted Subsidiary has shareholders other than the Company or other Restricted Subsidiaries, to its other shareholders on a pro rata basis), (ii) purchase, redeem, retire or otherwise acquire for value any Capital Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or another Restricted Subsidiary, (iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment any Subordinated Obligations (other than (1) the purchase, repurchase or other acquisition of Subordinated Obligations purchased 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 (2) Indebtedness Incurred pursuant to Section 4.03(b)(ii)) or (iv) make any Investment (other than a Permitted Investment) in any Person (any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition, retirement or Investment being herein referred to as a "Restricted Payment") if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company could not Incur at least $1.00 of additional Indebtedness under Section 4.03(a); or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments (the amount so expended, if other than in cash, to be determined in good faith by the Board of Directors, whose determination shall be conclusive and evidenced by a resolution of the Board of Directors) declared or made subsequent to the Closing Date would exceed the sum, without duplication, of: 41 41 (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Closing Date occurs to the end of the most recent fiscal quarter ending prior to the date of such Restricted Payment for which consolidated financial statements of the Company are publicly available (or, in case such Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) 100% of the aggregate Net Cash Proceeds (other than in respect of an Excluded Contribution) received by the Company (x) as capital contributions to the Company after the Closing Date or (y) from the issue or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Closing Date (other than a capital contribution from or an issuance or sale to (a) a Subsidiary of the Company or (b) an employee equity ownership or participation plan or other trust established by the Company or any of its Subsidiaries); (C) 100% of the fair market value (as determined in good faith by the Board of Directors of the Company) of shares of Qualified Stock of the Company or any Restricted Subsidiary issued after the Closing Date to acquire assets from a third party; (D) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Closing Date of any Indebtedness of the Company or its Restricted Subsidiaries issued after the Closing Date which is convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash or the fair market value of other property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); (E) 100% of the aggregate amount received by the Company or any Restricted Subsidiary in cash from the sale or other disposition (other than to (x) the Company or a Subsidiary of the Company or (y) an employee equity ownership or participation plan or other trust established by the Company or any of its Subsidiaries) of Restricted Investments made by the Company or any Restricted Subsidiary after the Closing Date and from repurchases and redemptions of such Restricted Investments from the Company or any Restricted Subsidiary by any Person (other than (x) the Company or any of its Subsidiaries or (y) an employee equity ownership or participation plan or other trust established by the Company or any of its Restricted Subsidiaries) and from repayments of loans or advances which constituted Restricted Investments; (F) the amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from (x) payments of dividends, repayments of the principal of loans or advances or other transfers of assets to the Company or any Restricted Subsidiary from Unrestricted 42 42 Subsidiaries or (y) the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investment") not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which amount was included in the calculation of the amount of Restricted Payments; and (G) $5.0 million. (b) The provisions of Section 4.04(a) shall not prohibit: (i) any purchase, repurchase, retirement or other acquisition or retirement for value of, or other distribution in respect of, Capital Stock of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company or capital contributions to the Company after the Closing Date (other than Disqualified Stock and other than Capital Stock issued or sold to, or capital contribution from, a Subsidiary of the Company or an employee equity ownership or participation plan or other trust established by the Company or any of its Subsidiaries); provided, however, that (1) such Restricted Payment shall be excluded in the calculation of the amount of Restricted Payments and (2) the Net Cash Proceeds from such sale or capital contribution applied in the manner set forth in this clause (i) shall be excluded from the calculation of amounts under Section 4.04(a)(iv)(3)(B); (ii) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations of the Company or a Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent sale of, (x) Capital Stock of the Company or a Restricted Subsidiary or (y) Subordinated Obligations of the Company or a Restricted Subsidiary that are permitted to be Incurred pursuant to Section 4.03; provided, however, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments; (iii) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by Section 4.06; provided, however, that such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments; (iv) Investments that are made with Excluded Contributions; provided, however, that such Investments shall be excluded in the calculation of the amount of Restricted Payments; (v) dividends or other distributions paid to holders of, or redemptions from holders of, Capital Stock within 60 days after the date of declaration thereof, or the giving of formal notice of redemption, if at such date of declaration such dividends or other distributions or redemptions would have complied with this Section 4.04(a); provided, however, that such dividend, distribution or redemption shall be included in the calculation of the amount of Restricted Payments; 43 43 (vi) any repurchase of Capital Stock owned by former officers, directors, consultants or employees of the Company or its Subsidiaries or their assigns, estates and heirs or entities controlled by them; provided, however, that the amount of such repurchases shall not, in the aggregate, exceed the sum of (1) $10.0 million (which amount shall be increased by the amount of any Net Cash Proceeds to the Company from (A) sales of Capital Stock of the Company to management, other employees or Permitted Holders subsequent to the Closing Date to the extent such amounts are not included under Section 4.04(a)(iv)(3)(B) and (B) any "key-man" life insurance policies which are used to make such repurchases) and (2) $2.0 million per fiscal year of the Company (which amount may be used in a subsequent fiscal year to the extent not used during a fiscal year); provided further, however, that the cancelation of Indebtedness owing to the Company from such former officers, directors, consultants or employees of the Company or any of its Restricted Subsidiaries in connection with a repurchase of Capital Stock of the Company shall not be deemed to constitute a Restricted Payment under the Indenture; provided further, however, that such repurchase shall be included in the calculation of the amount of Restricted Payments; (vii) any of the transactions pursuant to the Recapitalization Agreement; provided, however, that such amounts shall be excluded in the calculations of the amount of Restricted Payments; (viii) repurchases of Capital Stock deemed to occur upon the exercise of stock options, warrants or other convertible securities if such Capital Stock represents a portion of the exercise price thereof; provided, however, that such repurchases shall be excluded in the calculation of the amount of Restricted Payments; or (ix) so long as no Default or Event of Default shall have occurred and be continuing, payments not to exceed $500,000 in the aggregate to enable the Company to make payments to holders of its Capital Stock in lieu of the issuance of fractional shares of its Capital Stock; provided, however, that such payments shall be excluded in the calculation of the amount of Restricted Payments. SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations owed to the Company or any of its Restricted Subsidiaries (it being understood that the priority of any preferred stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock shall not be deemed a restriction on the ability to make distributions on Capital Stock), (b) make any loans or advances to the Company (it being understood that the subordination of loans or advances made to the Company to other Indebtedness Incurred by the Company shall not be deemed a restriction on the ability to make loans or advances) or (c) transfer any of its property or assets to the Company or any of its Restricted Subsidiaries, except: (i) any encumbrance or restriction pursuant to applicable law or any applicable rule, regulation or order, or an agreement in effect at or entered into on the Closing Date (including the Credit Agreement); 44 44 (ii) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Capital Stock or Indebtedness of such Restricted Subsidiary, in each case Incurred by such Restricted Subsidiary prior to the date on which such Restricted Subsidiary was acquired by the Company (other than Capital Stock or Indebtedness Incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company) and outstanding on such date; (iii) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (c)(i) or (c)(ii) of this Section 4.05 or this clause (iii) or contained in any amendment to an agreement referred to in clause (c)(i) or (c)(ii) of this Section 4.05 or this clause (c)(iii); provided, however, that the encumbrances and restrictions contained in any such Refinancing agreement or amendment are no more restrictive, taken as a whole, than the encumbrances and restrictions contained in such predecessor agreements; (iv) in the case of clause (c), any encumbrance or restriction (1) that restricts in a customary manner the assignment of any lease, license or similar contract or the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, (2) that is or was created by virtue of any transfer of, agreement to transfer or option or right with respect to any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by this Indenture, (3) contained in security agreements securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance or restriction restricts the transfer of the property subject to such security agreements, or (4) encumbrances or restrictions relating to Indebtedness permitted to be Incurred pursuant to Section 4.03(b)(vi) for property acquired in the ordinary course of business that only imposes encumbrances or restrictions on the property so acquired (it being agreed that any such encumbrance or restriction may also secure other Indebtedness permitted to be Incurred by the Company and provided by the same financing source providing the Indebtedness Incurred pursuant to Section 4.03(b)(vi)); (v) with respect to a Restricted Subsidiary, any restriction imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; (vi) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business; (vii) Indebtedness or other contractual requirements of a Securitization Entity in connection with a Qualified Securitization Transaction; provided, that such restrictions apply only to such Securitization Entity; 45 45 (viii) net worth provisions in leases and other agreements entered into by the Company or any Restricted Subsidiary in the ordinary course of business; and (ix) any agreement or instrument governing Indebtedness (whether or not outstanding) of Foreign Subsidiaries of the Company permitted to be Incurred pursuant to Section 4.03(a) or Section 4.03(b)(x). SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, make any Asset Disposition unless (i) the Company or such Restricted Subsidiary receives consideration (including by way of relief from, or by any other Person assuming sole responsibility for, any liabilities, contingent or otherwise) at the time of such Asset Disposition at least equal to the fair market value of the Capital Stock and assets subject to such Asset Disposition, (ii) at least 75% of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of (1) cash or Temporary Cash Investments, (2) properties and assets to be owned by the Company or any Restricted Subsidiary and used in a Permitted Business or (3) Capital Stock in one or more Persons engaged in a Permitted Business that are or thereby become Restricted Subsidiaries of the Company, and (iii) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Restricted Subsidiary, as the case may be): (1) first, (i) to the extent the Company elects (or is required by the terms of any Indebtedness), to prepay, repay, redeem or purchase (x) Bank Indebtedness or (y) other Senior Indebtedness of the Company or Indebtedness (other than any Disqualified Stock) of a Restricted Subsidiary (in the case of clause (y), other than Indebtedness owed to the Company or an Affiliate of the Company and other than Preferred Stock of a Restricted Subsidiary that is not a Note Guarantor) or (ii) to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary or the application by the Company of the Net Available Cash received by a Restricted Subsidiary of the Company), in each case within 365 days (or, in the case of Foreign Subsidiary Asset Dispositions, 545 days) from the later of such Asset Disposition or the receipt of such Net Available Cash; provided that pending the final application of any such Net Available Cash, the Company and its Restricted Subsidiaries may temporarily reduce Indebtedness or otherwise invest such Net Available Cash in any manner not prohibited by this Indenture; (2) second, within 365 days from the later of such Asset Disposition or the receipt of such Net Available Cash (or, in the case of Foreign Subsidiary Asset Dispositions, 545 days), to the extent of the balance of such Net Available Cash after such application in accordance with clause (1), to make an Offer (as defined below) to purchase Securities pursuant to and subject to the conditions set forth in Section 4.06(b); provided, however, that if the Company elects (or is required by the terms of any Senior Subordinated Indebtedness), such Offer may be made ratably to purchase the Securities and other Senior Subordinated Indebtedness of the Company; and 46 46 (3) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (1) (other than the proviso thereof) and (2) for any general corporate purpose not restricted by the terms of this Indenture; provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (1) or (2) above, the Company or such Restricted Subsidiary shall retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this Section 4.06, the Company and the Restricted Subsidiaries shall not be required to apply any Net Available Cash in accordance with this Section 4.06(a) except to the extent that the aggregate Net Available Cash from all Asset Dispositions that is not applied in accordance with this Section 4.06(a) exceeds $10.0 million. For the purposes of this Section 4.06, the following are deemed to be cash: (A) the assumption of any liabilities of the Company (other than Disqualified Stock of the Company) or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such liabilities in connection with such Asset Disposition and (B) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash. (b) In the event of an Asset Disposition that requires the purchase of Securities (and other Senior Subordinated Indebtedness) pursuant to Section 4.06(a)(iii)(2), the Company shall be required to purchase Securities (and other Senior Subordinated Indebtedness) tendered pursuant to an offer by the Company for the Securities (and other Senior Subordinated Indebtedness) (the "Offer") at a purchase price of 100% of their principal amount plus accrued and unpaid interest and liquidated damages, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date) in accordance with the procedures (including prorating in the event of oversubscription) set forth in Section 4.06(c). If the aggregate purchase price of Securities (and other Senior Subordinated Indebtedness) tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Securities (and other Senior Subordinated Indebtedness), the Company shall apply the remaining Net Available Cash for any general corporate purpose not restricted by the terms of the Indenture. The Company shall not be required to make an Offer for Securities (and other Senior Subordinated Indebtedness) pursuant to this Section 4.06 if the Net Available Cash available therefor (after application of the proceeds as provided in clause (1) of Section 4.06(a)(iii)) is less than $10.0 million for any particular Asset Disposition (which lesser amount shall be carried forward for purposes of determining whether an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). Upon completion of the Offer, the amount of Net Available Cash shall be reduced to zero. (c) (i) Promptly, and in any event within 10 days after the Company becomes obligated to make an Offer, the Company shall be obligated to deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in 47 47 part (subject to prorating as hereinafter described in the event the Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the "Purchase Date") and shall contain such information concerning the business of the Company which the Company in good faith believes will enable such Holders to make an informed decision (which at a minimum shall include (1) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current Reports describing Asset Dispositions otherwise described in the offering materials (or corresponding successor reports), (2) a description of material developments in the Company's business subsequent to the date of the latest of such reports, and (3) if material, appropriate pro forma financial information) and all instructions and materials necessary to tender Securities pursuant to the Offer, together with the address referred to in clause (c) (iii). (ii) Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided above, the Company shall deliver to the Trustee an Officers' Certificate as to (1) the amount of the Offer (the "Offer Amount"), (2) the allocation of the Net Available Cash from the Asset Dispositions pursuant to which such Offer is being made and (3) the compliance of such allocation with the provisions of Section 4.06(a). By no later than 11:00 a.m. New York City time on the Purchase Date, the Company shall irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) an amount equal to the Offer Amount or, if less, the purchase price of Securities (and other Senior Subordinated Indebtedness) tendered and accepted for payment in the Offer. Upon the expiration of the period for which the Offer remains open (the "Offer Period"), the Company shall deliver to the Trustee for cancelation the Securities or portions thereof that have been properly tendered to and are to be accepted by the Company. The Trustee (or the Paying Agent, if not the Trustee) shall, on the date of purchase, mail or deliver payment to each tendering Holder in the amount of the purchase price. (iii) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered by the Holder for purchase and a statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities and any other Senior Subordinated Indebtedness included in the Offer surrendered by holders thereof exceeds the Offer Amount, the Company shall select the Securities and other Senior Subordinated Indebtedness to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities and other Senior Subordinated Indebtedness in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. 48 48 (iv) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (v) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.07. Limitation on Transactions with Affiliates. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction (including, the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless such Affiliate Transaction is on terms (i) that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate, (ii) that, in the event that such Affiliate Transaction involves an aggregate amount in excess of $5.0 million, (1) are set forth in writing and (2) except as provided in Section 4.07(a)(iii), have been approved by a majority of the members of the Board of Directors having no personal stake in such Affiliate Transaction (if any such members exist) and (iii) that, in the event (1) such Affiliate Transaction involves an amount in excess of $10.0 million, or (2) if there are no members of the Board of Directors having no personal stake in such Affiliate Transaction and such Affiliate Transaction involves an aggregate amount in excess of $5.0 million, have been determined by a nationally recognized appraisal, accounting or investment banking firm to be fair, from a financial standpoint, to the Company and its Restricted Subsidiaries. (b) The provisions of Section 4.07(a) shall not prohibit (i) any Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any issuance of securities, or other payments awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, options to purchase Capital Stock of the Company and equity ownership, restricted stock plans, long-term incentive plans, stock appreciation rights plans, participation plans or similar employee benefits plans approved by the Board of Directors, (iii) the grant of options (and the exercise thereof) to purchase Capital Stock of the Company or similar rights to employees and directors of the Company pursuant to plans approved by the Board of Directors, (iv) loans or advances to officers, directors or employees in the ordinary course of business, but in any event not to exceed $2.0 million in the aggregate outstanding at any one time, (v) the payment of reasonable fees to directors of the Company and its Subsidiaries who are not employees of the Company or its Subsidiaries and other reasonable fees, compensation, benefits and indemnities paid or entered into by the Company or its Restricted Subsidiaries in the ordinary course of business to or with the officers, directors or employees of the Company and its Restricted Subsidiaries, (vi) any transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries, (vii) the provision by Persons 49 49 who may be deemed Affiliates or stockholders of the Company (other than Chase Capital Partners and Persons directly or indirectly controlled by Chase Capital Partners) of investment banking, commercial banking, trust, lending or financing, investment, underwriting, placement agent, financial advisory or similar services to the Company or its Subsidiaries performed after the Closing Date, (viii) sales of Capital Stock to Permitted Holders approved by a majority of the members of the Board of Directors who do not have a material direct or indirect financial interest in or with respect to the transaction being considered, or (ix) the existence or performance by the Company or any Restricted Subsidiary under any agreement as in effect as of the Closing Date (including the Recapitalization Agreement and the agreements to be entered into pursuant thereto or any amendment thereto) or replacement agreement therefor or any transaction contemplated thereby (including pursuant to any amendment thereto or replacement agreement therefor) so long as such amendment or replacement is not more disadvantageous to the Holders of the Securities in any material respect than the original agreement as in effect on the Closing Date. SECTION 4.08. Change of Control. (a) Upon a Change of Control, each Holder shall have the right to require that the Company repurchase all or any part of such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest and liquidated damages, if any, due on the relevant interest payment date), in accordance with the terms contemplated in Section 4.08(b); provided, however, that notwithstanding the occurrence of a Change of Control, the Company shall not be obligated to repurchase the Securities pursuant to this Section 4.08 in the event that it has exercised its right to redeem all the Securities under paragraph 5 of the Securities. In the event that at the time of such Change of Control the terms of any agreement governing Bank Indebtedness of the Company or its Subsidiaries restrict or prohibit the repurchase of Securities pursuant to this Section 4.08, then prior to the mailing of the notice to Holders provided for in Section 4.08(b) below but in any event within 30 days following any Change of Control, the Company shall (i) repay in full all such Bank Indebtedness or offer to repay in full all such Bank Indebtedness and repay the Bank Indebtedness of each lender who has accepted such offer or (ii) obtain the requisite consent of the lenders under such agreements to permit the repurchase of the Securities as provided for in Section 4.08(b). (b) Within 30 days following any Change of Control (except as provided in the proviso to the first sentence of Section 4.08(a)), the Company shall mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") stating: (i) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase all or a portion (in integral multiples of $1,000) of such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest and liquidated damages, if any, due on the relevant interest payment date); (ii) the circumstances and relevant facts and financial information regarding such Change of Control; 50 50 (iii) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (iv) the instructions determined by the Company, consistent with this Section, that a Holder must follow in order to have its Securities purchased. (c) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the purchase date a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. Holders whose Securities are purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (d) On the purchase date, all Securities purchased by the Company under this Section shall be delivered to the Trustee for cancelation, and the Company shall pay the purchase price plus accrued and unpaid interest and liquidated damages, if any, to the Holders entitled thereto. (e) Notwithstanding the foregoing provisions of this Section, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in Section 4.08(b) applicable to a Change of Control Offer made by the Company and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer. (f) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section 4.08. A Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (g) Prior to any Change of Control Offer, the Company shall deliver to the Trustee an Officers' Certificate stating that all conditions precedent contained herein to the right of the Company to make such offer have been complied with. (h) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. 51 51 SECTION 4.09. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate (which certificate may be the same certificate required by TIA Section 314(a)(4)) stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA Section 314(a)(4). SECTION 4.10. Further Instruments and Acts. Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 4.11. Future Note Guarantors. The Company shall cause each Domestic Subsidiary and any other Restricted Subsidiary that guarantees any Senior Indebtedness (other than a Foreign Subsidiary that guarantees Senior Indebtedness Incurred by another Foreign Subsidiary) to become a Note Guarantor, and, if applicable, execute and deliver to the Trustee a supplemental indenture substantially in the form of Exhibit C pursuant to which such Domestic or other Restricted Subsidiary will Guarantee payment of the Securities. SECTION 4.12. Limitation on Lines of Business. The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business, other than a Permitted Business, except that the Company and any of its Restricted Subsidiaries may engage in a new business so long as the Company and its Restricted Subsidiaries, taken as a whole, remain substantially engaged in a Permitted Business. ARTICLE 5 Successor Company SECTION 5.01. (a) When Company May Merge or Transfer Assets. The Company shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless: (i) the resulting, surviving or transferee Person (the "Successor Company") shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by a supplemental indenture hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture; (ii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; 52 52 (iii) immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to Section 4.03(a); and (iv) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture. The Successor Company shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, but the predecessor Company in the case of a conveyance, transfer or lease of all or substantially all its assets shall not be released from the obligation to pay the principal of and interest on the Securities. (b) The Company shall not permit any Note Guarantor to consolidate with or merge with or into any Person unless: (i) (1) the resulting, surviving or transferee Person will be a corporation, partnership or limited liability company organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and such Person (if not such Note Guarantor) shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Note Guarantor under its Note Guarantee; (2) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person or any Restricted Subsidiary as a result of such transaction as having been Incurred by such Person or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; and (3) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture; or (ii) such transaction results in the Company receiving cash or other property (other than Capital Stock representing a controlling interest in the successor entity), and the transaction is made in compliance with Section 4.06. (c) Notwithstanding the foregoing, (i) any Restricted Subsidiary may consolidate with, merge into or transfer or lease all or part of its properties and assets to the Company or a Subsidiary that is a Note Guarantor and (ii) the Company may merge with an Affiliate incorporated solely for (1) the purpose of incorporating the Company or (2) organizing the Company in another jurisdiction to realize tax or other benefits. ARTICLE 6 Defaults and Remedies SECTION 6.01. Events of Default. An "Event of Default" occurs if: (a) the Company defaults in any payment of interest on any Security or in any payment of liquidated damages, in each case, when the same becomes due 53 53 and payable, whether or not such payment shall be prohibited by Article 10, and such default continues for a period of 30 days; (b) the Company (i) defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon required redemption or repurchase, upon declaration or otherwise, whether or not such payment shall be prohibited by Article 10 or (ii) fails to redeem or purchase Securities when required pursuant to this Indenture or the Securities, whether or not such redemption or purchase shall be prohibited by Article 10; (c) the Company or any Note Guarantor fails to comply with Section 5.01; (d) the Company or any Restricted Subsidiary fails to comply with Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11 or 4.12 (other than a failure to purchase Securities when required under Section 4.06 or 4.08) and such failure continues for 45 days after the written notice specified below; (e) the Company or any Restricted Subsidiary fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in (a), (b), (c) or (d) above) and such failure continues for 60 days after the written notice specified below; (f) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary is not paid within any applicable grace period after final maturity or the acceleration by the holders thereof because of a default and the aggregate principal amount of such Indebtedness unpaid or accelerated exceeds $10.0 million or its foreign currency equivalent at the time and such failure continues for 30 days after the written notice specified below; (g) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a Custodian of it or for any substantial part of its property; or (iv) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Significant Subsidiary in an involuntary case; 54 54 (ii) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; or (iii) orders the winding up or liquidation of the Company or any Significant Subsidiary; or any similar relief is granted under any foreign laws and the order or decree remains unstayed and in effect for 60 days; (i) any judgment or decree for the payment of money in excess of $10.0 million (net of any amounts with respect to which a reputable and creditworthy insurance company has acknowledged liability in writing) or its foreign currency equivalent against the Company or a Restricted Subsidiary if such judgment or decree becomes final and nonappealable and remains outstanding for a period of 60 days following such judgment and is not discharged, waived or the execution thereof stayed; or (j) any Note Guarantee of a Material Subsidiary ceases to be in full force and effect (except as contemplated by the terms thereof) or any Note Guarantor or Person acting by or on behalf of such Note Guarantor denies or disaffirms its obligations under this Indenture or any Note Guarantee and such Default continues for 10 days after the written notice specified below. The foregoing shall constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clause (d), (e), (f) or (j) above is not an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities notify the Company of the Default and the Company or the Note Guarantor, as applicable, does not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any event which is, or with the giving of notice or the lapse of time or both would become, an Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(g) or (h) with respect to the Company) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities by written notice (specifying the Event of Default and stating that 55 55 the notice is a "notice of acceleration") to the Company may declare the principal of and accrued but unpaid interest and liquidated damages on all the Securities to be due and payable. Upon such a declaration, such principal and interest and liquidated damages shall be due and payable immediately. If an Event of Default specified in Section 6.01(g) or (h) with respect to the Company occurs, the principal of and interest and liquidated damages on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences except (a) a Default in the payment of the principal of or interest on a Security, (b) a Default arising from the failure to redeem or purchase any Security when required pursuant to the terms of this Indenture or (c) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Holder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Holders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. (a) Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to this Indenture or the Securities unless: 56 56 (i) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (ii) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; (iii) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (v) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period. (b) A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and liquidated damages and interest on the Securities held by such Holder, on or after the respective due dates expressed or provided for in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount then due and owing (together with interest on overdue principal and (to the extent lawful) on any unpaid interest at the rate provided for in the Securities) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, any Subsidiary or Note Guarantor, their creditors or their property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article 6, it shall pay out the money or property in the following order: 57 FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Indebtedness of the Company to the extent required by Article 10 and to holders of Senior Indebtedness of the Note Guarantors to the extent required by Article 12; THIRD: to Holders for amounts due and unpaid on the Securities for principal and interest, ratably, and any liquidated damages without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, interest and any liquidated damages and interest, respectively; and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section. At least 15 days before such record date, the Trustee shall mail to each Holder and the Company a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company nor any Note Guarantor (to the extent it may lawfully do so) shall at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company and each Note Guarantor (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7 Trustee SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: 58 58 (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (iv) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 7.02. Rights of Trustee. (a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. 59 59 (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other paper or document unless requested in writing to do so by the Holders of not less than a majority in principal amount of the Securities at the time outstanding, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the Company's expense and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (g) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. (h) The Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any certificate previously delivered and not superseded. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent or Registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, any Note Guarantee or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company or any Note Guarantor in this Indenture or in any document 60 60 issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. The Trustee shall not be charged with knowledge of any Default or Event of Default under Sections 6.01(c), (d), (e), (f), (i) or (j) or of the identity of any Significant Subsidiary unless either (a) a Trust Officer shall have actual knowledge thereof or (b) the Trustee shall have received notice thereof in accordance with Section 13.02 hereof from the Company, any Note Guarantor or any Holder at the Corporate Trust Office of the Trustee, such notice referencing the Securities and this Indenture. SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is actually known to a Trust Officer. Except in the case of a Default in payment of principal of or interest on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Holders. SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable after each May 15 beginning with the May 15 following the date of this Indenture, and in any event prior to July 15 in each year, the Trustee shall mail to each Holder a brief report dated as of such May 15 that complies with TIA Section 313(a) if and to the extent required thereby. The Trustee shall also comply with TIA Section 313(b) and 313(c). A copy of each report at the time of its mailing to Holders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services as shall be agreed to in writing from time to time by the Company and the Trustee. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company and each Note Guarantor, jointly and severally, shall indemnify the Trustee and any predecessor Trustee against any and all loss, liability or expense (including reasonable attorneys' fees), including taxes (other than taxes based upon, measured by or determined by the income of the Trustee), incurred by or in connection with the administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company of any claim for which it may seek indemnity promptly upon obtaining actual knowledge thereof; provided, however, that any failure so to notify the Company shall not relieve the Company or any Note Guarantor of its indemnity obligations hereunder. The Company shall defend the claim and the indemnified party shall provide reasonable cooperation at the Company's expense in the defense. Such indemnified parties may have separate counsel and the Company and the Note Guarantors, as applicable shall pay the fees and expenses 61 61 of such counsel; provided, however, that the Company shall not be required to pay such fees and expenses if it assumes such indemnified parties' defense and, in such indemnified parties' reasonable judgment, there is no conflict of interest between the Company and the Note Guarantors, as applicable, and such parties in connection with such defense. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by an indemnified party through such party's own wilful misconduct, negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest and liquidated damages, if any, on particular Securities. The Company's payment obligations pursuant to this Section shall survive the satisfaction or discharge of this Indenture, any rejection or termination of this Indenture under any bankruptcy law or the resignation or removal of the Trustee. Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(g) or (h) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. (a) The Trustee may resign at any time by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (i) the Trustee fails to comply with Section 7.10; (ii) the Trustee is adjudged bankrupt or insolvent; (iii) a receiver or other public officer takes charge of the Trustee or its property; or (iv) the Trustee otherwise becomes incapable of acting. (b) If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. (c) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. (d) If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in 62 62 principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee at the expense of the Company. (e) If the Trustee fails to comply with Section 7.10, unless the Trustee's duty to resign is stayed as provided in TIA Section 310(b), any Holder who has been a bona fide holder of a Security for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b); subject to its right to apply for a stay of its duty to resign under the penultimate paragraph of TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against the Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When (i) all outstanding Securities (other than Securities replaced or paid pursuant to 63 63 Section 2.07) have been canceled or delivered to the Trustee for cancelation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article 3 hereof, and the Company irrevocably deposits with the Trustee funds in an amount sufficient or U.S. Government Obligations, the principal of and interest on which will be sufficient, or a combination thereof sufficient, in the written opinion of a nationally recognized firm of independent public accountants delivered to the Trustee (which delivery shall only be required if U.S. Government Obligations have been so deposited), to pay the principal of, premium (if any) and interest and liquidated damages, if any, on the outstanding Securities when due at maturity or upon redemption of, including interest thereon to maturity or such redemption date (other than Securities replaced or paid pursuant to Section 2.07) and liquidated damages, if any, and if in the case of both clause (i) and (ii) the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all of its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11 and 4.12 and the operation of Section 5.01(a)(iii), 6.01(d), 6.01(f), 6.01(g) (with respect to Significant Subsidiaries of the Company only), 6.01(h) (with respect to Significant Subsidiaries of the Company only) 6.01(i) and 6.01(j) ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. In the event that the Company terminates all of its obligations under the Securities and this Indenture by exercising its legal defeasance option or its covenant defeasance option, the obligations under the Note Guarantees shall each be terminated simultaneously with the termination of such obligations. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Section 6.01(d), 6.01(f), 6.01(g) (with respect to Significant Subsidiaries only), 6.01(h) (with respect to Significant Subsidiaries only), 6.01(i) or 6.01(j) or because of the failure of the Company to comply with Section 5.01(a)(iii). Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07, 7.08 and in this Article 8 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07, 8.04, 8.05 and 8.06 shall survive. SECTION 8.02. (a) Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if: 64 64 (i) the Company irrevocably deposits in trust with the Trustee money in an amount sufficient or U.S. Government Obligations, the principal of and interest on which will be sufficient, or a combination thereof sufficient, to pay the principal of, premium (if any) and interest, on the Securities when due at maturity or redemption, as the case may be, including interest thereon to maturity or such redemption date and liquidated damages (if any); (ii) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal, premium, if any, interest and liquidated damages, if any, when due on all the Securities to maturity or redemption, as the case may be; (iii) 123 days pass after the deposit is made and during the 123-day period no Default specified in Section 6.01(g) or (h) with respect to the Company occurs which is continuing at the end of the period; (iv) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article 10; (v) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (vi) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (1) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (2) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and legal defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and legal defeasance had not occurred; (vii) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and covenant defeasance had not occurred; and (viii) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article 8 have been complied with. 65 65 (b) Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3. (c) Notwithstanding the foregoing, the Opinion of Counsel required by clause (vi) above need not be delivered if all Notes not theretofore delivered to the Trustee for cancelation have become due and payable. SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest and liquidated damages, if any, on the Securities. Money and securities so held in trust are not subject to Article 10 or 12. SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any money or U.S. Government Obligations held by it as provided in this Article which, in the written opinion of nationally recognized firm of independent public accountants delivered to the Trustee (which delivery shall only be required if U.S. Government Obligations have been so deposited), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent discharge or defeasance in accordance with this Article. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of principal, interest or liquidated damages (if any) that remains unclaimed for two years, and, thereafter, Holders entitled to the money must look to the Company for payment as general creditors, and the Trustee and the Paying Agent shall have no further liability with respect to such monies. SECTION 8.05. Indemnity for Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; provided, however, that, if the Company has made any payment of principal of or interest or liquidated damages on, any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. 66 66 ARTICLE 9 Amendments SECTION 9.01. Without Consent of Holders. The Company, the Note Guarantors and the Trustee may amend this Indenture or the Securities without notice to or consent of any Holder: (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article 5; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (iv) to make any change in Article 10 or Article 12 that would limit or terminate the benefits available to any holder of Senior Indebtedness of the Company or a Note Guarantor (or Representatives thereof) under Article 10 or Article 12, respectively; (v) to add additional Guarantees with respect to the Securities or to secure the Securities; (vi) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (vii) to comply with any requirement of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; (viii) to make any change that does not materially and adversely affect the rights of any Holder under the provisions of this Indenture; or (ix) to provide for the issuance of the Exchange Notes or Private Exchange Notes, which shall have terms substantially identical in all material respects to the Initial Securities (except that the transfer restrictions and liquidated damages provisions contained in the Initial Securities shall be modified or eliminated, as appropriate), and which shall be treated, together with any outstanding Initial Securities, as a single issue of securities. After an amendment under this Section 9.01 becomes effective, the Company shall mail to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.01. SECTION 9.02. With Consent of Holders. (a) The Company, the Note Guarantors and the Trustee may amend this Indenture or the Securities without notice to any Holder but with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange for the Securities) and compliance with any provisions of 67 67 this Indenture may be waived with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Securities). However, without the consent of each Holder affected, an amendment or waiver may not: (i) reduce the amount of Securities whose Holders must consent to an amendment; (ii) reduce the rate of or extend the time for payment of interest or any liquidated damages on any Security; (iii) reduce the principal of or extend the Stated Maturity of any Security; (iv) reduce the premium payable upon the redemption of any Security or change the time at which any Security may be redeemed in accordance with Article 3; (v) make any Security payable in money other than that stated in the Security; (vi) make any change in Article 10 or Article 12 that adversely affects the rights of any Holder under Article 10 or Article 12; (vii) make any change in Section 6.04 or 6.07 or the second sentence of this Section 9.02; or (viii) modify the Note Guarantees in any manner adverse to the Holders. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section 9.02 becomes effective, the Company shall mail to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section 9.02. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. (a) A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date on which the Trustee receives an Officers' Certificate from the Company certifying that the requisite number of consents have been received. After an amendment or waiver becomes effective, it shall bind every Holder. An amendment or waiver becomes effective upon the (i) receipt by the Company or the Trustee of the requisite number of consents, (ii) satisfaction of conditions to 68 68 effectiveness as set forth in this Indenture and any indenture supplemental hereto containing such amendment or waiver and (iii) execution of such amendment or waiver (or supplemental indenture) by the Company and the Trustee. (b) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee to Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture and that such amendment is the legal, valid and binding obligation of the Company and the Note Guarantors enforceable against them in accordance with its terms, subject to customary exceptions, and complies with the provisions hereof (including Section 9.03). ARTICLE 10 Subordination SECTION 10.01. Agreement to Subordinate. The Company agrees, and each Holder by accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full of all Senior Indebtedness of the Company and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Securities shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company and shall rank senior to all existing and future Subordinated Obligations of the Company; and only Indebtedness of the Company that is Senior Indebtedness of the Company shall rank senior to the Securities in accordance with the provisions set forth herein. For purposes of this Article 10, the Indebtedness evidenced by the Securities shall be deemed to include any liquidated damages payable pursuant to the provisions set forth in the Securities and the 69 69 Registration Agreement. All provisions of this Article 10 shall be subject to Section 10.12. SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (a) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full of such Senior Indebtedness before Holders shall be entitled to receive any payment of principal of or interest on the Securities; and (b) until the Senior Indebtedness of the Company is paid in full , any payment or distribution to which Holders would be entitled but for this Article 10 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Holders of the Securities may receive Capital Stock and any debt securities that are subordinated to such Senior Indebtedness to at least the same extent as the Securities. SECTION 10.03. Default on Designated Senior Indebtedness. The Company may not pay the principal of, premium (if any) or interest on the Securities or make any deposit pursuant to Section 8.01 and may not otherwise repurchase, redeem or otherwise retire any Securities (collectively, "pay the Securities") if (a) any principal of, interest on, unpaid drawings for letters of credit in respect of, or regularly accruing fees with respect to any, Designated Senior Indebtedness of the Company is not paid when due or (b) any other default on such Designated Senior Indebtedness occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (i) the default has been cured or waived and any such acceleration has been rescinded or (ii) such amounts due under Designated Senior Indebtedness have been paid in full; provided, however, that the Company may pay the Securities without regard to the foregoing if the Company and a Trust Officer of the Trustee receive written notice approving such payment from the Representative of such Designated Senior Indebtedness with respect to which either of the events set forth in clause (a) or (b) of this sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (a) or (b) of the preceding sentence) with respect to any Designated Senior Indebtedness of the Company pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Securities for a period (a "Payment Blockage Period") commencing upon the receipt by a Trust Officer of the Trustee (with a copy to the Company) of written notice specified as a "notice of default" and describing with particularity the default under such Designated Senior Indebtedness (a "Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (a) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (b) by repayment in full of such Designated Senior Indebtedness or (c) because the default giving rise to such Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but 70 70 subject to the provisions contained in the first sentence of this Section), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Securities after the end of such Payment Blockage Period, including any missed payments. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period; provided, however, that if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness other than the Bank Indebtedness, the Representative of the Bank Indebtedness may give another Blockage Notice within such period; provided further, however, that in no event may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. For purposes of this Section, no default or event of default that existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. SECTION 10.04. Acceleration of Payment of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness of the Company (or their Representative) of the acceleration. If any Designated Senior Indebtedness of the Company is outstanding, the Company may not pay the Securities until five Business Days after such holders or the Representative of such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Securities only if this Article 10 otherwise permits payment at that time. SECTION 10.05. When Distribution Must Be Paid Over. If a payment or distribution is made to Holders that because of this Article 10 should not have been made to them, the Holders who receive the distribution shall hold such payment or distribution in trust for holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. SECTION 10.06. Subrogation. After all Senior Indebtedness of the Company is paid in full and until the Securities are paid in full, Holders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Article 10 to holders of such Senior Indebtedness which otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on such Senior Indebtedness. SECTION 10.07. Relative Rights. This Article 10 defines the relative rights of Holders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall: (a) impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest 71 71 and liquidated damages, if any, on the Securities in accordance with their terms; or (b) prevent the Trustee or any Holder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Company to receive distributions otherwise payable to Holders. SECTION 10.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than three Business Days prior to the date of such payment, a Trust Officer of the Trustee receives written notice satisfactory to it that payments may not be made under this Article 10. The Company, the Registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of the Company may give the notice; provided, however, that, if an issue of Senior Indebtedness of the Company has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. The Registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 or any other Section of this Indenture. SECTION 10.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative (if any). SECTION 10.11. Article 10 Not to Prevent Events of Default or Limit Right To Accelerate. The failure to make a payment pursuant to the Securities by reason of any provision in this Article 10 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 10 shall have any effect on the right of the Holders or the Trustee to accelerate the maturity of the Securities. SECTION 10.12. Trust Monies Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article 8 by the Trustee for the payment of principal of and interest and liquidated damages, if any, on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness of the Company or subject to the restrictions set forth in this Article 10, and none of the Holders shall be obligated to 72 72 pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company. SECTION 10.13. Trustee Entitled to Rely. Upon any payment or distribution pursuant to this Article 10, the Trustee and the Holders shall be entitled to rely (a) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (b) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders or (c) upon the Representatives for the holders of Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 10, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 10. SECTION 10.14. Trustee to Effectuate Subordination. Each Holder by accepting a Security authorizes and directs the Trustee on his, her or its behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Holders and the holders of Senior Indebtedness of the Company as provided in this Article 10 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article 10 or otherwise. SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions. Each Holder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. 73 73 ARTICLE 11 Note Guarantees SECTION 11.01. (a) Note Guarantees. Each Note Guarantor hereby jointly and severally and unconditionally guarantees, as a primary obligor and not merely as a surety, to each Holder and to the Trustee and its successors and assigns (i) the full and punctual payment when due, whether at Stated Maturity, by acceleration, by redemption or otherwise, of all obligations of the Company under this Indenture (including obligations to the Trustee) and the Securities, whether for payment of principal of, interest on or liquidated damages, if any, in respect of the Securities and all other monetary obligations (to the fullest extent permitted by applicable law) of the Company under this Indenture and the Securities and (ii) the full and punctual performance within applicable grace periods of all other obligations of the Company whether for fees, expenses, indemnification or otherwise under this Indenture and the Securities (all the foregoing being hereinafter collectively called the "Guaranteed Obligations"). To the fullest extent permitted by applicable law, each Note Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from each such Note Guarantor, and that each such Note Guarantor shall remain bound under this Article 11 notwithstanding any extension or renewal of any Guaranteed Obligation. (b) Each Note Guarantor waives presentation to, demand of payment from and protest to the Company of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Note Guarantor waives notice of any default under the Securities or the Guaranteed Obligations. The obligations of each Note Guarantor hereunder shall not be affected by (i) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise; (ii) any extension or renewal of any thereof; (iii) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (iv) the release of any security held by any Holder or the Trustee for the Guaranteed Obligations or any of them; (v) the failure of any Holder or Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (vi) any change in the ownership of such Note Guarantor, except as provided in Section 11.02(b). (c) Each Note Guarantor hereby waives any right to which it may be entitled to have its obligations hereunder divided among the Note Guarantors, such that such Note Guarantor's obligations would be less than the full amount claimed. Each Note Guarantor hereby waives any right to which it may be entitled to have the assets of the Company first be used and depleted as payment of the Company's or such Note Guarantor's obligations hereunder prior to any amounts being claimed from or paid by such Note Guarantor hereunder. Each Note Guarantor hereby waives any right to which it may be entitled to require that the Company be sued prior to an action being initiated against such Note Guarantor. (d) Each Note Guarantor further agrees that its Note Guarantee herein constitutes a guarantee of payment, performance and compliance when due (and not a 74 74 guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Guaranteed Obligations. (e) The Note Guarantee of each Note Guarantor is, to the extent and in the manner set forth in Article 12, subordinated and subject in right of payment to the prior payment in full of the principal of and premium, if any, and interest on all Senior Indebtedness of the relevant Note Guarantor and is made subject to such provisions of this Indenture. (f) Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06, the obligations of each Note Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Note Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, wilful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Note Guarantor or would otherwise operate as a discharge of any Note Guarantor as a matter of law or equity. (g) Each Note Guarantor agrees that its Note Guarantee shall remain in full force and effect until payment in full of all the Guaranteed Obligations or such Note Guarantee is released upon the merger or the sale of all the Capital Stock or assets of the Note Guarantor in compliance with Section 4.06 or Article 5. Each Note Guarantor further agrees that its Note Guarantee herein shall, to the fullest extent permitted by applicable law, continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest or liquidated damages, if any, on any Guaranteed Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. (h) In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Note Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest or liquidated damages, if any, on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, each Note Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Guaranteed Obligations, (ii) accrued and unpaid interest on such Guaranteed Obligations (but only to the extent not prohibited by law) and (iii) all other monetary obligations of the Company to the Holders and the Trustee. (i) Each Note Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Guaranteed Obligations 75 75 guaranteed hereby until payment in full of all Guaranteed Obligations and all obligations to which the Guaranteed Obligations are subordinated as provided in Article 12. Each Note Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, to the fullest extent permitted by applicable law, (i) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in Article 6 for the purposes of any Note Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article 6, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by such Note Guarantor for the purposes of this Section 11.01. (j) Each Note Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section 11.01. (k) Upon request of the Trustee, each Note Guarantor shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 11.02. Limitation on Liability. (a) Any term or provision of this Indenture to the contrary notwithstanding, the maximum aggregate amount of the Guaranteed Obligations guaranteed hereunder by any Note Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Note Guarantor, void or voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. (b) A Note Guarantee as to any Note Guarantor that is a Subsidiary of the Company shall terminate and be of no further force or effect and such Note Guarantor shall be deemed to be released from all obligations under this Article 11 upon (A) the merger or consolidation of such Note Guarantor with or into any Person other than the Company or a Subsidiary or Affiliate of the Company where such Note Guarantor is not the surviving entity of such consolidation or merger or (B) the sale by the Company or any Subsidiary of the Company (or any pledgee of the Company) of the Capital Stock of such Note Guarantor (or by any other Person as a result of a foreclosure of any lien on such Capital Stock securing Senior Indebtedness), where, after such sale, such Note Guarantor is no longer a Subsidiary of the Company; provided, however, that each such merger, consolidation or sale (or, in the case of a sale by such a pledgee, the disposition of the proceeds of such sale actually received by the Company or any of its Subsidiaries) shall comply with Section 4.06 and Section 5.01(b) and (ii) such Note Guarantor being released from its Guarantee of, and all pledges and security interests granted in connection with, the Credit Agreement and any other Indebtedness of the Company or any Subsidiary of the Company. (c) In addition, a Note Guarantee of any Note Guarantor that is a Subsidiary of the Company shall terminate and be of no further force or effect and such Note Guarantor shall be deemed to be released from all obligations under this Article 11 upon the Issuer's designation of such Note Guarantor as an Unrestricted Subsidiary, 76 76 provided that such designation complies with the other applicable provisions of this Indenture. At the request of the Company, the Trustee shall execute and deliver an appropriate instrument evidencing such release (in the form provided by the Company). SECTION 11.03. Successors and Assigns. This Article 11 shall be binding upon each Note Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. SECTION 11.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article 11 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 11 at law, in equity, by statute or otherwise. SECTION 11.05. Modification. No modification, amendment or waiver of any provision of this Article 11, nor the consent to any departure by any Note Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Note Guarantor in any case shall entitle such Note Guarantor to any other or further notice or demand in the same, similar or other circumstances. SECTION 11.06. Execution of Supplemental Indenture for Future Note Guarantors. Each Subsidiary which is required to become a Note Guarantor pursuant to Section 4.11 shall promptly execute and deliver to the Trustee a supplemental indenture in the form of Exhibit C hereto pursuant to which such Subsidiary shall become a Note Guarantor under this Article 11 and shall guarantee the Guaranteed Obligations. Concurrently with the execution and delivery of such supplemental indenture, the Company shall deliver to the Trustee an Opinion of Counsel and an Officers' Certificate to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors' rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Note Guarantee of such Note Guarantor is a valid and binding obligation of such Note Guarantor, enforceable against such Note Guarantor in accordance with its terms and or to such other matters as the Trustee may reasonably request. SECTION 11.07. Non-Impairment. The failure to endorse a Note Guarantee on any Security shall not affect or impair the validity thereof. 77 77 ARTICLE 12 Subordination of the Note Guarantees SECTION 12.01. Agreement To Subordinate. Each Note Guarantor agrees, and each Holder by accepting a Security agrees, that the obligations of a Note Guarantor hereunder are subordinated in right of payment, to the extent and in the manner provided in this Article 12, to the prior payment in full of all Senior Indebtedness of such Note Guarantor and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness of such Note Guarantor. The obligations hereunder with respect to a Note Guarantor shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of such Note Guarantor and shall rank senior to all existing and future Subordinated Obligations of such Note Guarantor; and only Indebtedness of such Note Guarantor that is Senior Indebtedness of such Note Guarantor shall rank senior to the obligations of such Note Guarantor in accordance with the provisions set forth herein. SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of a Note Guarantor to creditors upon a total or partial liquidation or a total or partial dissolution of such Note Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Note Guarantor and its properties: (a) holders of Senior Indebtedness of such Note Guarantor shall be entitled to receive payment in full of such Senior Indebtedness before Holders shall be entitled to receive any payment pursuant to any Guaranteed Obligations from such Note Guarantor; and (b) until the Senior Indebtedness of such Note Guarantor is paid in full, any payment or distribution to which Holders would be entitled but for this Article 12 shall be made to holders of such Senior Indebtedness as their respective interests may appear, except that Holders may receive Capital Stock and any debt securities that are subordinated to such Senior Indebtedness to at least the same extent as the Note Guarantees. SECTION 12.03. Default on Designated Senior Indebtedness of a Note Guarantor. A Note Guarantor may not make any payment pursuant to any of the Guaranteed Obligations or repurchase, redeem or otherwise retire any Securities (collectively, "pay its Guarantee") if (a) any Designated Senior Indebtedness of such Note Guarantor is not paid when due or (b) any other default on Designated Senior Indebtedness of such Note Guarantor occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (i) the default has been cured or waived and any such acceleration has been rescinded or (ii) such Designated Senior Indebtedness has been paid in full; provided, however, that such Note Guarantor may pay its Guarantee without regard to the foregoing if such Note Guarantor and a Trust Officer of the Trustee receive written notice approving such payment from the Representative of the holders of such Designated Senior Indebtedness with respect to which either of the events in clause (a) or (b) of this sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (a) or (b) of the preceding sentence) with respect to any Designated Senior Indebtedness of a Note Guarantor pursuant to which the maturity thereof may be 78 78 accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, such Note Guarantor may not pay its Guarantee for a period (a "Guarantee Payment Blockage Period") commencing upon the receipt by a Trust Officer of the Trustee (with a copy to such Note Guarantor and the Company) of written notice specified as a "notice of default" and describing with particularity the default under such Designated Senior Indebtedness (a "Guarantee Blockage Notice") of such default from the Representative of the holders of the Designated Senior Indebtedness of such Note Guarantor specifying an election to effect a Guarantee Payment Blockage Period and ending 179 days thereafter (or earlier if such Guarantee Payment Blockage Period is terminated (a) by written notice to the Trustee (with a copy to such Note Guarantor and the Company) from the Person or Persons who gave such Guarantee Blockage Notice, (b) because such Designated Senior Indebtedness has been repaid in full or (c) because the default giving rise to such Guarantee Blockage Notice is no longer continuing). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section 12.03), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, such Note Guarantor may resume to paying its Note Guarantee after such Guarantee Payment Blockage Period, including any missed payments. Not more than one Guarantee Blockage Notice may be given with respect to a Note Guarantor in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness of such Note Guarantor during such period; provided, however, that if any Guarantee Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness of such Note Guarantor other than the Bank Indebtedness, the Representative of the Bank Indebtedness may give another Guarantee Blockage Notice within such period; provided further, however, that in no event may the total number of days during which any Guarantee Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. For purposes of this Section 12.03, no default or event of default that existed or was continuing on the date of the commencement of any Guarantee Payment Blockage Period with respect to the Designated Senior Indebtedness initiating such Guarantee Payment Blockage Period shall be, or be made, the basis of the commencement of a subsequent Guarantee Payment Blockage Period by the Representative of such Designated Senior Indebtedness, whether or not within a period of 360 consecutive days, unless such default or event of default shall have been cured or waived for a period of not less than 90 consecutive days. SECTION 12.04. Demand for Payment. If payment of the Securities is accelerated because of an Event of Default and a demand for payment is made on a Note Guarantor pursuant to Article 11, the Trustee (provided that a Trust Officer of the Trustee shall have received written notice from the Company, such Note Guarantor or a Representative identifying such Designated Senior Indebtedness, on which notice the Trustee shall be entitled to conclusively rely) shall promptly notify the holders of the Designated Senior Indebtedness of such Note Guarantor (or the Representative of such holders) of such demand. If any Designated Senior Indebtedness of such Note Guarantor is outstanding, such Note Guarantor may not pay its Guarantee until five Business Days after such holders or the Representative of the holders of the Designated Senior Indebtedness of such Note Guarantor receive notice of such demand and, thereafter, may pay its Guarantee only if this Article 12 otherwise permits payment at that time. 79 79 SECTION 12.05. When Distribution Must Be Paid Over. If a payment or distribution is made to Holders that because of this Article 12 should not have been made to them, the Holders who receive the payment or distribution shall hold such payment or distribution in trust for holders of the Senior Indebtedness of the relevant Note Guarantor and pay it over to them as their respective interests may appear. SECTION 12.06. Subrogation. After all Senior Indebtedness of a Note Guarantor is paid in full and until the Securities are paid in full in cash, Holders shall be subrogated to the rights of holders of Senior Indebtedness of such Note Guarantor to receive distributions applicable to Designated Senior Indebtedness of such Note Guarantor. A distribution made under this Article 12 to holders of Senior Indebtedness of such Note Guarantor which otherwise would have been made to Holders is not, as between such Note Guarantor and Holders, a payment by such Note Guarantor on Senior Indebtedness of such Note Guarantor. SECTION 12.07. Relative Rights. This Article 12 defines the relative rights of Holders and holders of Senior Indebtedness of a Note Guarantor. Nothing in this Indenture shall: (a) impair, as between a Note Guarantor and Holders, the obligation of a Note Guarantor which is absolute and unconditional, to make payments with respect to the Guaranteed Obligations to the extent set forth in Article 11; or (b) prevent the Trustee or any Holder from exercising its available remedies upon a default by a Note Guarantor under its obligations with respect to the Guaranteed Obligations, subject to the rights of holders of Senior Indebtedness of such Note Guarantor to receive distributions otherwise payable to Holders. SECTION 12.08. Subordination May Not Be Impaired by a Note Guarantor. No right of any holder of Senior Indebtedness of a Note Guarantor to enforce the subordination of the obligations of such Note Guarantor hereunder shall be impaired by any act or failure to act by such Note Guarantor or by its failure to comply with this Indenture. SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding Section 12.03, the Trustee or the Paying Agent may continue to make payments on the Guaranteed Obligations and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than three Business Days prior to the date of such payment, a Trust Officer of the Trustee receives written notice satisfactory to it that payments may not be made under this Article 12. A Note Guarantor, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of a Note Guarantor may give the notice; provided, however, that if an issue of Senior Indebtedness of a Note Guarantor has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness of a Note Guarantor with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like 80 80 rights. The Trustee shall be entitled to all the rights set forth in this Article 12 with respect to any Senior Indebtedness of a Note Guarantor which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of such Note Guarantor; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 12 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 or any other Section of this Indenture. SECTION 12.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of a Note Guarantor, the distribution may be made and the notice given to their Representative (if any). SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit Right To Accelerate. The failure of a Note Guarantor to make a payment on any of its Guaranteed Obligations by reason of any provision in this Article 12 shall not be construed as preventing the occurrence of a default by such Note Guarantor under such obligations. Nothing in this Article 12 shall have any effect on the right of the Holders or the Trustee to make a demand for payment on a Note Guarantor pursuant to Article 11. SECTION 12.12. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article 12, the Trustee and the Holders shall be entitled to rely (a) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.02 are pending, (b) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders or (c) upon the Representatives for the holders of Senior Indebtedness of a Note Guarantor for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness of a Note Guarantor and other Indebtedness of a Note Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of a Note Guarantor to participate in any payment or distribution pursuant to this Article 12, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of such Note Guarantor held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 12, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 12. SECTION 12.13. Trustee To Effectuate Subordination. Each Holder by accepting a Security authorizes and directs the Trustee on his, her or its behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Holders and the holders of Senior Indebtedness of each of the Note Guarantors as provided in this Article 12 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of a Note Guarantor. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of a Note Guarantor and shall not be liable to 81 81 any such holders if it shall mistakenly pay over or distribute to Holders or the relevant Note Guarantor or any other Person, money or assets to which any holders of Senior Indebtedness of such Note Guarantor shall be entitled by virtue of this Article 12 or otherwise. SECTION 12.15. Reliance by Holders of Senior Indebtedness of a Note Guarantor on Subordination Provisions. Each Holder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of a Note Guarantor, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. SECTION 12.16. Defeasance. The terms of this Article 12 shall not apply to payments from money or the proceeds of U.S. Government Obligations held in trust by the Trustee for the payment of principal of and interest on the Securities pursuant to the provisions described in Section 8.03. ARTICLE 13 Miscellaneous SECTION 13.01. Trust Indenture Act Controls. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by, or with another provision (an "incorporated provision") included in this Indenture by operation of, TIA Sections 310 to 318, inclusive, such imposed duties or incorporated provision shall control. SECTION 13.02. Notices. Any notice or communication shall be in writing (which may be a facsimile with the original to follow) and delivered in person or mailed by first-class mail addressed as follows: if to the Company: Huntsman Packaging Corporation 50 Huntsman Way Salt Lake City, UT 84108 Attention of: Ronald G. Moffitt if to the Trustee: The Bank of New York, Floor 21W 101 Barclay Street New York, NY 10286 Attention of: 82 82 Corporate Trust Administration The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Holder shall be mailed, first class mail, to the Holder at the Holder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 13.03. Communication by Holders with Other Holders. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel in form reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with (provided, however, that such counsel may rely as to matters of fact on Officers' Certificates). SECTION 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture (other than pursuant to Section 4.09) shall include: (a) a statement that the individual making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and 83 83 (d) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 13.06. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company, any Note Guarantor or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any Note Guarantor (other than Chase Securities Inc.) shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Holders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or other day on which banking institutions are not required by law or regulation to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 13.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 13.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company or any of the Note Guarantors, shall not have any liability for any obligations of the Company or any of the Note Guarantors under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 13.11. Successors. All agreements of the Company and each Note Guarantor in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. 84 84 SECTION 13.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 85 85 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. HUNTSMAN PACKAGING CORPORATION, by Name: Scott K. Sorensen Title: Executive Vice President and Chief Financial Officer EDISON PLASTICS INTERNATIONAL, INC., HUNTSMAN BULK PACKAGING CORPORATION, HUNTSMAN CONTAINER CORPORATION INTERNATIONAL, HUNTSMAN EDISON FILMS CORPORATION, HUNTSMAN FILM PRODUCTS OF MEXICO, INC., HUNTSMAN KCL CORPORATION, HUNTSMAN PACKAGING GEORGIA, INC., HUNTSMAN PACKAGING OF CANADA, LLC, by /s/ RONALD G. MOFFITT ----------------------------------- Name: Ronald G. Moffitt Title: Executive Vice President, Secretary and General Counsel THE BANK OF NEW YORK, as Trustee by /s/ MICHELE L. RUSSO ----------------------------------- Name: Michele L. Russo Title: Assistant Vice President 86 86 APPENDIX A PROVISIONS RELATING TO INITIAL SECURITIES, PRIVATE EXCHANGE NOTES AND EXCHANGE NOTES 1. Definitions 1.1 Definitions For the purposes of this Appendix A the following terms shall have the meanings indicated below: "Definitive Security" means a certificated Initial Security, Private Exchange Note or Exchange Note (bearing the Restricted Securities Legend if the transfer of such Security is restricted by applicable law) that does not include the Global Securities Legend. "Depositary" means The Depository Trust Company, its nominees and their respective successors. "Global Securities Legend" means the legend set forth under that caption in Exhibit A to this Indenture. "IAI" means an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Initial Purchasers" means Chase Securities Inc. and Deutsche Bank Securities Inc. "Private Exchange" means an offer by the Company, pursuant to the Registration Agreement, to issue and deliver to certain purchasers, in exchange for the Initial Securities held by such purchasers as part of their initial distribution, a like aggregate principal amount of Private Exchange Notes. "Private Exchange Notes" means the Securities of the Company issued in exchange for Initial Securities pursuant to this Indenture in connection with the Private Exchange pursuant to the Registration Agreement. "Purchase Agreement" means the Purchase Agreement dated May 25, 2000, among the Company, the Note Guarantors and the Initial Purchasers. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registered Exchange Offer" means an offer by the Company, pursuant to the Registration Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for their Initial Securities, a like aggregate principal amount of Exchange Notes registered under the Securities Act. 87 87 "Registration Agreement" means the Exchange and Registration Rights Agreement dated May 31, 2000, among the Company, the Note Guarantors and the Initial Purchasers. "Restricted Securities Legend" means the legend set forth in Section 2.3(d)(i) herein. "Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Rule 144A" means Rule 144A under the Securities Act. "Rule 144A Securities" means all Initial Securities offered and sold to QIBs in reliance on Rule 144A. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depositary) or any successor person thereto, who shall initially be the Trustee. "Shelf Registration Statement" means a registration statement filed by the Company in connection with the offer and sale of Initial Securities pursuant to the Registration Agreement. "Transfer Restricted Securities" means Definitive Securities and any other Securities that bear or are required to bear the Restricted Securities Legend. 1.2 Other Definitions
- ------------------------------------------------------------------------- Term: Defined - ---- in Section: ---------- - ------------------------------------------------------------------------- - ------------------------------------------------------------------------- "Agent Members" 2.1(c) - ------------------------------------------------------------------------- "IAI Global Security" 2.1(b) - ------------------------------------------------------------------------- "Global Security" 2.1(b) - ------------------------------------------------------------------------- "Rule 144A Global Security" 2.1(b) - -------------------------------------------------------------------------
2. The Securities 2.1 Form and Dating (a) The Initial Securities issued on the date hereof will be (i) offered and sold by the Company pursuant to the Purchase Agreement and (ii) resold, initially only to QIBs in reliance on Rule 144A. Such Initial Securities may thereafter be transferred to, among others, QIBs and, except as set forth below, IAIs in accordance with Rule 501. (b) Global Securities. Rule 144A Securities shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form (collectively, the "Rule 144A Global Security"), without interest coupons and bearing the Global Securities Legend and Restricted Securities Legend, which shall be deposited on 88 88 behalf of the purchasers of the Securities represented thereby with the Securities Custodian, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as provided in this Indenture. One or more global securities in definitive, fully registered form without interest coupons and bearing the Global Securities Legend and the Restricted Securities Legend (collectively, the "IAI Global Security") shall also be issued on the Closing Date, deposited with the Securities Custodian, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as provided in this Indenture to accommodate transfers of beneficial interests in the Securities to IAIs subsequent to the initial distribution. The Rule 144A Global Security and the IAI Global Security are each referred to herein as a "Global Security" and are collectively referred to herein as "Global Securities", provided, that the term "Global Security" when used in Sections 2.1(b), 2.1(c), 2.3(f)(i), 2.3(g)(i) and 2.4 of this Appendix shall also include any Security in global form issued in connection with a Registered Exchange Offer or Private Exchange. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee and on the schedules thereto as hereinafter provided. (c) Book-Entry Provisions. This Section 2.1(c) shall apply only to a Global Security deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(c) and Section 2.2 and pursuant to an order of the Company signed by two Officers, authenticate and deliver initially one or more Global Securities that (i) shall be registered in the name of the Depositary for such Global Security or Global Securities or the nominee of such Depositary and (ii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions or held by the Trustee as Securities Custodian. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or by the Trustee as Securities Custodian or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (d) Definitive Securities. Except as provided in Section 2.3 or 2.4, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Securities. 2.2 Authentication. The Trustee shall authenticate and make available for delivery upon a written order of the Company signed by two Officers (a) Initial Securities for original issue on the date hereof in an aggregate principal amount of $220,000,000, and (b) the (i) Exchange Notes for issue only in a Registered Exchange Offer and (ii) 89 89 Private Exchange Notes for issue only in the Private Exchange, in the case of each of (i) and (ii) pursuant to the Registration Agreement and for a like principal amount of Initial Securities exchanged pursuant thereto. Such order shall specify the amount of the Securities to be authenticated, the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities, Exchange Notes or Private Exchange Notes. The aggregate principal amount of Securities outstanding at any time may not exceed $220,000,000, except as provided in Sections 2.07 and 2.08 of this Indenture. 2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive Securities. When Definitive Securities are presented to the Registrar with a request: (i) to register the transfer of such Definitive Securities; or (ii) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for transfer or exchange: (1) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (2) in the case of Definitive Securities which are Transfer Restricted Securities, are accompanied by the following additional information and documents, as applicable: (A) if such Definitive Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in the form set forth on the reverse side of the Initial Security or Private Exchange Note, as applicable); or (B) if such Definitive Securities are being transferred to the Company, a certification to that effect (in the form set forth on the reverse side of the Initial Security or Private Exchange Note, as applicable); or (C) if such Definitive Securities are being transferred pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or in reliance upon another exemption from the registration requirements of the Securities Act, (x) a certification to that effect (in the form set forth on the reverse side of the Initial Security or Private Exchange Note, as applicable) and (y) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i) and (z) in the case of a transfer to an IAI, a signed letter substantially in the form of Exhibit D. 90 90 (b) Restrictions on Transfer of a Definitive Security for a Beneficial Interest in a Global Security. A Definitive Security may not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Security, duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, together with: (i) certification (in the form set forth on the reverse side of the Initial Security or Private Exchange Note, as applicable) that such Definitive Security is being transferred (1) to a QIB in accordance with Rule 144A or (2) to an IAI that has furnished to the Trustee a signed letter substantially in the form of Exhibit D, and in the case of clause (2), an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i); and (ii) written instructions directing the Trustee to make, or to direct the Securities Custodian to make, an adjustment on its books and records with respect to such Global Security to reflect an increase in the aggregate principal amount of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such increase, then the Trustee shall cancel such Definitive Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Securities Custodian, the aggregate principal amount of Securities represented by the Global Security to be increased by the aggregate principal amount of the Definitive Security to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Security equal to the principal amount of the Definitive Security so canceled. If no Global Securities are then outstanding and the Global Security has not been previously exchanged for certificated securities pursuant to Section 2.4, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Global Security in the appropriate principal amount. (c) Transfer and Exchange of Global Securities. (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depositary, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. A transferor of a beneficial interest in a Global Security shall deliver a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in such Global Security or another Global Security and such account shall be credited in accordance with such order with a beneficial interest in the applicable Global Security and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Security being transferred. In the case of a transfer of a beneficial interest in the Rule 144A Global Security for an interest in the IAI Global Security, the transferee must furnish a signed letter substantially in the form of Exhibit D to the Trustee and an opinion of counsel or other evidence reasonably satisfactory to the Trustee as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i). 91 91 (ii) If the proposed transfer is a transfer of a beneficial interest in one Global Security to a beneficial interest in another Global Security, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of Global Security from which such interest is being transferred. (iii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. (iv) In the event that a Global Security is exchanged for Definitive Securities pursuant to Section 2.4 prior to the consummation of the Registered Exchange Offer or the effectiveness of the Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A or such other applicable exemption from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company. (d) Legend. (i) Except as permitted by the following paragraphs (ii), (iii) or (iv), each Security certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form (each defined term in the legend being defined as such for purposes of the legend only): "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF 92 92 AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING THE EXEMPTION PROVIDED FOR BY RULE 144 THEREUNDER (IF AVAILABLE), SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE." Each Definitive Security shall bear the following additional legend: "IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS." (ii) Upon any sale or transfer of a Transfer Restricted Security that is a Definitive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Security that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Security if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the 93 93 reverse of the Initial Security, or Private Exchange Note, as applicable) and delivers an opinion of counsel or other evidence reasonably satisfactory to the Registrar as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i)). (iii) After a transfer of any Initial Securities or Private Exchange Notes during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Notes, as the case may be, all requirements pertaining to the Restricted Securities Legend on such Initial Securities or such Private Exchange Notes shall cease to apply and the requirements that any such Initial Securities or such Private Exchange Notes be issued in global form shall continue to apply. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Exchange Notes in exchange for their Initial Securities, all requirements pertaining to Initial Securities that Initial Securities be issued in global form shall continue to apply, and Exchange Notes in global form without the Restricted Securities Legend shall be available to Holders that exchange such Initial Securities in such Registered Exchange Offer. (v) Upon the consummation of a Private Exchange with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Private Exchange Notes in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities be issued in global form shall continue to apply, and Private Exchange Notes in global form with the Restricted Securities Legend shall be available to Holders that exchange such Initial Securities in such Private Exchange. (e) Cancelation or Adjustment of Global Security. At such time as all beneficial interests in a Global Security have either been exchanged for Definitive Securities, transferred, redeemed, repurchased or canceled, such Global Security shall be returned by the Depositary to the Trustee for cancelation or retained and canceled by the Trustee. At any time prior to such cancelation, if any beneficial interest in a Global Security is exchanged for Definitive Securities, transferred in exchange for an interest in another Global Security, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (f) Obligations with Respect to Transfers and Exchanges of Securities. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate, Definitive Securities and Global Securities at the Registrar's request. 94 94 (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchanges to be registered in the name of the registered Holder effecting the exchange pursuant to Sections 2.06, 3.06, 4.06, 4.08 and 9.05 of this Indenture). (iii) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent or the Registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary. (iv) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (g) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depositary or any other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to the registered Holders (which shall be the Depositary or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to 95 95 examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Definitive Securities (a) A Global Security deposited with the Depositary or with the Trustee as Securities Custodian pursuant to Section 2.1 or issued in connection with a Registered Exchange Offer or Private Exchange shall be transferred to the beneficial owners thereof in the form of Definitive Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as a Depositary for such Global Security or if at any time the Depositary ceases to be a "clearing agency" registered under the Exchange Act, and a successor depositary is not appointed by the Company within 90 days of such notice or after the Company becomes aware of such cessation, or (ii) an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of certificated Securities under this Indenture. (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to the Trustee, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depositary shall direct. Any certificated Initial Security in the form of a Definitive Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(d), bear the Restricted Securities Legend. (c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. (d) In the event of the occurrence of any of the events specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to the Trustee a reasonable supply of Definitive Securities in fully registered form without interest coupons. 96 96 EXHIBIT A [FORM OF FACE OF INITIAL SECURITY AND PRIVATE EXCHANGE NOTE] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY 97 97 BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING THE EXEMPTION PROVIDED FOR BY RULE 144 THEREUNDER (IF AVAILABLE), SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. Each Definitive Security shall bear the following additional legend: IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. 98 98 No. $___________ 13% Senior Subordinated Note due 2010 CUSIP No. ______ ISIN No. ______ HUNTSMAN PACKAGING CORPORATION, a Utah corporation, promises to pay to Cede & Co., or registered assigns, the principal sum [listed on the Schedule of Increases or Decreases in Global Security attached hereto](1) [of $_____](2) on June 1, 2010. Interest Payment Dates: June 1 and December 1. Record Dates: May 15 and November 15. - -------- 1 Insert if Security is to be issued in global form. 2 Insert if Security is to be issued in definitive form. 99 99 Additional provisions of this Security are set forth on the other side of this Security. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. HUNTSMAN PACKAGING CORPORATION, by -------------------------------- Name: Title: by -------------------------------- Name: Title: Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By: ------------------------- Authorized Signatory */ If the Security is to be issued in global form, add the Global Securities Legend and the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY". 100 100 [FORM OF REVERSE SIDE OF INITIAL SECURITY AND PRIVATE EXCHANGE NOTE] 13% Senior Subordinated Note due 2010 1. Interest (a) HUNTSMAN PACKAGING CORPORATION, a Utah corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company shall pay interest semiannually on June 1 and December 1 of each year. Interest on the Securities shall accrue from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from May 31, 2000 until the principal hereof is due. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. (b) Liquidated Damages. The holder of this Security is entitled to the benefits of an Exchange and Registration Rights Agreement, dated as of May 31, 2000, among the Company, Edison Plastics International, Inc., Huntsman Bulk Packaging Corporation, Huntsman Container Corporation International, Huntsman Edison Films Corporation, Huntsman Film Products of Mexico, Inc., Huntsman KCL Corporation, Huntsman Packaging Georgia, Inc. and Huntsman Packaging of Canada, LLC (the "Note Guarantors") and the Initial Purchasers named therein (the "Registration Agreement"). Capitalized terms used in this paragraph (b) but not defined herein have the meanings assigned to them in the Registration Agreement. Subject to the terms of the Registration Agreement, if (i) the Shelf Registration Statement or Exchange Offer Registration Statement, as applicable under the Registration Agreement, is not filed with the Commission on or prior to the date specified in the Registration Agreement, (ii) the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is not declared effective on or prior to the date specified in the Registration Agreement, (iii) the Registered Exchange Offer is not consummated on or prior to 225 days after the Issue Date (other than in the event the Company files a Shelf Registration Statement), or (iv) the Shelf Registration Statement is filed and declared effective on or prior to the date specified in the Registration Agreement but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 60 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company shall pay liquidated damages to each holder of Transfer Restricted Securities, during the period of such Registration Default, in an amount equal to $0.192 per week per $1,000 principal amount of the Securities constituting Transfer Restricted Securities held by such Holder until the applicable Registration Statement is filed or declared effective, the Registered Exchange Offer is consummated or the Shelf Registration Statement again becomes effective, an additional Registration Statement becomes effective or a post-effective amendment to the Shelf Registration Statement becomes effective, as the case may be. All accrued liquidated damages shall be paid to holders in the same manner as interest payments on the Securities on semi-annual payment dates which correspond to interest payment dates for the Securities. Following 101 101 the cure of all Registration Defaults, the accrual of liquidated damages shall cease. The Trustee shall have no responsibility with respect to the determination of the amount of any such liquidated damages. For purposes of the foregoing, "Transfer Restricted Securities" means (i) each Initial Security until the date on which such Initial Security has been exchanged for a freely transferable Exchange Note in the Registered Exchange Offer, it being understood that the requirement that an Exchange Dealer deliver a prospectus in connection with sales of Exchange Notes acquired in the Registered Exchange Offer shall not mean that the Exchange Note is not freely transferable, (ii) each Initial Security or Private Exchange Note until the date on which such Initial Security or Private Exchange Note has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement or (iii) each Initial Security or Private Exchange Note until the date on which such Initial Security or Private Exchange Note is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. The Company shall not be required to pay liquidated damages to any Holder of Transfer Restricted Securities to the extent such Holder fails to comply with certain obligations specified in the Registration Agreement. 2. Method of Payment The Company shall pay interest on the Securities (except defaulted interest) to the Persons who are registered holders at the close of business on the May 15 or November 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal, premium, if any, liquidated damages, if any, and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium, if any, liquidated damages, if any, and interest) shall be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company or any successor depositary. The Company will make all payments in respect of a certificated Security (including principal, premium, if any, interest and liquidated damages, if any), at the office of the Paying Agent, except that, at the option of the Company, payment of interest or liquidated damages may be made by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Securities may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar Initially, THE BANK OF NEW YORK, a New York banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent or Registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent or Registrar. 102 102 4. Indenture The Company issued the Securities under an Indenture dated as of May 31, 2000 (the "Indenture"), among the Company, the Note Guarantors and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all terms and provisions of the Indenture, and Holders (as defined in the Indenture) are referred to the Indenture and the TIA for a statement of such terms and provisions. The Securities are senior subordinated unsecured obligations of the Company limited to $220,000,000 aggregate principal amount at any one time outstanding (subject to Sections 2.07 and 2.08 of the Indenture). This Security is one of the [Initial Securities] [Private Exchange Notes] referred to in the Indenture. The Securities include the Initial Securities and any Exchange Notes and Private Exchange Notes issued in exchange for Initial Securities pursuant to the Indenture. The Initial Securities and any Exchange Notes and Private Exchange Notes are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur Indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates and make asset sales. The Indenture also imposes limitations on the ability of the Company and each Note Guarantor to consolidate or merge with or into any other Person or the Company to convey, transfer or lease all or substantially all its property. To guarantee the due and punctual payment of the principal, interest and liquidated damages, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Note Guarantors have jointly and severally unconditionally guaranteed the Guaranteed Obligations on a senior subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption Except as set forth in the following paragraph, the Securities shall not be redeemable at the option of the Company prior to June 1, 2005. On or after June 1, 2005, the Securities shall be redeemable at the option of the Company, in whole or in part, on not less than 30 nor more than 60 days prior notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest and liquidated damages, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest and liquidated damages, if any, due on the relevant interest payment date), if redeemed during the 12-month period commencing on June 1 of the years set forth below: 103 103
- ---------------------------------------------------------------- YEAR REDEMPTION PRICE - ---------------------------------------------------------------- 2005 106.500% - ---------------------------------------------------------------- 2006 104.333% - ---------------------------------------------------------------- 2007 102.167% - ---------------------------------------------------------------- 2008 and thereafter 100.000% - ----------------------------------------------------------------
In addition, prior to June 1, 2003, the Company may redeem up to a maximum of 35% of the original aggregate principal amount of the Securities with the Net Cash Proceeds of one or more Equity Offerings by the Company at a redemption price equal to 113% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages, if any, thereon to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest and liquidated damages, if any, due on the relevant interest payment date); provided, however, that after giving effect to any such redemption, at least 65% of the original aggregate principal amount of the Securities remains outstanding, and any such redemption shall be made within 120 days of such Equity Offering upon not less than 30 nor more than 60 days notice mailed to each holder of Securities being redeemed and otherwise in accordance with the procedures set forth in the Indenture. 6. Sinking Fund The Securities are not subject to any sinking fund. 7. Notice of Redemption Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his or her registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued and unpaid interest and liquidated damages, if any, on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest (and, if applicable, liquidated damages) ceases to accrue on such Securities (or such portions thereof) called for redemption. 8. Repurchase of Securities at the Option of Holders upon Change of Control Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due and liquidated damages, if any, on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 104 104 In accordance with Section 4.06 of the Indenture, the Company will be required to offer to purchase Securities upon the occurrence of certain events. 9. Subordination The Securities and Note Guarantees are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities and Note Guarantees may be paid. The Company and each Note Guarantor agrees, and each Holder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 10. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with, and subject to the restrictions on transfer and exchange set forth in, the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed. 11. Persons Deemed Owners Except as provided in paragraph 2 hereof, the registered Holder of this Security may be treated as the owner of it for all purposes. 12. Unclaimed Money If money for the payment principal, interest or liquidated damages, if any, remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look to the Company for payment and not to the Trustee for payment as general creditors and the Trustee and the Paying Agent shall have no further liability with respect to such monies. 13. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal of, and interest and liquidated damages, if any, on, the Securities to redemption or maturity, as the case may be. 14. Amendment, Waiver 105 105 Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended without prior notice to any Holder but with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Securities and (ii) any default or compliance with any provisions of the Indenture may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company, the Note Guarantors and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article 5 of the Indenture; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to add Note Guarantees with respect to the Securities; (v) to secure the Securities; (vi) to add additional covenants or to surrender rights and powers conferred on the Company; (vii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; (viii) to make any change that does not materially and adversely affect the rights of any Holder under the provisions of the Indenture; (ix) to make any change in the subordination provisions of the Indenture that would limit or terminate the benefits available to any holder of Senior Indebtedness of the Company (or any Representative thereof) under such subordination provisions; or (x) to provide for the issuance of the Exchange Notes or Private Exchange Notes. 15. Defaults and Remedies If an Event of Default occurs (other than an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company) and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal of and interest on all the Securities shall become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Securities may rescind any such acceleration with respect to the Securities and its consequences. If an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense and certain other conditions are complied with. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Securities unless (i) such Holder has previously given the Trustee notice that an Event of Default is continuing, (ii) Holders of at least 25% in principal amount of the outstanding Securities have requested the Trustee in writing to pursue the remedy, (iii) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and (v) the Holders of a majority in principal amount of the outstanding Securities have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Securities are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of 106 106 exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee shall be entitled to indemnification reasonably satisfactory to it against all losses and expenses caused by taking or not taking such action. 16. Trustee Dealings with the Company Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company, a Note Guarantor or its Affiliates and may otherwise deal with the Company, a Note Guarantor or its Affiliates with the same rights it would have if it were not Trustee. 17. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or any Note Guarantor shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. Governing Law THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITH OUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 21. CUSIP and ISIN Numbers The Company has caused CUSIP and ISIN numbers to be printed on the Securities and has directed the Trustee to use CUSIP and ISIN numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of 107 107 such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY WILL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY. 108 108 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - ------------------------------------------------------------ Date: Your Signature: ---------------- --------------------- ------------------------------------------------------------------------ Sign exactly as your name appears on the other side of this Security. Signature Guarantee: Date: ------------------------ ------------------------ Signature must be guaranteed Signature of Signature by a participant in a Guarantee recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee 109 109 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER RESTRICTED SECURITIES This certificate relates to $_________ principal amount of Securities held in (check applicable space) ____ book-entry or _____ definitive form by the undersigned. The undersigned (check one box below): has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Security held by the Depositary a Security or Securities in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Security (or the portion thereof indicated above); _ has requested the Trustee by written order to exchange or register the transfer of a Security or Securities. In connection with any transfer of any of the Securities evidenced by this certificate, the undersigned confirms that such Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1) _ to the Company; or (2) _ to the Registrar for registration in the name of the Holder, without transfer; or (3) _ pursuant to an effective registration statement under the Securities Act of 1933; or (4) _ inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (5) _ to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements; or (6) _ pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any Person other than the registered Holder thereof; provided, however, that if box (5) or (6) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such 110 110 legal opinions, certifications and other information required by the Indenture to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. ------------------------ Your Signature Signature Guarantee: Date: ------------------------- ----------------------------- Signature must be guaranteed Signature of Signature by a participant in a Guarantee recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee - ----------------------------------------------------------------------------- TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ---------------- ------------------------------------- NOTICE: To be executed by an executive officer 111 111 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is $[ ]. The following increases or decreases in this Global Security have been made:
- --------------------------------------------------------------------------------------------- Date of Amount of Amount of Principal Signature Exchange decrease in increase in amount of of Principal Principal this Global authorized Amount of Amount of Security signatory this Global this Global following of Trustee Security Security such or decrease or Securities increase Custodian - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
112 112 OPTION OF HOLDER TO ELECT PURCHASE IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.06 (ASSET DISPOSITION) OR 4.08 (CHANGE OF CONTROL) OF THE INDENTURE, CHECK THE BOX: ASSET DISPOSITION _ CHANGE OF CONTROL _ IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE AMOUNT ($1,000 OR AN INTEGRAL MULTIPLE THEREOF): $ DATE: __________________ YOUR SIGNATURE: __________________ (SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE SECURITY) SIGNATURE GUARANTEE: ---------------------------------------------------------- SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE 113 113 EXHIBIT B [FORM OF FACE OF EXCHANGE NOTE] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. 114 114 No. $__________ 13% Senior Subordinated Note due 2010 CUSIP No. ________ ISIN No. __________ HUNTSMAN PACKAGING CORPORATION, a Utah corporation, promises to pay to Cede & Co., or registered assigns, the principal sum [listed on the Schedule of Increases or Decreases in Global Security attached hereto](3) [of $______] on June 1, 2010. Interest Payment Dates: June 1 and December 1. Record Dates: May 15 and November 15. - -------- 3 115 115 Additional provisions of this Security are set forth on the other side of this Security. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. HUNTSMAN PACKAGING by --------------------------- Name: Title: by --------------------------- Name: Title: Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION THE BANK OF NEW YORK, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by ----------------------------- Authorized Signatory */ If the Security is to be issued in global form, add the Global Securities Legend and the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY". 116 116 [FORM OF REVERSE SIDE OF EXCHANGE NOTE] 13% Senior Subordinated Note due 2010 1. Interest. HUNTSMAN PACKAGING CORPORATION, a Utah corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company shall pay interest semiannually on June 1 and December 1 of each year. Interest on the Securities shall accrue from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from May 31, 2000 until the principal hereof is due. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment The Company shall pay interest on the Securities (except defaulted interest) to the Persons who are registered Holders at the close of business on the May 15 or November 15 next preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal, premium, if any, and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) shall be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company or any successor depositary. The Company will make all payments in respect of a certificated Security (including principal, premium, if any, and interest), at the office of the Paying Agent, except that, at the option of the Company, payment of interest may be made by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Securities may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar Initially, The Bank of New York, a New York banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent or Registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent or Registrar. 4. Indenture 117 117 The Company issued the Securities under an Indenture dated as of May 31, 2000 (the "Indenture"), between among the Company, the Note Guarantors and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all terms and provisions of the Indenture, and Holders (as defined in the Indenture) are referred to the Indenture and the TIA for a statement of such terms and provisions. The Securities are senior subordinated unsecured obligations of the Company limited to $220,000,000 aggregate principal amount at any one time outstanding (subject to Sections 2.07 and 2.08 of the Indenture). This Security is one of the Exchange Notes referred to in the Indenture. The Securities include the Initial Securities and any Exchange Notes and Private Exchange Notes issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities, the Exchange Notes and the Private Exchange Notes are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur Indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates and make Asset Sales. The Indenture also imposes limitations on the ability of the Company and each Note Guarantor to consolidate or merge with or into any other Person or the Company to convey, transfer or lease all or substantially all of its property. To guarantee the due and punctual payment of the principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Note Guarantors have, jointly and severally, unconditionally guaranteed the Guaranteed Obligations on a senior basis subordinated pursuant to the terms of the Indenture. 5. Optional Redemption Except as set forth in the following paragraph, the Securities shall not be redeemable at the option of the Company prior to June 1, 2005. On or after June 1, 2005, the Securities shall be redeemable at the option of the Company, in whole or in part, on not less than 30 nor more than 60 days prior notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest and liquidated damages, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on June 1 of the years set forth below:
- ------------------------------------------------------------------- YEAR REDEMPTION PRICE - -------------------------------------------------------------------
118 118 2005 106.500% - ------------------------------------------------------------------- 2006 104.333% - ------------------------------------------------------------------- 2007 102.167% - ------------------------------------------------------------------- 2008 and thereafter 100.000% - -------------------------------------------------------------------
In addition, prior to June 1, 2003, the Company may redeem up to a maximum of 35% of the original aggregate principal amount of the Securities with the Net Cash Proceeds of one or more Equity Offerings (i) by the Company at a redemption price equal to 113% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that after giving effect to any such redemption, at least 65% of the original aggregate principal amount of the Securities remains outstanding, and any such redemption shall be made within 120 days of such Equity Offering upon not less than 30 nor more than 60 days notice mailed to each Holder of Securities being redeemed and otherwise in accordance with the procedures set forth in the Indenture. 6. Sinking Fund The Securities are not subject to any sinking fund. 7. Notice of Redemption Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his or her registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued and unpaid interest and liquidated damages, if any, on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 8. Repurchase of Securities at the Option of Holders upon Change of Control Upon a Change of Control, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest and liquidated damages, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. In accordance with Section 4.06 of the Indenture, the Company will be required to offer to purchase Securities upon the occurrence of certain events. 9. Subordination 119 119 The Securities and Note Guarantees are subordinated to Senior Indebtedness, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness must be paid before the Securities may be paid. The Company and each Note Guarantor agrees, and each Holder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 10. Denominations; Transfer; Exchange The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 11. Persons Deemed Owners Except as provided in paragraph 2 hereof, the registered Holder of this Security may be treated as the owner of it for all purposes. 12. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment as general creditors and the Trustee and the Paying Agent shall have no further liability with respect to such monies. 13. Discharge and Defeasance Subject to certain conditions, the Company at any time may terminate some of or all its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 14. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended without prior notice to any Holder but with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Securities and (ii) any default or compliance with any of the provisions of the Indenture may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company, the Note Guarantors and 120 120 the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article 5 of the Indenture; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to add Note Guarantees with respect to the Securities; (v) to secure the Securities; (vi) to add additional covenants or to surrender rights and powers conferred on the Company; (vii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; (viii) to make any change that does not materially and adversely affect the rights of any Holder under the provisions of the Indenture; (ix) to make any change in the subordination provisions of the Indenture that would limit or terminate the benefits available to any holder of Senior Indebtedness of the Company (or any Representative thereof) under such subordination provisions; or (x) to provide for the issuance of the Exchange Notes or Private Exchange Notes. 15. Defaults and Remedies If an Event of Default occurs (other than an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company) and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Securities may declare the principal of and accrued but unpaid interest on all the Securities to be due and payable. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs, the principal of and interest on all the Securities shall become immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Securities may rescind any such acceleration with respect to the Securities and its consequences. If an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense and certain other conditions are complied with. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Securities unless (i) such Holder has previously given the Trustee notice that an Event of Default is continuing, (ii) Holders of at least 25% in principal amount of the outstanding Securities have requested the Trustee in writing to pursue the remedy, (iii) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity and (v) the Holders of a majority in principal amount of the outstanding Securities have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Securities are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. Prior to taking any action under the Indenture, the Trustee shall be entitled to indemnification reasonably satisfactory to it against all losses and expenses caused by taking or not taking such action. 121 121 16. Trustee Dealings with the Company Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company, a Note Guarantor or its Affiliates and may otherwise deal with the Company, a Note Guarantor or its Affiliates with the same rights it would have if it were not Trustee. 17. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or any Note Guarantor shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 18. Authentication This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. Governing Law THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 21. CUSIP and ISIN Numbers The Company has caused CUSIP and ISIN numbers to be printed on the Securities and has directed the Trustee to use CUSIP and ISIN numbers in notices of redemption as a convenience to Holders. No representation is made as to 17 the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY WILL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITT EN REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SECURITY. 122 122 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. - ------------------------------------------------------------ Date: Your Signature: ---------------- --------------------- - -------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. Signature Guarantee: Date: --------------------------- ------------------------------- Signature must be guaranteed Signature of Signature by a participant in a Guarantee recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee 123 123 OPTION OF HOLDER TO ELECT PURCHASE IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.06 (ASSET DISPOSITION) OR 4.08 (CHANGE OF CONTROL) OF THE INDENTURE, CHECK THE BOX: ASSET DISPOSITION _ CHANGE OF CONTROL _ IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED BY THE COMPANY PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE AMOUNT ($1,000 OR AN INTEGRAL MULTIPLE THEREOF): $ DATE: YOUR SIGNATURE: ------------------ ------------------ (SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE SECURITY) SIGNATURE GUARANTEE: --------------------------------------------- SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE. 124 20 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is $[ ]. The following increases or decreases in this Global Security have been made:
- --------------------------------------------------------------------------------------- Date of Amount of Amount of Principal Signature Exchange decrease in increase in amount of of Principal Principal this Global authorized Amount of Amount of Security signatory this Global this Global following of Trustee Security Security such or decrease or Securities increase Custodian - --------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------
125 125 EXHIBIT C FORM OF SUPPLEMENTAL INDENTURE SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as of , among [GUARANTOR] (the "New Guarantor"), a subsidiary of HUNTSMAN PACKAGING CORPORATION (or its successor), a Utah corporation (the "Company"), [OTHER EXISTING GUARANTORS] and THE BANK OF NEW YORK, a New York banking corporation, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H : WHEREAS the Company and [OLD GUARANTORS] (the "Existing Guarantors") has heretofore executed and delivered to the Trustee an Indenture (the "Indenture") dated as of May 31, 2000, providing for the issuance of an aggregate principal amount of up to $220,000,000 of 13% Senior Subordinated Notes due 2010 (the "Securities"); WHEREAS Section 4.11 of the Indenture provides that under certain circumstances the Company is required to cause the New Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor shall unconditionally guarantee all the Company's obligations under the Securities pursuant to a Note Guarantee on the terms and conditions set forth herein; and WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and the Existing Guarantors are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor, the Company, the Existing Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Agreement to Guarantee. The New Guarantor hereby agrees, jointly and severally with all the Existing Guarantors, to unconditionally guarantee the Company's obligations under the Securities on the terms and subject to the conditions set forth in Articles 11 and 12 of the Indenture and to be bound by all other applicable provisions of the Indenture and the Securities. 2. Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 3. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE 126 126 STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 4. Trustee Makes No Representation. The recitals contained herein shall be taken as the statements of the Company, [NEW GUARANTOR] and the Existing Guarantors, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 5. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 6. Effect of Headings. The Section headings herein are for convenience only and shall not effect the construction thereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. [NEW GUARANTOR], by ------------------------------ Name: Title: HUNTSMAN PACKAGING CORPORATION, by ------------------------------ Name: Title: [OTHER EXISTING GUARANTORS], by ------------------------------ Name: Title: THE BANK OF NEW YORK, as Trustee, by ------------------------------ Name: Title: 127 127 EXHIBIT D Form of Transferee Letter of Representation Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, UT 84108 Ladies and Gentlemen: This certificate is delivered to request a transfer of $ principal amount of the 13% Senior Subordinated Notes due 2010 (the "Notes") of Huntsman Packaging Corporation (the "Issuer"). Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows: Name: ----------------------------------------------------------------- Address: --------------------------------------------------------------- Taxpayer ID Number: ---------------------------------------------------- The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")), purchasing for our own account or for the account of such an institutional "accredited investor" at least $250,000 principal amount of the Notes, and we are acquiring the Notes not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we invest in or purchase securities similar to the Notes in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment. 2. We understand that the Notes have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Notes to offer, sell or otherwise transfer such Securities prior to the date that is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Notes (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement that has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act ("Rule 144A"), to a person we reasonably believe is a qualified institutional 128 128 buyer under Rule 144A (a "QIB") that is purchasing for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) to an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor," in each case, in a minimum principal amount of Notes of $250,000, or (e) pursuant to any other available exemption from the registration requirements of the Securities Act, including the exemption provided for by Rule 144 thereunder (if available) subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Notes is proposed to be made pursuant to clause (d) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Notes for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Securities pursuant to clause (d) or (e) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company and the Trustee. TRANSFEREE: , ----------------- by: --------------------------- EX-4.3 7 ex4-3.txt EXCHANGE AND REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.3 1 EXECUTION COPY HUNTSMAN PACKAGING CORPORATION 220,000 UNITS CONSISTING OF $220,000,000 PRINCIPAL AMOUNT OF 13% SENIOR SUBORDINATED NOTES DUE 2010 AND WARRANTS TO PURCHASE 18,532 SHARES OF COMMON STOCK EXCHANGE AND REGISTRATION RIGHTS AGREEMENT May 31, 2000 CHASE SECURITIES INC. DEUTSCHE BANK SECURITIES INC. c/o Chase Securities Inc. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: Huntsman Packaging Corporation, a Utah corporation (the "Company"), proposes to issue and sell to Chase Securities Inc. ("CSI") and Deutsche Bank Securities Inc. ("DBSI" and, together with CSI, the "Initial Purchasers"), upon the terms and subject to the conditions set forth in a purchase agreement dated May 25, 2000 (the "Purchase Agreement"), 220,000 units (the "Units"), each Unit consisting of $1,000 principal amount of the Company's 13% Senior Subordinated Notes due 2010 (the "Notes") to be guaranteed on a senior subordinated basis by certain of the Company's subsidiaries signatory hereto (the "Note Guarantors") and one warrant to purchase 0.08424 shares of common stock, no par value, of the Company. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement. As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Initial Purchasers thereunder, the Company and the Note Guarantors agree with the Initial Purchasers, for the benefit of the holders (including the Initial Purchasers and the Market-Maker (as defined herein)) of the Notes, the Exchange Notes (as defined herein) and the Private Exchange Notes (as defined herein) (collectively, the "Holders"), as follows: 1. Registered Exchange Offer. Unless, because of any change in law or applicable interpretations thereof by the Commission's staff, the Company and the Note Guarantors determine in good faith after consultation with counsel that they are not permitted to effect the Registered Exchange Offer (as defined herein), the Company and the Note Guarantors shall (i) prepare and, not later than 75 days following the date of original issuance of the Notes (the "Issue Date"), file with the 2 2 Commission a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act with respect to a proposed offer to the Holders of the Notes (the "Registered Exchange Offer") to issue and deliver to such Holders, in exchange for the Notes, a like aggregate principal amount of debt securities of the Company (the "Exchange Notes") that are identical in all material respects to the Notes, except for the transfer restrictions relating to the Notes, (ii) use their reasonable best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act no later than 180 days after the Issue Date and the Registered Exchange Offer to be consummated no later than 225 days after the Issue Date and (iii) keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). The Exchange Notes will be issued under the Indenture or an indenture (the "Exchange Notes Indenture") among the Company, the Note Guarantors and the Trustee or such other bank or trust company that is reasonably satisfactory to the Initial Purchasers, as trustee (the "Exchange Notes Trustee"), such indenture to be identical in all material respects to the Indenture, except for the transfer restrictions relating to the Notes (as described above). All references in this Agreement to "prospectus" shall, except where the context otherwise requires, include any prospectus (or amendment or supplement thereto) filed with the Commission pursuant to Section 6 of this Agreement. Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Notes for Exchange Notes (assuming that such Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as defined herein) not complying with the requirements of the next sentence, (b) is not an Initial Purchaser holding Notes that have, or that are reasonably likely to have, the status of an unsold allotment in an initial distribution, (c) acquires the Exchange Notes in the ordinary course of such Holder's business, (d) has no arrangements or understandings with any person to participate in the distribution of the Exchange Notes and (e) if such Holder is not an Exchanging Dealer (as defined below), it is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes) and to trade such Exchange Notes from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company, the Note Guarantors, the Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, each Holder that is a broker-dealer electing to exchange Notes, acquired for its own account as a result of market-making activities or other trading activities, for Exchange Notes (an "Exchanging Dealer"), is required to deliver a prospectus containing substantially the information set forth in 3 3 Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section (if any) and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Notes received by such Exchanging Dealer pursuant to the Registered Exchange Offer. If, prior to the consummation of the Registered Exchange Offer, any Holder shall notify the Company in writing that it holds any Notes acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder notifies the Company in writing that it believes that it is not entitled to participate in the Registered Exchange Offer (other than because it has an understanding or arrangement with any person to participate in the distribution of the Exchange Notes) and such Holder has not received a written opinion from counsel to the Company, reasonably acceptable to such Holder to the effect that such Holder is legally permitted to participate in the Registered Exchange Offer, the Company shall, upon the request of any such Holder, simultaneously with the delivery of the Exchange Notes in the Registered Exchange Offer, issue and deliver to any such Holder, in exchange for the Notes held by such Holder (the "Private Exchange"), a like aggregate principal amount of debt securities of the Company (the "Private Exchange Notes") that are identical in all material respects to the Exchange Notes, except for the transfer restrictions relating to such Private Exchange Notes. The Private Exchange Notes will be issued under the same indenture as the Exchange Notes, and, if permitted under the policies established at such time by the CUSIP Service Bureau of Standard & Poor's Corporation, the Company shall use its reasonable best efforts to cause the Private Exchange Notes to bear the same CUSIP number as the Exchange Notes. In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; (d) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York City time, on the last business day on which the Registered Exchange Offer shall remain open; and 4 4 (e) otherwise comply in all respects with all laws that are applicable to the Registered Exchange Offer. As soon as practicable after the close of the Registered Exchange Offer and any Private Exchange, as the case may be, the Company shall: (a) accept for exchange all Notes tendered and not validly withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (b) deliver to the Trustee for cancelation all Notes so accepted for exchange; and (c) cause the Trustee or the Exchange Notes Trustee, as the case may be, promptly to authenticate and deliver to each Holder, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Notes of such Holder so accepted for exchange. The Company and the Note Guarantors shall use their reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein in order to permit such prospectus to be used by all persons (including Exchanging Dealers) subject to the prospectus delivery requirements of the Securities Act for 180 days after the consummation of the Registered Exchange Offer (such 180 days, the "Applicable Period"). The Indenture or the Exchange Notes Indenture, as the case may be, shall provide that the Notes, the Exchange Notes and the Private Exchange Notes shall vote and consent together on all matters as one class and that none of the Notes, the Exchange Notes or the Private Exchange Notes will have the right to vote or consent as a separate class on any matter. Interest on each Exchange Note and Private Exchange Note issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the Issue Date. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company and the Note Guarantors in writing (which may be contained in the applicable letter of transmittal) that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Notes received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Notes or the Exchange Notes within the meaning of the Securities Act, (iii) such Holder is not an affiliate of the Company or, if it is such an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable and (iv) if such Holder is a broker-dealer, 5 5 that it will deliver a prospectus in connection with any resale of such Exchange Notes during the Applicable Period. Notwithstanding any other provisions hereof, the Company and the Note Guarantors will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not, as of the consummation of the Registered Exchange Offer, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2. Shelf Registration. If (i) because of any change in law or applicable interpretations thereof by the Commission's staff the Company and the Note Guarantors determine in good faith after consultation with counsel that they are not permitted to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or (ii) any Notes validly tendered pursuant to the Registered Exchange Offer are not exchanged for Exchange Notes within 225 days after the Issue Date, or (iii) the Initial Purchasers so request with respect to Notes or Private Exchange Notes not eligible to be exchanged for Exchange Notes in the Registered Exchange Offer and held by them following the consummation of the Registered Exchange Offer, or (iv) any applicable law or interpretations do not permit any Holder to participate in the Registered Exchange Offer (other than because such Holder has an understanding or arrangement with any person to participate in the distribution of the Exchange Notes), or (v) any Holder that participates in the Registered Exchange Offer notifies the Company in writing within 30 days following the consummation of the Registered Exchange Offer that such Holder may not resell the Exchange Notes acquired by it in the Registered Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not legally available for such resales by such Holder, or (vi) the Company so elects, then the following provisions shall apply: (a) The Company and the Note Guarantors shall use their reasonable best efforts to file as promptly as practicable (but in no event more than 60 days after so required or requested pursuant to this Section 2; provided that in the case of any filing in response to clause (i), (iii) or (iv) of the preceding paragraph, the Company and the Note Guarantors shall not be required to make any such filing earlier than 75 days following the Issue Date (the date of such filing, the "Shelf Filing Date")) with the Commission, 6 6 and thereafter shall use their reasonable best efforts to cause to be declared effective on or prior to 105 days after the Shelf Filing Date (but, in the case of any filing in response to clause (i), (iii), (iv) or (vi) of the preceding paragraph, in no event earlier than the 180th day after the Issue Date), a shelf registration statement on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Notes (as defined below) by the Holders thereof from time to time in accordance with the methods of distribution set forth in such registration statement (hereafter, a "Shelf Registration Statement" and, together with any Exchange Offer Registration Statement, a "Registration Statement"). (b) The Company and the Note Guarantors shall use their reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be used by Holders of Transfer Restricted Notes for a period ending on the earlier of (i) two years from the Issue Date or such shorter period that will terminate when all the Transfer Restricted Notes covered by the Shelf Registration Statement have been sold pursuant thereto and (ii) the date on which the Notes become eligible for resale without volume restrictions pursuant to Rule 144 under the Securities Act (in any such case, such period being called the "Shelf Registration Period"). The Company and the Note Guarantors shall be deemed not to have used their reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if any of them voluntarily take any action that would result in Holders of Transfer Restricted Notes covered thereby not being able to offer and sell such Transfer Restricted Notes during that period, unless (A) such action is required by applicable law or (B) such action was permitted by Section 2(c). (c) Notwithstanding the provisions of Section 2(b) (but subject to the provisions of Section 3(b)), the Company and the Note Guarantors may for valid business reasons, including without limitation, a potential acquisition, divestiture of assets or other material corporate transaction, issue a notice that the Shelf Registration Statement is no longer effective or the prospectus included therein is no longer usable for offers and sales of Transfer Restricted Notes and may issue any notice suspending use of the Shelf Registration Statement required under applicable securities laws to be issued. The provisions of this Section 2(c) shall also be applicable to the Exchange Offer Registration Statement during the Applicable Period; provided that the Applicable Period shall be extended for the number of days (which shall not exceed 60) that the use of the Exchange Offer Registration Statement is suspended. 7 7 (d) Notwithstanding any other provisions hereof, the Company and the Note Guarantors shall ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in either case, other than with respect to information included therein in reliance upon or in conformity with written information furnished to the Company by or on behalf of any Holder specifically for use therein (the "Holders' Information")) does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus (in either case, other than with respect to Holders' Information), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 3. Liquidated Damages. (a) The parties hereto agree that the Holders of Transfer Restricted Notes will suffer damages if the Company and the Note Guarantors fail to fulfill their obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the applicable Registration Statement is not filed with the Commission on or prior to the date specified in this Agreement, (ii) the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is not declared effective on or prior to the date specified in this Agreement, (iii) the Registered Exchange Offer is not consummated on or prior to 225 days after the Issue Date (other than in the event the Company is requested or required or elected to file a Shelf Registration Statement), or (iv) the Shelf Registration Statement is filed and declared effective on or prior to the date specified in this Agreement but shall thereafter cease to be effective (at any time that the Company and the Note Guarantors are obligated to maintain the effectiveness thereof) without being succeeded within 60 days by an additional Registration Statement or a post-effective amendment to the Shelf Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Note Guarantors will be jointly and severally obligated to pay liquidated damages to each Holder of Transfer Restricted Notes, during the period of one or more such Registration Defaults, in an amount equal to $ 0.192 per week per $1,000 principal amount of Transfer Restricted Notes held by such Holder until (i) the applicable Registration Statement is filed, (ii) the Exchange Offer Registration Statement is declared effective and the Registered Exchange Offer is consummated, (iii) the Shelf Registration Statement is declared effective or (iv) the Shelf Registration Statement again becomes effective, an 8 8 additional Registration Statement becomes effective or a post-effective amendment to the Shelf Registration Statement becomes effective, as the case may be. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. As used herein, the term "Transfer Restricted Notes" means (i) each Note until the date on which such Note has been exchanged for a freely transferable Exchange Note in the Registered Exchange Offer (it being understood that the requirement that an Exchanging Dealer deliver a prospectus in connection with sales of Exchange Notes acquired in the Registered Exchange Offer shall not mean that the Exchange Note is not freely transferable for purposes of this Section 3), (ii) each Note or Private Exchange Note until the date on which it has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) each Note or Private Exchange Note until the date on which it is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3(a), the Company shall not be required to pay liquidated damages to a Holder of Transfer Restricted Notes if such Holder failed to comply with its obligations to make the representations set forth in the second to last paragraph of Section 1 or failed to provide the information required to be provided by it, if any, pursuant to Section 4(n). (b) Notwithstanding the foregoing provisions of Section 3(a), the Company and the Note Guarantors may for valid business reasons, including without limitation, a potential acquisition, divestiture of assets or other material corporate transaction, issue a notice that the Shelf Registration Statement is no longer effective or the prospectus included therein is no longer usable for offers and sales of Transfer Restricted Notes and may issue any notice suspending use of the Shelf Registration Statement required under applicable securities laws to be issued and, in the event that the aggregate number of days in any consecutive twelve-month period for which all such notices are issued and effective exceeds 60 days in the aggregate, then the Company and the Note Guarantors will be jointly and severally obligated to pay liquidated damages to each Holder of Transfer Restricted Notes covered by the Shelf Registration Statement in an amount equal to $0.192 per week per $1,000 principal amount of Notes constituting Transfer Restricted Notes covered by the Shelf Registration Statement held by such Holder. Upon the Company and the Note Guarantors declaring that the Shelf Registration Statement is useable after the period of time described in the preceding sentence, accrual of liquidated damages shall cease; provided, however, that if after any such cessation of the accrual of liquidated damages the Shelf Registration Statement again ceases to be useable beyond the period permitted above, liquidated damages will again accrue pursuant to the foregoing provisions. (c) The Company shall notify the Trustee and the Paying Agent under the Indenture immediately upon the happening of each and every Registration Default. The Company and the Note 9 9 Guarantors shall pay the liquidated damages due on the Transfer Restricted Notes by depositing with the Paying Agent (which may not be the Company for these purposes), in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on the next interest payment date specified by the Indenture and the Notes, sums sufficient to pay the liquidated damages then due. The liquidated damages due shall be payable on each interest payment date specified by the Indenture and the Notes to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay liquidated damages shall be deemed to accrue from and including the date of the applicable Registration Default. (d) The parties hereto agree that the liquidated damages provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by Holders of Transfer Restricted Notes by reason of the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to remain effective or (iii) the Exchange Offer Registration Statement to be declared effective and the Registered Exchange Offer to be consummated, in each case to the extent required by this Agreement. 4. Registration Procedures. In connection with any Registration Statement, the following provisions shall apply: (a) The Company shall (i) furnish to the Initial Purchasers, prior to the filing thereof with the Commission, a copy of the Exchange Offer Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as the Initial Purchasers may reasonably propose; (ii) include information substantially as set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section (if any) and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include information substantially as set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested in writing by any Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. (b) The Company shall advise the Initial Purchasers, each Exchanging Dealer and the Holders (if applicable) and, if requested by any such person, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): 10 10 (i) when any Registration Statement and any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Notes, the Exchange Notes or the Private Exchange Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in any Registration Statement or the prospectus included therein in order that the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company and the Note Guarantors will make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of any Registration Statement. (d) The Company will furnish to each Holder of Transfer Restricted Notes included within the coverage of any Shelf Registration Statement, without charge, at least one conformed copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company will, during the Shelf Registration Period, promptly deliver to each Holder of Transfer Restricted Notes included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by each of the selling Holders of Transfer Restricted Notes in connection with the offer and sale of the Transfer 11 11 Restricted Notes covered by such prospectus or any amendment or supplement thereto. (f) The Company will furnish to the Initial Purchasers, each Exchanging Dealer who so requests in writing, and to any other Holder who so requests in writing, without charge, at least one conformed copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if the Initial Purchasers or Exchanging Dealer or any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (g) The Company will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to the Initial Purchasers, each Exchanging Dealer and such other persons that are required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement or the Shelf Registration Statement and any amendment or supplement thereto as the Initial Purchasers, such Exchanging Dealer or other persons may reasonably request in writing; and the Company and the Note Guarantors consent to the use of such prospectus or any amendment or supplement thereto by the Initial Purchasers, such Exchanging Dealer or other persons, as applicable, as aforesaid. (h) Prior to the effective date of any Registration Statement, the Company and the Note Guarantors will use their reasonable best efforts to register or qualify, or cooperate with the Holders of Notes, Exchange Notes or Private Exchange Notes included therein and their respective counsel in connection with the registration or qualification of, such Notes, Exchange Notes or Private Exchange Notes for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Notes, Exchange Notes or Private Exchange Notes covered by such Registration Statement; provided that the Company and the Note Guarantors will not be required to qualify generally to do business in any jurisdiction where they are not then so qualified or to take any action which would subject them to general service of process or to taxation in any such jurisdiction where they are not then so subject. (i) The Company and the Note Guarantors will cooperate with the Holders of Notes, Exchange Notes or Private Exchange Notes to facilitate the timely preparation and delivery of certificates representing Notes, Exchange Notes or Private Exchange Notes to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the 12 12 Holders thereof may request in writing prior to sales of Notes, Exchange Notes or Private Exchange Notes pursuant to such Registration Statement. (j) If any event contemplated by Sections 2(c), 3(b) or 4(b)(ii) through (v) occurs during the period for which the Company and the Note Guarantors are required to maintain an effective Registration Statement, the Company and the Note Guarantors will, to the extent required after the end of the applicable periods referred to in Sections 2(c) and 3(b), promptly prepare and file with the Commission a post-effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to purchasers of the Notes, Exchange Notes or Private Exchange Notes from a Holder, the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Notes, the Exchange Notes and the Private Exchange Notes, as the case may be, and provide the applicable trustee with certificates for the Notes, the Exchange Notes or the Private Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company and the Note Guarantors will comply with all applicable rules and regulations of the Commission and the Company and the Note Guarantors will make generally available to their security holders as soon as practicable after the effective date of the applicable Registration Statement an earning statement of the Company satisfying the provisions of Section 11(a) of the Securities Act; provided that in no event shall such earning statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the applicable Registration Statement, which statement shall cover such 12-month period. (m) The Company and the Note Guarantors will cause the Indenture or the Exchange Notes Indenture, as the case may be, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (n) The Company may require each Holder of Transfer Restricted Notes to be registered pursuant to any Shelf Registration Statement to furnish to the Company such information concerning the Holder and the distribution of such Transfer Restricted Notes as the Company may from time to time reasonably require for inclusion in such Shelf 13 13 Registration Statement, and the Company may exclude from such registration the Transfer Restricted Notes of any Holder that fails to furnish such information within a reasonable time after receiving such request. Each Holder of Transfer Restricted Notes as to which a Shelf Registration Statement is being effected, by its participation in the Shelf Registration Statement, shall be deemed to agree to furnish the Company and the Note Guarantors all information concerning such Holder required to be described in order to make the information previously furnished by such Holder to the Company and the Note Guarantors not materially misleading. (o) In the case of (A) a Shelf Registration Statement, each Holder of Transfer Restricted Notes to be registered pursuant thereto agrees by acquisition of such Transfer Restricted Notes that, and (B) the Exchange Offer Registration Statement during the Applicable Period only, each Holder of Exchange Notes subject to the prospectus delivery requirements of the Securities Act agrees that, upon receipt of any notice from the Company pursuant to Sections 2(c), 3(b) or 4(b)(ii) through (v), such Holder will discontinue disposition of such Transfer Restricted Notes or Exchange Notes, as applicable, until such Holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(j) or until advised in writing (the "Advice") by the Company that the use of the applicable prospectus may be resumed. If the Company shall give any notice under Sections 2(c), 3(b) or 4(b)(ii) through (v) during the period that the Company is required to maintain an effective Registration Statement (the "Effectiveness Period"), such Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Notes or Exchange Notes, as applicable, covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(j) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). (p) In the case of a Shelf Registration Statement, the Company and the Note Guarantors shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of the Notes, Exchange Notes and Private Exchange Notes covered by the Shelf Registration Statement or the managing underwriters (if any) shall reasonably request in order to facilitate any disposition of Notes, Exchange Notes or Private Exchange Notes pursuant to such Shelf Registration Statement. Notwithstanding anything to the contrary contained in this Agreement, the Company and the Note Guarantors shall not be required to engage in more than one underwritten offering pursuant to this Agreement. 14 14 (q) In the case of a Shelf Registration Statement, the Company shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined below) acting for, Holders of a majority in aggregate principal amount of the Notes, Exchange Notes and Private Exchange Notes covered by the Shelf Registration Statement and any underwriter participating in any disposition of Notes, Exchange Notes or Private Exchange Notes pursuant to such Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (ii) use its reasonable best efforts to have its officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative, Special Counsel or any such underwriter (an "Inspector") in connection with such Shelf Registration Statement. (r) In the case of a Shelf Registration Statement, the Company shall, if requested by Holders of a majority in aggregate principal amount of the Notes, Exchange Notes and Private Exchange Notes covered by the Shelf Registration Statement, its Special Counsel or the managing underwriters (if any) in connection with such Shelf Registration Statement, use its reasonable best efforts to cause (i) its counsel to deliver an opinion relating to the Shelf Registration Statement and the Notes, Exchange Notes or Private Exchange Notes, as applicable, in customary form, (ii) its officers to execute and deliver all customary documents and certificates requested by Holders of a majority in aggregate principal amount of the Notes, Exchange Notes and Private Exchange Notes being sold, its Special Counsel or the managing underwriters (if any) and (iii) its independent public accountants to provide a comfort letter or letters in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. 5. Registration Expenses. The Company and the Note Guarantors will jointly and severally bear all expenses incurred in connection with the performance of their obligations under Sections 1, 2, 3 and 4 and the Company will reimburse the Initial Purchasers or the Holders, as applicable, for the reasonable fees and disbursements of one firm of attorneys (in addition to any local counsel) chosen by the Holders of a majority in aggregate principal amount of the Notes, the Exchange Notes and the Private Exchange Notes covered by each Registration Statement (the "Special Counsel") acting for the Initial Purchasers or Holders in connection therewith. The Company and the Note Guarantors are not required to pay any commissions or concessions of any broker-dealers. 6. Market-Making. (a) For so long as any of the Notes, Exchange Notes or Private Exchange Notes are outstanding 15 15 and CSI (in such capacity, the "Market-Maker") or any of its affiliates (as defined in the rules and regulations of the Commission) owns any equity securities of the Company, the Note Guarantors or any of their affiliates and proposes to make a market in the Notes, Exchange Notes or Private Exchange Notes as part of its business in the ordinary course, the following provisions shall apply for the sole benefit of the Market Maker: (i) The Company and the Note Guarantors shall (A) on the date that the Exchange Offer Registration Statement is filed with the Commission, file a registration statement (the "Market-Making Registration Statement") (which may be the Exchange Offer Registration Statement or the Shelf Registration Statement if permitted by the rules and regulations of the Commission) and use their best efforts to cause such Market-Making Registration Statement to be declared effective by the Commission on or prior to the consummation of the Exchange Offer; (B) periodically amend such Market-Making Registration Statement so that the information contained therein complies with the requirements of Section 10(a) under the Securities Act; (C) within 45 days following the end of each of the Company's fiscal quarters (other than the fourth quarter), file a supplement to the prospectus contained in the Market-Making Registration Statement that sets forth the financial results of the Company for such quarter; (D) amend the Market-Making Registration Statement or supplement the related prospectus when necessary to reflect any material changes in the information provided therein; and (E) amend the Market-Making Registration Statement when required to do so in order to comply with Section 10(a)(3) of the Securities Act; provided, however, that (1) prior to filing the Market-Making Registration Statement, any amendment thereto or any supplement to the related prospectus (other than a supplement filed pursuant to clause (C) of this paragraph unless the Market-Maker reasonably requests), the Company will furnish to the Market-Maker copies of all such documents proposed to be filed, which documents will be subject to the review of the Market-Maker and its counsel, (2) the Company and the Note Guarantors will not file the Market-Making Registration Statement, any amendment thereto or any supplement to the related prospectus (other than a supplement filed pursuant to clause (C) of this paragraph unless the Market-Maker reasonably requests) to which the Market-Maker and its counsel shall reasonably object unless the Company is advised by counsel that such Market-Making Registration Statement, amendment or supplement is required to be filed and (3) the Company will provide the Market-Maker and its counsel with copies of the Market-Making Registration Statement and each amendment and supplement filed. (ii) The Company shall notify the Market-Maker and, if requested by the Market-Maker, confirm such advice in writing, (A) when any post-effective amendment to the Market-Making Registration Statement or any amendment or 16 16 supplement to the related prospectus has been filed, and, with respect to any post-effective amendment, when the same has become effective; (B) of any request by the Commission for any post-effective amendment to the Market-Making Registration Statement, any supplement or amendment to the related prospectus or for additional information; (C) the issuance by the Commission of any stop order suspending the effectiveness of the Market-Making Registration Statement or the initiation of any proceedings for that purpose; (D) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Notes or Exchange Notes for sale in any jurisdiction or the initiation or threatening of any proceedings for such purpose; (E) of the happening of any event that makes any statement made in the Market-Making Registration Statement, the related prospectus or any amendment or supplement thereto untrue or that requires the making of any changes in the Market-Making Registration Statement, such prospectus or any amendment or supplement thereto, in order to make the statements therein not misleading; and (F) of any advice from a nationally recognized statistical rating organization that such organization has placed the Company under surveillance or review with negative implications or has determined to downgrade the rating of the Notes, Exchange Notes or Private Exchange Notes or any other debt obligation of the Company whether or not such downgrade shall have been publicly announced. (iii) If any event contemplated by Section 6(a)(ii)(B) through (E) occurs during the period for which the Company and the Note Guarantors are required to maintain an effective Market-Making Registration Statement, the Company and the Note Guarantors shall promptly prepare and file with the Commission a post-effective amendment to the Market-Making Registration Statement or a supplement to the related prospectus or file any other required document so that the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (iv) In the event of the issuance of any stop order suspending the effectiveness of the Market-Making Registration Statement or of any order suspending the qualification of the Notes, Exchange Notes or Private Exchange Notes for sale in any jurisdiction, the Company and the Note Guarantors shall use promptly their reasonable best efforts to obtain its withdrawal. (v) The Company shall furnish to the Market-Maker, without charge, (i) at least one conformed copy of the Market-Making Registration Statement and any post-effective amendment thereto; and (ii) as many copies of the related prospectus and any amendment or supplement thereto as the Market-Maker may reasonably request. 17 17 (vi) The Company and the Note Guarantors shall consent to the use of the prospectus contained in the Market-Making Registration Statement or any amendment or supplement thereto by the Market-Maker in connection its market making activities. (vii) For so long as the Notes, Exchange Notes or Private Exchange Notes shall be outstanding, the Company shall furnish to the Market-Maker (A) as soon as practicable after the end of each of the Company's fiscal years, the number of copies reasonably requested by the Market-Maker of the Company's annual report for such year, (B) as soon as available, the number of copies reasonably requested by the Market-Maker of each report (including, without limitation, reports on Forms 10-K, 10-Q and 8-K) or definitive proxy statements of the Company filed under the Exchange Act or mailed to stockholders and (C) all public reports and all reports and financial statements furnished by the Company to the Nasdaq National Market System or any U.S. national securities exchange or quotation service upon which the Notes or Exchange Notes may be listed pursuant to requirements of or agreements with such exchange or quotation service or to the Commission pursuant to the Exchange Act or any rule or regulation of the Commission thereunder. (viii) Notwithstanding the foregoing provisions of Section 6, the Company and the Note Guarantors may for valid business reasons, including without limitation, a potential acquisition, divestiture of assets or other material corporate transaction, issue a notice that the Market-Making Registration Statement is no longer effective or the prospectus included therein is no longer usable for offers and sales of Notes, Exchange Notes or Private Exchange Notes and may issue any notice suspending use of the Market-Making Registration Statement required under applicable securities laws to be issued; provided that the use of the Market-Making Registration Statement shall not be suspended for more than 60 days in the aggregate in any consecutive 12 month period. The Market-Maker agrees that upon receipt of any notice from the Company pursuant to this Section 6(a)(viii), it will discontinue use of the Market-Making Registration Statement until receipt of copies of the supplemented or amended prospectus relating thereto or until advised in writing by the Company that the use of the Market-Making Registration Statement may be resumed. (b) In connection with the Market-Making Registration Statement, the Company shall (i) make reasonably available for inspection by a representative of, and counsel acting for, the Market-Maker all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (ii) use its reasonable best efforts to have its officers, directors, employees, accountants and counsel supply 18 18 all relevant information reasonably requested by such representative or counsel or the Market-Maker. (c) Prior to the effective date of the Market-Making Registration Statement, the Company and the Note Guarantors will use their reasonable best efforts to register or qualify, or cooperate with the Market-Maker and its counsel in connection with the registration or qualification of, such Notes, Exchange Notes or Private Exchange Notes for offer and sale under the securities or blue sky laws of such jurisdictions as the Market-Maker reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Notes, Exchange Notes or Private Exchange Notes covered by the Market-Making Registration Statement; provided that the Company and the Note Guarantors will not be required to qualify generally to do business in any jurisdiction where they are not then so qualified or to take any action which would subject them to general service of process or to taxation in any such jurisdiction where they are not then so subject. (d) The Company represents that the Market-Making Registration Statement, any post-effective amendments thereto, any amendments or supplements to the related prospectus and any documents filed by them under the Exchange Act will, when they become effective or are filed with the Commission, as the case may be, conform in all respects to the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission thereunder and will not, as of the effective date of such Market-Making Registration Statement or post-effective amendments and as of the filing date of amendments or supplements to such prospectus or filings under the Exchange Act, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Market-Making Registration Statement or the related prospectus in reliance upon and in conformity with written information furnished to the Company by the Market-Maker specifically for inclusion therein, which information the parties hereto agree will be limited to the statements concerning the Market-Making activities of the Market-Maker to be set forth on the cover page and in the "Plan of Distribution" section of the prospectus (the "Market-Maker's Information.") (e) At the time of effectiveness of the Market-Making Registration Statement (unless it is the same as the time of effectiveness of the Exchange Offer Registration Statement) and concurrently with each time the Market-Making Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented, the Company shall (if requested in writing by the Market-Maker) furnish the Market-Maker and its counsel with a certificate of its Chairman of the Board of Directors or Chief Financial Officer to the effect that: 19 19 (i) the Market-Making Registration Statement has been declared effective; (ii) in the case of an amendment or supplement, such amendment has become effective under the Securities Act as of the date and time specified in such certificate, if applicable; such amendment or supplement to the prospectus was filed with the Commission pursuant to the subparagraph of Rule 424(b) under the Securities Act specified in such certificate on the date specified therein; (iii) to the knowledge of such officers, no stop order suspending the effectiveness of the Market-Making Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the Commission; (iv) such officers have carefully examined the Market-Making Registration Statement and the prospectus (and, in the case of an amendment or supplement, such amendment or supplement) and as of the date of such Market-Making Registration Statement, amendment or supplement, as applicable, the Market-Making Registration Statement and the prospectus, as amended or supplemented, if applicable, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (f) At the time of effectiveness of the Market-Making Registration Statement (unless it is the same as the time of effectiveness of the Exchange Offer Registration Statement) and concurrently with each time the Market-Making Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented, the Company shall (if requested in writing by the Market-Maker) furnish the Market-Maker and its counsel with the written opinion of counsel for the Company satisfactory to the Market-Maker to the effect that: (i) the Market-Making Registration Statement has been declared effective; (ii) in the case of an amendment or supplement, such amendment has become effective under the Securities Act as of the date and time specified in such opinion, if applicable; such amendment or supplement to the prospectus was filed with the Commission pursuant to the subparagraph of Rule 424(b) under the Securities Act specified in such opinion on the date specified therein; (iii) to the knowledge of such counsel, no stop order suspending the effectiveness of the Market-Making Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the Commission; and (iv) such counsel has reviewed the Market-Making Registration Statement and the prospectus (and, in the case of an amendment or supplement, such amendment or supplement) and participated with officers of the Company and independent public accountants for the Company in the preparation of such Market-Making Registration Statement and prospectus (and, in the case of an amendment or supplement, such amendment or supplement) and has no reason to believe that (except for the financial statements and other financial and statistical data contained therein as 20 20 to which no belief is required) as of the date of such Market-Making Registration Statement, amendment or supplement, as applicable, the Market-Making Registration Statement and the prospectus, as amended or supplemented, if applicable, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (g) At the time of effectiveness of the Market-Making Registration Statement (unless it is the same as the time of effectiveness of the Exchange Offer Registration Statement) and concurrently with each time the Market-Making Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented to include audited annual financial information, the Company shall (if requested in writing by the Market-Maker) furnish the Market-Maker and its counsel with a letter of Arthur Andersen LLP (or other independent public accountants for the Company or the Note Guarantors of nationally recognized standing) and Deloitte and Touche LLP, if required, in form satisfactory to the Market-Maker, addressed to the Market-Maker and dated the date of delivery of such letter, (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission and, (ii) in all other respects, substantially in the form of the letter delivered to the Initial Purchasers pursuant to Section 5(f) of the Purchase Agreement, with, in the case of an amendment or supplement to include audited financial information, such changes as may be necessary to reflect the amended or supplemented financial information. (h) The Company and the Note Guarantors, on the one hand, and the Market- Maker, on the other hand, hereby agree to indemnify each other, and, if applicable, contribute to the other, in accordance with Sections 7 and 8 of this Agreement. (i) The Company will comply with the provisions of this Section 6 at its own expense and will reimburse the Market-Maker for its expenses associated with this Section 6 (including reasonable fees of counsel). (j) The agreements contained in this Section 6 and the representations, warranties and agreements contained in this Agreement shall survive all offers and sales of the Notes and Exchange Notes and shall remain in full force and effect, regardless of any termination or cancelation of this Agreement or any investigation made by or on behalf of any indemnified party. (k) For purposes of this Section 6, any reference to the terms "amend", "amendment" or "supplement" with respect to the Market-Making Registration Statement or the prospectus contained therein shall be deemed to refer to and include the filing under the Exchange Act of any document deemed to be incorporated therein by reference. 21 21 7. Indemnification. (a) In the event of a Shelf Registration Statement or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by the Initial Purchasers or Exchanging Dealer, as applicable, or in connection with any prospectus delivery by the Market-Maker, the Company and the Note Guarantors shall jointly and severally indemnify and hold harmless each Holder (including, without limitation, each of the Initial Purchasers, the Market-Maker or such Exchanging Dealer), its affiliates, its respective officers, directors, employees, representatives and agents, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 7 and Section 8 as a Holder) from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of Notes, Exchange Notes or Private Exchange Notes), to which that Holder may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or Market-Making Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (iii) in the case of the Market-Maker, any material breach by the Company of the representations, warranties and agreements contained in Section 6, and shall reimburse each Holder promptly upon demand for any legal or other expenses reasonably incurred by that Holder in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Note Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Holders' Information or Market-Maker's Information; and provided, further, that with respect to any such untrue statement in or omission from any related preliminary prospectus, the indemnity agreement contained in this Section 7(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage, liability or action received Notes, Exchange Notes or Private Exchange Notes to the extent that such loss, claim, damage, liability or action of or with respect to such Holder results from the fact that both (A) a copy of the final prospectus was not sent or given to such person at or prior to the written confirmation of the sale of such Notes, Exchange Notes or Private Exchange Notes to such person and (B) the untrue 22 22 statement in or omission from the related preliminary prospectus was corrected in the final prospectus unless, in either case, such failure to deliver the final prospectus was a result of non-compliance by the Company with Section 4(d), 4(e), 4(f), 4(g) or 6(a)(vi), as applicable. (b) In (i) the event of a Shelf Registration Statement, each Holder or (ii) connection with any prospectus delivery by the Market-Maker, the Market-Maker, as applicable, shall indemnify and hold harmless the Company, its affiliates, its respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 7(b) and Section 8 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or Market-Making Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Holders' Information or Market-Maker's Information furnished to the Company by such Holder, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable for any indemnity claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Notes, Exchange Notes or Private Exchange Notes pursuant to such Shelf Registration Statement or prospectus. (c) Promptly after receipt by an indemnified party under this Section 7 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 7(a) or 7(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 7 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party 23 23 otherwise than under this Section 7. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 7 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 7(a) and 7(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such 24 24 settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. 8. Contribution. If the indemnification provided for in Section 7 is unavailable or insufficient to hold harmless an indemnified party under Section 7(a) or 7(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (a) in such proportion as shall be appropriate to reflect the relative benefits received by the Company from the initial offering and sale of the Notes, on the one hand, and by a Holder from receiving Notes, Exchange Notes or Private Exchange Notes, as applicable, registered under the Securities Act, on the other, or (b) if the allocation provided by clause (a) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (a) above but also the relative fault of the Company and the Note Guarantors, on the one hand, and such Holder, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company and the Note Guarantors or information supplied by the Company and the Note Guarantors, on the one hand, or to any Holders_ Information or Market-Maker's Information supplied by such Holder, on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 8 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 8 shall be deemed to include, for purposes of this Section 8, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 8, an indemnifying party that is a Holder of Notes, Exchange Notes or Private Exchange Notes shall not be required to contribute any amount in excess of the amount by which the total price at which the Notes, Exchange Notes or Private Exchange Notes sold by such indemnifying party to any purchaser exceeds the amount of any damages which such indemnifying party has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 25 25 9. Rules 144 and 144A. The Company and the Note Guarantors shall use their reasonable best efforts to file the reports required to be filed by them under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company and the Note Guarantors are not required to file such reports, they will, upon the written request of any Holder of Transfer Restricted Notes or the Market-Maker, make publicly available other information so long as necessary to permit sales of such Holder's or the Market-Maker's securities pursuant to Rules 144 and 144A. The Company and the Note Guarantors covenant that they will take such further action as any Holder of Transfer Restricted Notes or the Market-Maker may reasonably request, all to the extent required from time to time to enable such Holder or the Market-Maker to sell Transfer Restricted Notes without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)). Upon the written request of any Holder of Transfer Restricted Notes, the Company and the Note Guarantors shall deliver to such Holder or the Market-Maker a written statement as to whether they have complied with such requirements. Notwithstanding the foregoing, nothing in this Section 9 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 10. Underwritten Registrations. If any of the Transfer Restricted Notes covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Notes included in such offering, subject to the consent of the Company and the Note Guarantors (which shall not be unreasonably withheld or delayed), and such Holders shall be responsible for all underwriting commissions and discounts in connection therewith. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Notes on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 11. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of the Notes, the Exchange Notes and the Private Exchange Notes, taken as a single class (and, with respect to the provisions of Section 6, the written consent of the Market-Maker). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a 26 26 matter that relates exclusively to the rights of Holders whose Notes, Exchange Notes or Private Exchange Notes are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate principal amount of the Notes, the Exchange Notes and the Private Exchange Notes being sold by such Holders pursuant to such Registration Statement whose rights are so affected. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telecopier or air courier guaranteeing next-day delivery: (1) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 11(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the registrar under the Indenture, with a copy in like manner to CSI and DBSI; (2) if to the Initial Purchasers or the Market-Maker, initially at their addresses set forth in the Purchase Agreement; and (3) if to the Company or the Note Guarantors, initially at the address of the Company set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; and when receipt is acknowledged by the recipient's telecopier machine, if sent by telecopier. The Company and the Note Guarantors or the Initial Purchasers may, by written notice to the other, designate additional or different addresses for subsequent notices or communications. (c) Successors And Assigns. This Agreement shall be binding upon the Company and its successors and assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopier) and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (e) Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, 27 27 the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (h) Remedies. In the event of a breach by the Company, the Note Guarantors or by any Holder of any of their obligations under this Agreement, each Holder, the Company or the Note Guarantors, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company or the Note Guarantors of their obligations under Sections 1 or 2 hereof for which liquidated damages have been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company, the Note Guarantors and each Holder agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by each such person of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, each such person shall waive the defense that a remedy at law would be adequate. (i) No Inconsistent Agreements. Each of the Company and the Note Guarantors represents, warrants and agrees with the Initial Purchasers that (i) it has not entered into, and shall not, on or after the date of this Agreement, enter into any agreement that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof, (ii) it has not previously entered into any agreement which remains in effect granting any registration rights with respect to any of its debt securities to any person and (iii) (with respect to the Company) without limiting the generality of the foregoing, without the written consent of the Holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Notes and the Market-Maker, it shall not grant to any person the right to request the Company to register any debt securities of the Company under the Securities Act unless the rights so granted are not in conflict or inconsistent with the provisions of this Agreement. (j) No Piggyback on Registrations. Neither the Company nor any of its security holders (other than the Holders of Transfer Restricted Notes in such capacity) shall have the right to include any securities of the Company in any Shelf Registration or Registered Exchange Offer other than Transfer Restricted Notes. (k) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent 28 28 jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 29 29 Please confirm that the foregoing correctly sets forth the agreement among the Company, the Note Guarantors and the Initial Purchasers. Very truly yours, HUNTSMAN PACKAGING CORPORATION, by /s/ RICHARD P. DURHAM ------------------------------ Name: Richard P. Durham Title: President and CEO EDISON PLASTICS INTERNATIONAL, INC., HUNTSMAN BULK PACKAGING CORPORATION, HUNTSMAN CONTAINER CORPORATION INTERNATIONAL, HUNTSMAN EDISON FILMS CORPORATION, HUNTSMAN FILM PRODUCTS OF MEXICO, INC., HUNTSMAN KCL CORPORATION, HUNTSMAN PACKAGING GEORGIA, INC., HUNTSMAN PACKAGING OF CANADA, LLC, by /s/ SCOTT K. SORENSEN ----------------------------- Name: Scott K. Sorensen Title: Vice President and/or Chief Financial Officer 30 30 Accepted: CHASE SECURITIES INC. by /s/ DAVID LYNCH --------------------------- Authorized Signatory DEUTSCHE BANK SECURITIES INC. by /s/ CHARLES DENNISON --------------------------- Authorized Signatory 31 31 ------------------------------------ ANNEX A ------------------------------------ Each broker-dealer that receives Exchange Notes for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Notes where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution". 32 32 ------------------------------------ ANNEX B ------------------------------------ Each broker-dealer that receives Exchange Notes for its own account in exchange for Notes, where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution". 33 33 PLAN OF DISTRIBUTION ------------------------------------ ANNEX C ------------------------------------ Each broker-dealer that receives Exchange Notes for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Notes where such Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until [ ] 200[ ], all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Registered Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Registered Exchange Offer (including the expenses of one counsel for the Holders of the Notes) other than commissions or concessions of any broker-dealers and will indemnify the Holders of the Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 34 34 ------------------------------------ ANNEX D ------------------------------------ - - CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: Address: If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-10.1 8 ex10-1.txt NOTE WARRANT AGREEMENT 1 EXHIBIT 10.1 NOTE WARRANT AGREEMENT Dated as of May 31, 2000 between HUNTSMAN PACKAGING CORPORATION and THE BANK OF NEW YORK, as Warrant Agent --------------------------------------------- Warrants for Common Stock of Huntsman Packaging Corporation --------------------------------------------- 2 TABLE OF CONTENTS Page - ---- ARTICLE I Definitions ----------- SECTION 1.01. Definitions 1 ----------- SECTION 1.02. Other Definitions 6 ----------------- SECTION 1.03. Rules of Construction 6 --------------------- ARTICLE II Note Warrant Certificates ------------------------- SECTION 2.01. Form and Dating. 7 --------------- SECTION 2.02. Execution and Authentication 7 ---------------------------- SECTION 2.04. Note Warrantholder Lists 8 ------------------------ SECTION 2.05. Transfer and Exchange 8 --------------------- SECTION 2.06. Replacement Certificate 9 ----------------------- SECTION 2.07. Outstanding Note Warrants 9 ------------------------- SECTION 2.08. Temporary Note Warrants 9 ----------------------- SECTION 2.09. Cancelation 10 ----------- SECTION 2.10. CUSIP Numbers 10 ------------- ARTICLE III Exercise Terms -------------- SECTION 3.01. Exercise 10 -------- SECTION 3.02. Exercise Periods; Notice of Exercisability 10 ------------------------------------------ SECTION 3.03. Expiration 10 ---------- SECTION 3.04. Manner of Exercise 11 ------------------ SECTION 3.05. Issuance of Note Warrant Shares 11 ------------------------------- SECTION 3.06. Fractional Note Warrant Shares 12 ------------------------------ SECTION 3.07. Reservation of Note Warrant Shares 12 ---------------------------------- SECTION 3.08. Compliance with Law 13 ------------------- SECTION 3.09. Registration Rights Agreement 13 ----------------------------- SECTION 3.10. Agreements of Holders After Exercise 13 ------------------------------------ 3 ARTICLE IV Antidilution Provisions ----------------------- SECTION 4.01. General 14 ------- SECTION 4.02. Stock Dividends, Subdivisions and Combinations 14 ---------------------------------------------- SECTION 4.03. Issuance of Common Stock 14 ------------------------ SECTION 4.04. Distributions of Assets or Securities Other than Common Stock 17 ------------------------------------------------------------- SECTION 4.05. Capital Reorganization, Capital Reclassifications, Merger, Etc.18 --------------------------------------------------------------- SECTION 4.06. Other Actions Affecting Common Stock 18 ------------------------------------ SECTION 4.07. Miscellaneous 19 ------------- ARTICLE V Warrant Agent ------------- SECTION 5.01. Appointment of Warrant Agent 22 ---------------------------- SECTION 5.02. Rights and Duties of Warrant Agent 22 ---------------------------------- SECTION 5.03. Individual Rights of Warrant Agent 23 ---------------------------------- SECTION 5.04. Warrant Agent's Disclaimer 23 -------------------------- SECTION 5.05. Compensation and Indemnity 23 -------------------------- SECTION 5.06. Successor Warrant Agent 24 ----------------------- ARTICLE VI Miscellaneous ------------- SECTION 6.01. SEC Reports 26 ----------- SECTION 6.02. Persons Benefitting 26 ------------------- SECTION 6.03. Rights of Holders 26 ----------------- SECTION 6.04. Amendment. 26 ---------- SECTION 6.05. Notices 27 ------- SECTION 6.06. Governing Law 27 ------------- SECTION 6.07. Successors 28 ---------- SECTION 6.08. Multiple Originals 28 ------------------ SECTION 6.09. Table of Contents 28 ----------------- SECTION 6.10. Severability 28 ------------ APPENDIX PROVISIONS RELATING TO NOTE WARRANTS EXHIBIT A Form of Face of Note Warrant Certificate EXHIBIT B Form of Transferee Letter of Representation 4 4 NOTE WARRANT AGREEMENT dated as of May 31, 2000 (this "Note Warrant Agreement"), between HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), and THE BANK OF NEW YORK, a New York banking corporation, as warrant agent (the "Warrant Agent"). The Company desires to issue the warrants (the "Note Warrants") described herein. The Note Warrants will initially entitle the holders thereof (the "Holders") to purchase, in the aggregate, 18,532 shares of Common Stock, no par value, of the Company ("Common Stock") in connection with an offering (the "Offering") by the Company of 220,000 units (the "Units"). Each Unit consists of: (i) $1,000 principal amount of the Company's 13% Senior Subordinated Notes due 2010 (a "Note") and (ii) one warrant (each, a "Note Warrant") to purchase 0.08424 shares of Common Stock. The Note Warrants will not trade separately from the Notes until the earliest date (the "Separation Date") to occur of (i) 180 days after the date hereof, (ii) a Change of Control, (iii) the occurrence of an Event of Default, (iv) the date on which a registration statement with respect to the Notes or a Registered Exchange Offer for the Notes is declared effective and (v) such earlier date as determined by CSI in its discretion. The Company further desires the Warrant Agent to act on behalf of the Company in connection with the issuance, transfer, exchange and exercise of the Note Warrants and other matters as provided herein and the Warrant Agent is willing to so act. Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of Note Warrants: ARTICLE I Definitions SECTION 1.01. Definitions. "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 the purposes of this definition, "control" when used with respect to any 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. "Board of Directors" or "Board" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. 5 5 "Business Day" means each day that is not (a) Pioneer Day in the State of Utah, (b) a Saturday, Sunday, or legal holiday or (c) any other day on which banks are not required to be open in New York, New York; provided, however, that any determination of a Business Day relating to a securities exchange or other securities market means a Business Day on which such exchange or market is open for trading. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Cashless Exercise Ratio" means a fraction, the numerator of which is the excess of the Current Market Value per share of Common Stock on the Exercise Date over the Exercise Price per share as of the Exercise Date and the denominator of which is the Current Market Value per share of the Common Stock on the Exercise Date. "Certificated Note Warrants" means certificated Note Warrants in fully registered definitive form. "Change of Control" shall have the meaning assigned to it in the Indenture. "Closing Date" means the date on which the Note Warrants are initially issued. "Common Stock" shall have the meaning assigned to it in the preamble hereto. "Convertible Securities" means any Capital Stock, evidence of indebtedness or other securities or rights convertible into or exchangeable for Common Stock. "CSI" means Chase Securities Inc. "Current Market Value" means, for any security as of any date of determination, the price per share or other applicable unit determined as follows: (a) if such security is Publicly Traded as of the date of determination, the price shall be determined by computing the average, over a period consisting of the most recent twenty-one (21) Business Days occurring on or prior to the date of determination, of the applicable price set forth below (but excluding any trades or quotations that are not bona fide, arm's length transactions): (i) the average of the closing prices for such security on such Business Day on all domestic national securities exchanges on which such security may be listed if such exchanges are the primary securities markets for such security, or (ii) if there have been no sales on any such exchange on such Business Day, the average of the highest 6 6 bid and lowest asked prices on all such exchanges at the end of such Business Day if such exchanges are the primary securities markets for such security, or (iii) if on any Business Day such security is not so listed, the closing sales price on such Business Day quoted on the Nasdaq National Market or the Nasdaq Small-Cap Market, as applicable, or if there have been no sales on the Nasdaq National Market or the Nasdaq Small-Cap Market, as the case may be, on such Business Day, the average of the highest bid and lowest asked prices quoted on the Nasdaq National Market or the Nasdaq Small-Cap Market, as the case may be; (iv) if on any Business Day such security is not so listed and not quoted in the Nasdaq National Market or Nasdaq Small-Cap Market, the average of the highest bid and lowest asked prices on such Business Day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization; provided, however, that (1) for the purposes of any determination of the "Current Market Value" of any share of a security on any day after the "ex" date or any similar date for any dividend or distribution paid or to be paid with respect to such security, any price of such security on a day prior to such "ex" date or similar date shall be reduced by the fair market value of the per share amount of such dividend or distribution as determined in good faith by the Board of Directors of the Company and (2) for the purposes of any determination of the "Current Market Value" of any security on any day on or after (i) the effective day of any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of outstanding securities or (ii) the "ex" date or any similar date for any dividend or distribution with respect to such securities in shares of that security, any price of such security on a day prior to such effective date or "ex" date or similar date shall be appropriately adjusted to reflect such subdivision, combination, dividend or distribution; and (b) if such security is not Publicly Traded as of the date of determination, in the case of the Common Stock, the Enterprise Value Per Share, and, in the case of any other security, the fair market value of one share or other applicable unit of such security, shall be determined in good faith by the Board exercising reasonable business judgment. "Enterprise Value" means the highest price that would be paid for the entire common equity interest in the Company on a going-concern basis in a single arm's-length transaction between a willing buyer and a willing seller (neither acting under compulsion), using valuation techniques then prevailing in the securities industry and assuming full disclosure of all relevant information and a reasonable period of time for effectuating such sale. For the purposes of determining Enterprise Value, (i) the exercise price of Options to acquire Common Stock that are not Out of the Money shall be deemed to have been received by the Company and (ii) the liquidation preference or indebtedness, as the case may be, represented by Convertible Securities that are not Out of the Money shall be deemed to have been eliminated or canceled. "Enterprise Value Per Share" means the price per share of Common Stock obtained by dividing (A) the Enterprise Value by (B) the number of shares of Common Stock outstanding (on a Fully Diluted Basis) at the time of determination. "Event of Default" shall have the meaning assigned to it in the Indenture. "Exchange Act" means the Securities Exchange Act of 1934. "Exercisability Date" means the first day that an Exercise Event shall have occurred. "Exercise Date" means, for a given Note Warrant, the day on which such Note Warrant is exercised pursuant to Section 3.04. "Exercise Event" means the occurrence of (i) the closing of an initial public equity offering of the Company, (ii) a class of equity securities of the Company 7 7 being listed on a national securities exchange or being authorized for quotation on the Nasdaq National Market or is otherwise subject to registration under the Exchange Act or (iii) the Separation Date. "Fully Diluted Basis" means, with respect to the Common Stock at any time of determination, the number of shares of Common Stock that would be issued and outstanding at such time, assuming full conversion, exercise and exchange of all issued and outstanding Convertible Securities and Options that shall be (or may become) exchangeable for, or exercisable or convertible into, Common Stock, including any warrants to purchase Common Stock of the Company (including the Note Warrants), except that the number of shares of Common Stock outstanding on a Fully Diluted Basis shall not include the number of shares of Common Stock issuable upon exercise, conversion or exchange of Options or Convertible Securities that, at the time of determination, are Out of the Money. "Holder" or "Note Warrantholder" means the Person in whose name a Note Warrant is registered on the Warrant Registrar's books. "Indenture" means the Indenture dated as of May 31, 2000, among the Company, the Note Guarantors and the Trustee, with respect to the Notes, as it may be amended, modified or supplemented from time to time. "Initial Purchasers" means CSI and Deutsche Bank Securities Inc. "Note Guarantors" shall have the meaning assigned to it in the Indenture. "Note Warrant Agreement" means this Note Warrant Agreement as amended or supplemented from time to time. "Note Warrant Certificates" mean the registered certificates (including the Global Note Warrants) issued by the Company under this Note Warrant Agreement representing the Note Warrants. "Note Warrant Shares" means (a) the shares of Common Stock issued or issuable upon exercise of a Note Warrant in accordance with Article III, (b) all other securities or other property issued or issuable or delivered or deliverable upon any such exercise in accordance with this Note Warrant Agreement and (c) any securities of the Company distributed with respect to the securities referred to in the preceding clauses (a) and (b). "Offering Memorandum" means the Offering Memorandum dated May 25, 2000, of the Company. "Officer" means the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. 8 8 "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Warrant Agent. Such counsel may be an employee of or counsel to the Company or the Warrant Agent. "Options" means any warrants, options or other rights to subscribe for or to purchase (i) Common Stock or (ii) Convertible Securities. "Out of the Money" means, at any date of determination (a) in the case of an Option, that the aggregate Current Market Value as of such date of the shares of Common Stock issuable upon the exercise of such Option is less than the aggregate exercise price payable upon such exercise and (b) in the case of a Convertible Security, that the quotient resulting from dividing the Current Market Value as of such date of such Convertible Security by the number of shares issuable as of such date upon conversion or exchange of such Convertible Security is greater than the Current Market Value of a share of Common Stock. "Person" means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over Capital Stock of any other class of such Person, including the Company's Series A Cumulative Exchangeable Redeemable Preferred Stock. "Preferred Stock Warrants" means the warrants to purchase initially 43,242 shares of the Common Stock issuable under the Warrant Agreement dated as of May 31, 2000, among the Company and the holders of Preferred Stock party thereto, as such number or warrants may be adjusted under certain circumstances specified in such Warrant Agreement. "Publicly Traded" means, with respect to any security, that such security is (a) listed on a domestic securities exchange, (b) quoted on the Nasdaq National Market or the Nasdaq Small-Cap Market or (c) traded in the domestic over-the-counter market, which trades are reported by the National Quotation Bureau, Incorporated. "Registered Exchange Offer" shall have the meaning assigned to it in the Indenture. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the date hereof among the Company, the Initial Purchasers, the Warrant Agent and the other security holders of the Company party thereto, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the provisions thereof. "Restated Charter" means the amended and restated certificate or articles of incorporation of the Company, as in effect at the time in question, including any 9 9 certificates of designation or articles of amendment filed with the Secretary of State of the State of Utah pursuant to the terms thereof. "SEC" or "Commission" means the Securities and Exchange Commission. "Securities" means the Note Warrants and the Note Warrant Shares. "Securities Act" means the Securities Act of 1933, as amended. "Separation Date" has the meaning assigned to it in the recitals hereto. "Stockholders Agreement" means the Stockholders' Agreement dated as of the date hereof among the Company, the holders of Common Stock party thereto and the other security holders of the Company party thereto, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the provisions thereof. "Trustee" means The Bank of New York, or any successor trustee under the Indenture. "Uniform Commercial Code" shall have the meaning assigned to it in the Indenture. "Warrant Agent" means the party named as such in this Note Warrant Agreement until a successor replaces it and, thereafter, means the successor. "Warrant Officer" means any officer within the corporate trust department of the Warrant Agent, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Warrant Agent who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such Person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Warrant Agreement. "Wholly Owned Subsidiary" shall have the meaning assigned to it in the Indenture. SECTION 1.02. Other Definitions.
Defined in Term Section ---- ------- "Cashless Exercise" 3.04 "Exercise Price" 3.01 "Expiration Date" 3.02(c) "Stock Registrar" 3.07 "Stock Transfer Agent" 3.05 "Warrant Registrar" 2.03
SECTION 1.03. Rules of Construction. Unless the context otherwise requires: 10 10 (i) a defined term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time; (iii) "or" is not exclusive; (iv) "including" means including without limitation; and (v) words in the singular include the plural and words in the plural include the singular. ARTICLE II Note Warrant Certificates SECTION 2.01. Form and Dating. Provisions relating to Note Warrants are set forth in the Appendix, which is hereby incorporated in and expressly made a part of this Note Warrant Agreement. The Note Warrant Certificates shall each be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Note Warrant Agreement. The Note Warrant Certificates may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Note Warrant Certificate shall be dated the date of its authentication. SECTION 2.02. Execution and Authentication. Two Officers shall sign the Note Warrant Certificates for the Company by manual or facsimile signature. If an Officer whose signature is on a Note Warrant Certificate no longer holds that office at the time the Warrant Agent authenticates the Note Warrant Certificate, the Note Warrant Certificate shall be valid nevertheless. A Note Warrant shall not be valid until an authorized signatory of the Warrant Agent manually signs the certificate of authentication on the Note Warrant Certificate. The signature shall be conclusive evidence that the Note Warrant has been authenticated under this Note Warrant Agreement. The Warrant Agent shall authenticate and make available for delivery Note Warrant Certificates as set forth in the Appendix. The Warrant Agent may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Note Warrants. Any such appointment shall be evidenced by an instrument signed by a Warrant Officer, a copy of which shall be furnished to the Company. Unless limited by the terms of such appointment, an authenticating agent may authenticate Note Warrants whenever the Warrant Agent may do so. Each reference in this Note Warrant Agreement to authentication by the Warrant 11 11 Agent includes authentication by such agent. An authenticating agent has the same rights as any Warrant Registrar or agent for service of notices and demands. SECTION 2.03. Warrant Registrar. (a) The Company shall maintain an office or agency where Note Warrants may be presented for registration of transfer, exchange or exercise (the "Warrant Registrar"). The Warrant Registrar shall keep a register of the Note Warrants and of their transfer, exchange or exercise. The Company may have one or more co-registrars. The term Warrant Registrar includes any co-registrars. The Company initially appoints the Warrant Agent as (i) Warrant Registrar in connection with the Note Warrants and (ii) the Warrant Custodian (as defined in the Appendix) with respect to the Global Note Warrants. (b) The Company shall enter into an appropriate agency agreement with any Warrant Registrar not a party to this Note Warrant Agreement. The agreement shall implement the provisions of this Note Warrant Agreement that relate to such agent. The Company shall notify the Warrant Agent of the name and address of any such agent. If the Company fails to maintain a Warrant Registrar, the Warrant Agent shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 5.05. The Company or any of its domestically organized Wholly Owned Subsidiaries may act as Warrant Registrar. (c) The Company may remove any Warrant Registrar upon written notice to such Warrant Registrar and to the Warrant Agent; provided, however, that no such removal shall become effective until (i) acceptance of an appointment by a successor as evidenced by an appropriate agreement entered into by the Company and such successor Warrant Registrar and delivered to the Warrant Agent or (ii) notification to the Warrant Agent that the Warrant Agent shall serve as Warrant Registrar until the appointment of a successor in accordance with clause (i) above. The Warrant Registrar may resign at any time upon written notice to the Company and the Warrant Agent; provided, however, that the Warrant Agent may resign as Warrant Registrar only if the Warrant Agent also resigns as Warrant Agent in accordance with Section 5.06. (d) The Company and the Warrant Agent may deem and treat the Person in whose name a Note Warrant Certificate is registered as the absolute owner of such Note Warrant Certificate for all purposes whatsoever and neither the Company nor the Warrant Agent shall be affected by notice to the contrary. SECTION 2.04. Note Warrantholder Lists. The Warrant Agent shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Note Warrantholders. If the Warrant Agent is not the Warrant Registrar, the Company shall furnish, or cause the Warrant Registrar to furnish, to the Warrant Agent, in writing at such times as the Warrant Agent may request in writing, a list in such form and as of such date as the Warrant Agent may reasonably require of the names and addresses of Note Warrantholders. SECTION 2.05. Transfer and Exchange. The Note Warrants shall be issued in registered form and shall be transferable only upon the surrender of a Note Warrant Certificate for registration of transfer and in compliance with the Appendix. When a Note Warrant is presented to the Warrant Registrar with a request to register a transfer, the Warrant Registrar shall register the transfer as requested if its requirements 12 12 therefor are met. When Note Warrants are presented to the Warrant Registrar with a request to exchange them for an equal number of Note Warrants of other denominations, the Warrant Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Company shall execute and the Warrant Agent shall authenticate Note Warrant Certificates at the Warrant Registrar's request. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer, exchange or exercise pursuant to this Section 2.05. Any Holder of a Global Note Warrant (as defined in the Appendix) shall, by acceptance of such Global Note Warrant, agree that transfers of beneficial interests in such Global Note Warrant may be effected only through a book-entry system maintained by (a) the Holder of such Global Note Warrant (or its agent) or (b) any Holder of a beneficial interest in such Global Note Warrant, and that ownership of a beneficial interest in such Global Note Warrant shall be required to be reflected in a book entry. All Note Warrants issued upon any transfer or exchange pursuant to the terms of this Note Warrant Agreement will evidence the same Note Warrants and shall be governed by the same provisions of this Note Warrant Agreement as the Note Warrants surrendered upon such transfer or exchange. SECTION 2.06. Replacement Certificate. If a mutilated Note Warrant is surrendered to the Warrant Agent or if the Holder of a Note Warrant claims that the Note Warrant Certificate has been lost, destroyed or wrongfully taken, the Company shall issue and the Warrant Agent shall authenticate a replacement Note Warrant Certificate if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the Holder (a) notifies the Company or the Warrant Agent within a reasonable time after such Holder has notice of such loss, destruction or wrongful taking and the Warrant Registrar does not register a transfer prior to receiving such notification, (b) makes such request to the Company or the Warrant Agent prior to the Note Warrant being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code (a "protected purchaser") and (c) satisfies any other reasonable requirements of the Warrant Agent. If required by the Warrant Agent or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Warrant Agent to protect the Company and the Warrant Agent from any loss that either of them may suffer if a Note Warrant is replaced. The Company and the Warrant Agent may charge the Holder for their expenses in replacing a Note Warrant Certificate. Every replacement Note Warrant is an additional obligation of the Company. The provisions of this Section 2.06 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement of mutilated, lost, destroyed or wrongfully taken Note Warrants. SECTION 2.07. Outstanding Note Warrants. Note Warrants outstanding at any time are all Note Warrant Certificates executed by the Company and authenticated by the Warrant Agent except for those canceled by it, those delivered to it for cancelation and those described in this Section 2.07 as not outstanding. A Note Warrant does not cease to be outstanding because an Affiliate of the Company holds the Note Warrant. A Note Warrant ceases to be outstanding if the Company holds the Note Warrant. 13 13 If a Note Warrant Certificate is replaced pursuant to Section 2.06, it ceases to be outstanding unless the Warrant Agent and the Company receive proof satisfactory to them that the replaced Note Warrant Certificate is held by a protected purchaser. SECTION 2.08. Temporary Note Warrants. In the event that Definitive Note Warrants (as defined in the Appendix) are to be issued under the terms of this Note Warrant Agreement, until such Definitive Note Warrants are ready for delivery, the Company may prepare and the Warrant Agent shall authenticate temporary Note Warrant Certificates. Temporary Note Warrant Certificates shall be substantially in the form of Definitive Note Warrants but may have variations that the Company considers appropriate for temporary Note Warrants. Without unreasonable delay, the Company shall prepare and the Warrant Agent shall authenticate Definitive Note Warrants and deliver them in exchange for temporary Note Warrant Certificates upon surrender of such temporary Note Warrant Certificates at the office or agency of the Company, without charge to the Holder. SECTION 2.09. Cancelation. The Company at any time may deliver Note Warrant Certificates to the Warrant Agent for cancelation. The Warrant Agent and no one else shall cancel all Note Warrant Certificates surrendered for registration of transfer, exchange, exercise or cancelation and shall dispose of canceled Note Warrant Certificates in accordance with its customary procedures or deliver canceled Note Warrant Certificates to the Company pursuant to written direction by an Officer. The Company may not issue new Note Warrant Certificates to replace Note Warrant Certificates that have been exercised or Note Warrants which the Company has purchased or otherwise acquired. The Warrant Agent shall not authenticate Note Warrant Certificates to replace canceled Note Warrant Certificates other than pursuant to the terms of this Note Warrant Agreement. SECTION 2.10. CUSIP Numbers. The Company in issuing the Note Warrants may use "CUSIP" numbers (if then generally in use) and, if so, the Warrant Agent shall also use "CUSIP" numbers in notices to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Note Warrant Certificates or as contained in any notice and that reliance may be placed only on the other identification numbers printed on the Note Warrant Certificates, and any such notice shall not be affected by any defect in or omission of such numbers. ARTICLE III Exercise Terms SECTION 3.01. Exercise. Each Note Warrant shall initially entitle the Holder thereof, subject to adjustment pursuant to the terms of this Note Warrant Agreement, to purchase 0.08424 shares of Common Stock. The exercise price (the "Exercise Price") of each Note Warrant is $.01 per share. SECTION 3.02. Exercise Periods; Notice of Exercisability. (a) Subject to the terms and conditions set forth herein, the Note Warrants shall be exercisable at any time and from time to time on any Business Day following the Exercisability Date. 14 14 (b) Upon the occurrence of any Exercise Event, the Company shall send to each Holder and to each beneficial owner of the Note Warrants to the extent that the Note Warrants are held of record by a depositary or other agent, by first-class mail, at the addresses appearing on the Warrant Register, a notice of the Exercise Event which has occurred, which notice shall describe (i) the type of Exercise Event, (ii) the date of such Exercise Event and (iii) prominently set forth on such notice, the Expiration Date (as defined below). (c) No Note Warrant shall be exercisable after June 1, 2010 (the "Expiration Date"). SECTION 3.03. Expiration. A Note Warrant shall terminate and become void as of the earlier of (i) the close of business on the Expiration Date or (ii) the date such Note Warrant is exercised. The Company shall give notice not less than 90, and not more than 120, days prior to the Expiration Date to the Holders of all then outstanding Note Warrants to the effect that the Note Warrants will terminate and become void as of the close of business on the Expiration Date; provided, however, that if the Company fails to give notice as provided in this Section 3.03, the Note Warrants will nevertheless expire and become void on the Expiration Date. SECTION 3.04. Manner of Exercise. Note Warrants may be exercised upon (i) surrender to the Warrant Agent at the office of the Warrant Agent of the related Note Warrant Certificate, together with the form of election attached thereto to purchase Common Stock on the reverse thereof duly filled in and signed by the Holder thereof and (ii) payment to the Warrant Agent, for the account of the Company, of the Exercise Price for each Note Warrant Share or other security issuable upon the exercise of such Note Warrants then exercised. Such payment shall be made (i) in cash or by certified or official bank check payable to the order of the Company or by wire transfer of funds to an account designated by the Company for such purpose or (ii) without the payment of cash, by reducing the number of shares of Common Stock which would be obtainable upon the exercise of a Note Warrant by the payment of the Exercise Price solely in cash so as to yield a number of shares of Common Stock upon the exercise of such Note Warrant equal to the product of (a) the number of shares of Common Stock issuable as of the Exercise Date upon the exercise of such Note Warrant (if payment of the Exercise Price were being made in cash) and (b) the Cashless Exercise Ratio. An exercise of a Note Warrant in accordance with the immediately preceding clause (ii) is herein called a "Cashless Exercise". Upon surrender of a Note Warrant Certificate representing more than one Note Warrant in connection with the Holder's option to elect a Cashless Exercise, the number of shares of Common Stock deliverable upon a Cashless Exercise shall be equal to the number of shares of Common Stock issuable upon the exercise of Note Warrants that the holder specifies are to be exercised pursuant to a Cashless Exercise multiplied by the Cashless Exercise Ratio. All provisions of this Note Warrant Agreement shall be applicable with respect to a surrender of a Note Warrant Certificate pursuant to a Cashless Exercise for less than the full number of Note Warrants represented thereby. Until such time, if any, that a registration statement covering the issuance of Note Warrant Shares to the Holders upon exercise of the Note Warrants by the Holders thereof (a "Common Registration Statement") has been filed and declared effective, and at any time that such Common Registration Statement shall cease to be in effect, the Company may require that any Holder exercising a Note Warrant must do so 15 15 through a Cashless Exercise, and may amend such Note Warrant to eliminate the requirement for payment of the Exercise Price with respect to a Cashless Exercise. Subject to Section 3.02, the rights represented by the Note Warrants shall be exercisable at the election of the Holders thereof either in full at any time or from time to time in part and in the event that a Note Warrant Certificate is surrendered for exercise of less than all the Note Warrants represented by such Note Warrant Certificate at any time prior to the Expiration Date, a new Note Warrant Certificate representing the remaining Note Warrants shall be issued. The Warrant Agent shall authenticate and deliver the required new Note Warrant Certificates, and the Company, at the Warrant Agent's request, shall supply the Warrant Agent with Note Warrant Certificates duly signed on behalf of the Company for such purpose. SECTION 3.05. Issuance of Note Warrant Shares. Subject to Section 2.06, upon the surrender of Note Warrant Certificates and payment of the per share Exercise Price or election of a Cashless Exercise, as set forth in Section 3.04, the Warrant Agent shall requisition from the Company, and the Company shall issue and, if appointed, cause the transfer agent for the Common Stock ("Stock Transfer Agent") to authenticate and deliver to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of full Note Warrant Shares so purchased upon the exercise of such Note Warrants or other securities or property to which it is entitled, registered or otherwise, to the Person or Persons entitled to receive the same (including any depositary institution so designated by a Holder), together with cash as provided in Section 3.06 in respect of any fractional Note Warrant Shares otherwise issuable upon such exercise. To the extent permitted by law, such certificate or certificates shall be deemed to have been issued and any Person so designated to be named therein shall be deemed to have become a holder of record of such Note Warrant Shares as of the date of the surrender of such Note Warrant Certificates and payment of the per share Exercise Price or election of a Cashless Exercise, as aforesaid; provided, however, that if, at such date, the transfer books for the Note Warrant Shares shall be closed, the certificates for the Note Warrant Shares in respect of which such Note Warrants are then exercised shall be issuable as of the date on which such books shall next be opened and until such date the Company shall be under no duty to deliver any certificates for such Note Warrant Shares; provided further, however, that such transfer books, unless otherwise required by law, shall not be closed at any one time for a period longer than 20 calendar days. SECTION 3.06. Fractional Note Warrant Shares. The Company shall not be required to issue fractional Note Warrant Shares on the exercise of Note Warrants. If more than one Note Warrant shall be exercised in full at the same time by the same Holder, the number of full Note Warrant Shares which shall be issuable upon such exercise shall be computed on the basis of the aggregate number of Note Warrant Shares which may be purchasable pursuant thereto. If any fraction of a Note Warrant Share would, except for the provisions of this Section 3.06, be issuable upon the exercise of any Note Warrant (or specified portion thereof), the Company shall pay an amount in cash equal to the Current Market Value per Note Warrant Share, as determined on the day immediately preceding the date the Note Warrant is presented for exercise, multiplied by such fraction, computed to the nearest whole cent. SECTION 3.07. Reservation of Note Warrant Shares. The Company shall at all times keep reserved out of its authorized shares of Common Stock a number of 16 16 shares of Common Stock sufficient to provide for the exercise of all outstanding Note Warrants. The registrar for the Common Stock (the "Stock Registrar") shall at all times until the Expiration Date reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Note Warrant Agreement on file with the Stock Transfer Agent if such Stock Transfer Agent is appointed. The Company will supply such Stock Transfer Agent, if appointed, with duly executed stock certificates for such purpose and will itself provide or otherwise make available any cash which may be payable as provided in Section 3.06. The Company will furnish to such Stock Transfer Agent, if appointed, a copy of all notices of adjustments (and certificates related thereto) transmitted to each Holder. Before taking any action which would cause an adjustment pursuant to Article IV to reduce the Exercise Price below the then par value (if any) of the Common Stock, the Company shall take any and all corporate action which may, in the opinion of counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock at the Exercise Price as so adjusted. The Company covenants that all Note Warrant Shares which may be issued upon exercise of Note Warrants shall, upon issue, be fully paid, nonassessable, free of preemptive rights, free from all taxes and free from all liens, charges and security interests with respect to the issue thereof. SECTION 3.08. Compliance with Law. If at any time after the Common Stock is Publicly Traded, any shares of Common Stock required to be reserved for purposes of the exercise of Note Warrants require, under any other Federal or state law or applicable governing rule or regulation of any national securities exchange, registration with or approval of any governmental authority, or listing on any such national securities exchange before such shares may be issued upon exercise, the Company will use its best efforts to cause such shares to be duly registered or approved by such governmental authority or listed on the relevant national securities exchange; provided, however, that this Section 3.08 shall not obligate the Company to register the Common Stock under the Securities Act or qualify the Common Stock under state securities or blue sky laws. SECTION 3.09. Registration Rights Agreement. Each Holder shall be a "Note Warrantholder" as such term is defined in the Registration Rights Agreement and by the acceptance of a Note Warrant shall be deemed to be a party to the Registration Rights Agreement and shall be bound by and entitled to the benefits thereunder. Any Person to whom a Note Warrant is transferred in accordance with this Article III shall, by acceptance of the Note Warrant, be deemed to be a party to the Registration Rights Agreement and shall be bound by and entitled to the benefits thereunder. SECTION 3.10. Agreements of Holders After Exercise. Except as otherwise provided in a written notice from the Company to the Holders, which notice shall be accompanied by a certified resolution adopted by the Board of Directors of the Company approving the giving of such notice, each Holder who exercises their Note Warrant for Common Stock agrees to be bound by the following provisions that apply to all shareholders of the Company: (i) Notice of any meeting of the Board of Directors of the Company shall be deemed to be effective at the earliest of the following: (1) when received; (2) five (5) days after it is mailed; (3) the date shown on the return receipt if sent by registered or 17 17 certified mail, return receipt requested, and the receipt is signed by or on behalf of the director or (4) when it is sent (with confirmation of sending) to the telecopier number or e-mail address provided by that director to the Company; (ii) A majority of the number of directors prescribed by resolution (or if no number is prescribed, the number in office immediately before the meeting begins) shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, unless the Restated Charter requires a greater number; (iii) Notwithstanding Section 16-10a-702 of the Utah Revised Business Corporation Act, a special meeting of the stockholders may only be called in the manner provided in the Bylaws of the Company or if the holders of shares representing at least ten (10%) of the shares entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date, and deliver to the Company's secretary one or more written demands for the meeting, stating the purpose or purposes for which it is held; (iv) Unless written consents of all shareholders entitled to vote on a matter have been obtained, the Company shall give notice of any shareholder approval without a meeting taken under Section 16-10a-704 of the Utah Revised Business Corporation Action within ten (10) days of the taking of the corporate action by written consent to: (1) Those shareholders entitled to vote who have not consented in writing and (2) those shareholders not entitled to vote and to whom the Utah Revised Business Corporation Act requires notice be given. Such notice shall contain or be accompanied by the same material that would have been required if a formal meeting had been called to consider the action. ARTICLE IV Antidilution Provisions SECTION 4.01. General. The Exercise Price and the number and kind of Note Warrant Shares issuable upon exercise of each Note Warrant shall be subject to adjustment from time to time in accordance with this Article IV. SECTION 4.02. Stock Dividends, Subdivisions and Combinations. If, at any time after the Closing Date, the Company shall: (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock; or (ii) subdivide, split or reclassify its outstanding shares of Common Stock into a larger number of shares of Common Stock; or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock; then (A) the number of Note Warrant Shares issuable upon exercise of each Note Warrant shall be adjusted so as to equal the number of Note Warrant Shares that the Holder of such Note Warrant would have held immediately after the occurrence of such event if the Holder had exercised such Note Warrant immediately prior to the occurrence of such event (or, in the case of clause (i), the record date therefor) and (B) the Exercise Price shall be adjusted to be equal to (x) the Exercise Price immediately prior to the occurrence of such event multiplied by (y) a fraction (1) the numerator of which is the number of Note Warrant Shares issuable upon exercise 18 18 of such Note Warrant immediately prior to the adjustment in clause (A) and (2) the denominator of which is the number of Note Warrant Shares issuable upon exercise of such Note Warrant immediately after the adjustment in clause (A). An adjustment made pursuant to this Section 4.02 shall become effective immediately after the occurrence of such event retroactive to the record date, if any, for such event. SECTION 4.03. Issuance of Common Stock. (a) If, at any time after the Closing Date, the Company shall issue or sell (or, in accordance with Section 4.03(b), shall be deemed to have issued or sold) any shares of Common Stock (other than any issuance for which an adjustment is made pursuant to Section 4.02 or Section 4.05 or no adjustment is required pursuant to Section 4.07(g)) without consideration or for a consideration per share less than the Current Market Value for the Common Stock determined as of the date of such issuance or sale, then, effective immediately upon such issuance or sale, the Exercise Price and the number Note Warrant Shares issuable upon exercise of each Note Warrant shall be adjusted as follows: (i) The Exercise Price shall be reduced to an amount equal to the product obtained by multiplying (A) the Exercise Price in effect immediately prior to such issuance or sale times (B) a fraction, (I) the numerator of which shall be the sum of (x) the product of (1) the number of shares of Common Stock outstanding (on a Fully Diluted Basis) immediately prior to such issuance or sale times (2) the Current Market Value for the Common Stock as of the date of such issuance or sale plus (y) the consideration, if any, received by the Company upon such issuance or sale, and (II) the denominator of which shall be the product of (x) the number of shares of Common Stock outstanding (on a Fully Diluted Basis) immediately after such issuance or sale times (y) such Current Market Value; and (ii) the number of Note Warrant Shares issuable upon exercise of such Note Warrant shall be increased to the number of shares determined by multiplying (A) the number of Note Warrant Shares issuable upon exercise of such Note Warrant immediately prior to such issuance or sale by (B) a fraction, (1) the numerator of which shall be the Exercise Price in effect immediately prior to the adjustment in clause (i) of this Section 4.03(a), and (2) the denominator of which shall be the Exercise Price in effect immediately after such adjustment. (b) The issuance or sale of Options or Convertible Securities shall be deemed, in accordance with this Section 4.03(b), to be the issuance of Common Stock. (i) If the Company in any manner issues or grants any Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options (or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon the exercise of such Options) shall be deemed, for purposes of Section 4.03(a), to be outstanding and to have been issued and sold by the Company. For purposes of Section 4.03(a), the Common Stock issuable upon exercise of Options or upon conversion or exchange of Convertible Securities issuable upon exercise of Options for Convertible Securities shall be deemed to have been issued and sold at a price per share equal to (A) the sum of (x) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of such Options plus (y) the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options plus (z) in the case of such Options for Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon conversion or exchange of such Convertible Securities divided by (B) the total maximum number of shares of Common Stock issuable upon exercise of such Options or upon the conversion 19 19 or exchange of all such Convertible Securities issuable upon the exercise of such Options. (ii) If the Company in any manner issues or sells any Convertible Securities, then the maximum number of shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities shall be deemed, for purposes of Section 4.03(a) to be outstanding and to have been issued and sold by the Company. For purposes of Section 4.03(a), the Common Stock issuable upon conversion or exchange of Convertible Securities shall be deemed to have been issued and sold at a price per share equal to (A) the sum of (x) the total amount received or receivable by the Company as consideration for the issuance or sale of such Convertible Securities plus (y) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof divided by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. (iii) If, at any time after any adjustment of the Exercise Price and the number of Note Warrant Shares issuable upon exercise of the Note Warrants shall have been made pursuant to Section 4.03(a) as a result of the issuance of Options or Convertible Securities, or after any new adjustment of the Exercise Price and the number of Note Warrant Shares shall have been made pursuant to this Section 4.03(b)(iii) (each of the foregoing, a "previous adjustment"): (A) such Options or the right of conversion or exchange of such Convertible Securities shall expire, or be terminated or surrendered, and all or a portion of such Options or the right of conversion or exchange with respect to all or a portion of such Convertible Securities, as the case may be, shall not have been exercised or treated as having been exercised or otherwise canceled or acquired by the Company in connection with any settlement, including any cash settlement, of such Options or the rights of conversion or exchange of such Convertible Securities; or (B) there has been any change in the number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (including as a result of a change in the number of Convertible Securities issuable upon the exercise of such Options or the operation of antidilution provisions applicable thereto); or (C) the consideration per share for which shares of Common Stock are issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities, or the maturity of such Convertible Securities, shall be changed; then, with respect to the unexercised portion of any then outstanding Note Warrants, the previous adjustment shall be rescinded and annulled and the shares of Common Stock which were deemed to have been issued and that gave rise to 20 20 the previous adjustment shall no longer be deemed to have been issued. Thereupon, a recomputation shall be made of the adjustment, if any, of the Exercise Price and the number of Note Warrant Shares issuable upon exercise of such Note Warrants as a consequence of such Options or Convertible Securities on the basis of: (1) treating the number of shares of Common Stock, if any, theretofore actually issued or issuable pursuant to the previous exercise of such Options or such right of conversion or exchange (including Options or rights treated as exercised, otherwise cancelled or acquired in connection with any settlement), as having been issued on the date or dates of such issuance as determined for purposes of the previous adjustment and for the total amount of consideration actually received and receivable therefor (determined in the manner described in Section 4.03(b)(i) or Section 4.03(b)(ii), as the case may be); (2) treating the maximum number of shares of Common Stock (x) issuable upon the exercise (or upon the conversion or exchange of Convertible Securities issuable upon the exercise) of all Options which then remain outstanding and (y) issuable upon the conversion or exchange of all Convertible Securities which then remain outstanding, as having been issued; and (3) making the computations called for in Section 4.03(a) hereof on the basis of the revised terms of such outstanding Options or Convertible Securities, as the case may be, as if they were newly issued at the time of such revision. Any adjustment of the Exercise Price and the number of Note Warrant Shares issuable upon exercise of the Note Warrants resulting from such recomputation shall supersede the previous adjustment. (iv) Any adjustment of the Exercise Price or the number of Note Warrant Shares issuable upon the exercise of Note Warrants to be made pursuant to this Section 4.03 with respect to the issuance of (A) any Options (whether for Common Stock or Convertible Securities), (B) any Convertible Securities issuable upon the exercise of such Options or (C) any shares of Common Stock issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities shall be made effective upon the issuance of such Options. Any adjustment of the Exercise Price or the number of Note Warrant Shares issuable upon the exercise of Note Warrants to be made pursuant to this Section 4.03 with respect to the issuance of (x) any Convertible Securities (other than Convertible Securities issuable upon the exercise of Options) or (y) any shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities shall be made effective upon the issuance of such Convertible Securities. No further adjustment of the Exercise Price or the number of Note Warrant Shares issuable upon the exercise of Note Warrants shall be made upon the actual issuance of Common Stock or of Convertible Securities upon the exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities. 21 21 SECTION 4.04. Distributions of Assets or Securities Other than Common Stock. (a) If, at any time after the Closing Date, the Company shall, by dividend or otherwise, distribute to the holders of its Common Stock any shares of its capital stock (other than a distribution of Common Stock referred to in Section 4.02), rights or warrants to purchase any of its securities (other than those referred to in Section 4.03), evidences of its indebtedness, cash or other property (other than cash dividends or cash distributions paid out of current or retained earnings), then the Exercise Price and the number of Note Warrant Shares issuable upon exercise of each Note Warrant shall be adjusted as follows: (i) The Exercise Price shall be reduced to an amount equal to the product of (A) the Exercise Price in effect immediately prior to such issuance or sale times (B) a fraction (I) the numerator of which shall be (x) the Current Market Value for the Common Stock as of the record date for determining stockholders entitled to such distribution less (y) the fair market value of the portion of the capital stock, rights or warrants, evidences of indebtedness, cash or other property distributed or to be distributed with respect to one share of Common Stock, and (II) the denominator of which shall be such Current Market Value; and (ii) the number of Note Warrant Shares issuable upon exercise of such Note Warrant shall be increased to the number of shares determined by multiplying (A) the number of Note Warrant Shares issuable upon exercise of such Note Warrant immediately prior to such distribution times (B) a fraction (1) the numerator of which shall be the Exercise Price in effect immediately prior to the adjustment in clause (i) of this Section 4.04 and (2) the denominator of which shall be the Exercise Price in effect immediately after such adjustment. (b) Notwithstanding anything to the contrary contained in paragraph (a), upon a dividend payment or other distribution by the Company which would otherwise trigger an adjustment pursuant to paragraph (a), no such adjustment will be required if, upon such dividend payment or other distribution, the Company simultaneously pays to each Holder of a Note Warrant his, her or its pro rata portion of such dividend payment or other distribution as if such Holder had fully exercised his, her or its Note Warrant immediately prior to the record date for such distribution or, if no record is taken, the date as of which the record holders of Note Warrant Shares entitled to such dividend payment or other distribution are to be determined. SECTION 4.05. Capital Reorganization, Capital Reclassifications, Merger, Etc. If, at any time after the Closing Date, (i) there shall be any capital reorganization or any reclassification of the capital stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares to which Section 4.02 applies or any distribution to which Section 4.04 applies) or (ii) the Company shall consolidate with, merge with or into, or sell all or substantially all of its assets or property to, another Person, then in each such case, effective as of the effective date of such event retroactive to the record date, if any, of such event, each Note Warrant shall be exercisable for the kind and number of shares of stock, other securities, cash or other property to which a holder of the number of Note Warrant Shares issuable upon exercise of such Note Warrant would have been entitled to receive and/or to continue to 22 22 hold upon such event. In any such case, if necessary, the provisions of this Agreement (including this Article IV) and the Note Warrants with respect to the rights and interests thereafter of the Holders of the Note Warrants shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock, other securities, cash or other property thereafter deliverable upon the exercise of the Note Warrants. SECTION 4.06. Other Actions Affecting Common Stock. (a) If at any time or from time to time the Company shall take any action affecting its Common Stock, other than any action of a type otherwise described in this Article IV, then the number of Note Warrant Shares issuable upon exercise of each Note Warrant shall be adjusted to such extent, if any, and in such manner and at such time, as the Board shall, in the good faith, exercise of its reasonable business judgement, determine to be equitable in the circumstances; provided, however, that no such adjustment shall decrease the number of Note Warrant Shares issuable upon exercise of such Note Warrant or increase the Exercise Price. (b) The Company will not, by amendment of its certificate or articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company; provided, however, that the Company shall not be deemed to be avoiding or seeking to avoid observance or performance solely because any action otherwise in compliance with this Note Warrant Agreement is structured so as to avoid the need for, or to minimize the extent of, any adjustment under this Article IV. The Company shall at all times in good faith assist in the carrying out of all the provisions of this Article IV and in the taking of all such action as may be necessary or reasonably appropriate in order to protect the exercise rights of the Holders against impairment. SECTION 4.07. Miscellaneous. (a) If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, then the consideration received therefor shall be deemed to be the net amount received or to be received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for consideration other than cash (including in connection with any merger in which the Company issues such securities), then the amount of the consideration other than cash received by the Company shall be the fair market value of such consideration, as of the date of receipt, determined in good faith by the Board exercising reasonable business judgment. (b) The number of shares of Common Stock outstanding at any given time does not include shares owned or held by or for the account of the Company or any Subsidiary, and the disposition of any shares so owned or held shall be considered an issuance of Common Stock. (c) If the Company takes a record of the holders of Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the 23 23 case may be. If the Company shall take any such record of the holders of its Common Stock and shall, thereafter and before the taking of the action for which such record was taken, legally abandon its plan to take such action, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (d) In any case in which this Article IV shall require that any adjustment in the number of Note Warrant Shares issuable upon the exercise of any Note Warrant or in the Exercise Price be made effective as of immediately after a record date for a specified event, the Company may elect to defer, until the occurrence of such event, the issuing to the Holder of any Note Warrant exercised after such record date of the shares of Common Stock and shares or other units of other securities of the Company, if any, issuable upon such exercise over and above the number of shares or other units that would have been issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment. In such case, the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares or other units upon the occurrence of the event requiring such adjustment. (e) Whenever the Exercise Price or the number of Note Warrant Shares shall be adjusted as provided in this Article IV, the Company shall provide to each Holder, in accordance with Section 6.05, a statement, signed by the Chairman, the President or the Chief Financial Officer of the Company, describing in reasonable detail the facts requiring such adjustment and setting forth a calculation of the Exercise Price and the number of Note Warrant Shares applicable to each Note Warrant after giving effect to such adjustment. All calculations under this Article IV shall be made to the nearest one-hundredth of a cent ($.0001) or to the nearest one-hundredth of a share, as the case may be. Adjustments pursuant to this Article IV shall apply to successive events or transactions of the types covered thereby. Notwithstanding any other provision of this Article IV, no adjustment shall be made to the number of Note Warrant Shares or to the Exercise Price if such adjustment represents less than 1% of the number of Note Warrant Shares previously required to be so delivered, but any lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall amount to 1% or more of the number of Note Warrant Shares to be so delivered. (f) The Company may make such reductions in the Exercise Price or increase in the number of Note Warrant Shares to be received by any Holder upon the exercise or exchange of a Note Warrant, in addition to those adjustments required by this Article IV, as it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Common Stock, or any issuance wholly for cash of any shares of Common Stock, or any issuance wholly for cash of shares of Common Stock or Convertible Securities, or any stock dividend, or any issuance of Options hereinafter made by the Company to the holders of its Common Stock shall not be taxable to such holders. (g) Notwithstanding any other provision of this Article IV, no adjustment shall be made pursuant to this Article IV in respect of (i) the issuance of Common Stock in any underwritten public offering that is registered with the Commission, (ii) the issuance of Common Stock or Options to purchase Common Stock issued to employees, officers, directors or consultants of the Company or any Subsidiary, 24 24 or the issuance of Common Stock upon the exercise of any such Options, provided, however, that the aggregate amount of all such Common Stock or Common Stock which may be acquired upon the exercise of such Options shall not exceed an aggregate of 14,954 shares of Common Stock (as such number is adjusted for stock splits, stock dividends, reverse stock splits or combinations affecting the Common Stock), (iii) the issuance from time to time of shares of Common Stock upon the exercise of any of the Note Warrants or the Preferred Stock Warrants, (iv) the issuance of Common Stock pursuant to any adjustment provided for in Section 4.02, Section 4.04 and Section 4.05, (v) the issuance of Common Stock or Options as purchase price payable to sellers (other than any Affiliates of the Company) in any merger, share exchange, consolidation, liquidation or other business combination required to be approved and actually approved by the requisite vote (being not less than a majority based on voting power) of the shareholders of the Company, (vi) 8,902 shares of Common Stock issuable upon exercise of the option granted to Jack Knott and (vii) securities issued in connection with the adoption of a shareholder rights plan by the Company. (h) The Company shall not increase the par value of any shares of Common Stock or other securities issuable upon the exercise of the Note Warrants to an amount that exceeds the Exercise Price. Before taking any action that would cause an adjustment pursuant to this Article IV that would reduce the Exercise Price below the par value per share of the Common Stock, the Company shall be required to take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and nonassessable Note Warrant Shares at the Exercise Price as so adjusted. (i) In the event that the Company: (i) shall authorize the issuance to all holders of Common Stock of rights or warrants to subscribe for or purchase capital stock of the Company or of any other subscription rights or warrants; or (ii) shall authorize a dividend or other distribution to all holders of Common Stock of evidences of its indebtedness, cash or other property or assets; or (iii) becomes a party to any consolidation or merger for which approval of any shareholders of the Company will be required, or to a conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any capital reorganization or reclassification or change of the Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination); or (iv) commences a voluntary or involuntary dissolution, liquidation or winding up; then the Company shall provide a written notice to each Holder stating (1) the date as of which the holders of record of Common Stock to be entitled to receive any such rights, warrants or distribution are to be determined, (2) the material terms of any such consolidation or merger and the expected effective date thereof, or (3) the material terms of any such conveyance, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of record of Common Stock will be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, conveyance, transfer, dissolution, liquidation or winding up. Such notice shall be given as promptly as practicable and not later than ten (10) Business Days prior to the effective date (or the applicable record date, if earlier) of such event. The failure to give the notice required by this Section 4.07(i) or any defect therein shall not affect the legality or validity of any distribution, right, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. 25 25 (j) The form of Note Warrant Certificate need not be changed because of any adjustment made pursuant to this Article IV, and Note Warrant Certificates issued after such adjustment may state the same Exercise Price and the same number of shares of Common Stock issuable upon exercise of the Note Warrants as are stated in the Note Warrant Certificates initially issued pursuant to this Note Warrant Agreement. The Company, however, may at any time in its sole discretion make any change in the form of Note Warrant Certificate that it may deem appropriate to give effect to such adjustments and that does not affect the substance of the Note Warrant Certificate, and any Note Warrant Certificate thereafter issued or authenticated, whether in exchange or substitution for an outstanding Note Warrant Certificate or otherwise, may be in the form as so changed. (k) The Company will not merge or consolidate with or into, or sell, transfer or lease all or substantially all of its property to, any other entity unless the successor or purchasing entity, as the case may be (if not the Company), is organized under the laws of the United States of America or any state or political subdivision thereof and shall expressly agree to provide to each Holder the securities, cash or property required by Section 4.05 hereof upon the exercise or exchange of Note Warrants and expressly assumes, by supplemental agreement, the due and punctual performance and observance of each and every covenant and condition of this Agreement to be performed and observed by the Company; provided, however, that the initial obligation of such successor with respect to the exercise or exchange of Note Warrants shall be only as set forth in Section 4.05. (l) If, at any time prior to the Expiration Date, the Company pays any dividend or makes any distribution (whether in cash, property or securities of the Company) on its Common Stock which does not result in an adjustment under this Article IV, then the Company shall simultaneously pay to the Holder of each Note Warrant, the cash, property or securities that would have been paid or delivered to such Holder on the Note Warrant Shares receivable upon the exercise in full of such Note Warrant had such Note Warrant been fully exercised immediately prior to the record date for such dividend or distribution or, if no record is taken, the date as of which the record holders of Note Warrant Shares entitled to such dividend or distribution are to be determined. ARTICLE V Warrant Agent SECTION 5.01. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the provisions of this Note Warrant Agreement and the Warrant Agent hereby accepts such appointment. SECTION 5.02. Rights and Duties of Warrant Agent. (a) Agent for the Company. In acting under this Note Warrant Agreement and in connection with the Note Warrant Certificates, the Warrant Agent is acting solely as agent of the Company and does not assume any obligation or relationship or agency or trust for or with any of the holders of Note Warrant Certificates or beneficial owners of Note Warrants. 26 26 (b) Counsel. The Warrant Agent may consult with counsel satisfactory to it (and may require an Opinion of Counsel before it acts or refrains from acting), and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the advice of such counsel. (c) Documents. The Warrant Agent shall be protected and shall incur no liability for or in respect of any action taken or thing suffered by it in reliance upon any Note Warrant Certificate, notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper parties. (d) No Implied Obligations. The Warrant Agent shall be obligated to perform only such duties as are specifically set forth herein and in the Note Warrant Certificates, and no implied duties or obligations of the Warrant Agent shall be read into this Note Warrant Agreement or the Note Warrant Certificates against the Warrant Agent. The Warrant Agent shall not be under any obligation to take any action hereunder which may tend to involve it in any expense or liability for which it does not receive indemnity reasonably satisfactory to it. The Warrant Agent shall not be accountable or under any duty or responsibility for the use by the Company of any of the Note Warrant Certificates authenticated by the Warrant Agent and delivered by it to the Holders or on behalf of the Holders pursuant to this Note Warrant Agreement or for the application by the Company of the proceeds of the Note Warrants. The Warrant Agent shall have no duty or responsibility in case of any default by the Company in the performance of its covenants or agreements contained herein or in the Note Warrant Certificates or in the case of the receipt of any written demand from a Holder with respect to such default, including any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise. (e) Not Responsible for Adjustments or Validity of Stock. The Warrant Agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist that may require an adjustment of the number of shares of Common Stock issuable upon exercise of each Note Warrant or the Exercise Price, or with respect to the nature or extent of any adjustment when made, or with respect to the method employed, or herein or in any supplemental agreement provided to be employed, in making the same. The Warrant Agent shall not be accountable with respect to the validity or value of any shares of Common Stock or of any securities or property which may at any time be issued or delivered upon the exercise of any Note Warrant or upon any adjustment pursuant to Article IV, and it makes no representation with respect thereto. The Warrant Agent shall not be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates upon the surrender of any Note Warrant Certificate for the purpose of exercise or upon any adjustment pursuant to Article IV, or to comply with any of the covenants of the Company contained in Article IV. SECTION 5.03. Individual Rights of Warrant Agent. The Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Note Warrants or other securities of the Company or its affiliates and may otherwise deal with the Company or its affiliates with the same rights it would have 27 27 if it were not Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. SECTION 5.04. Warrant Agent's Disclaimer. The Warrant Agent shall not be responsible for and makes no representation as to the validity or adequacy of this Note Warrant Agreement or the Note Warrant Certificates and it shall not be responsible for any statement of the Company in this Note Warrant Agreement or the Note Warrant Certificates other than the Warrant Agent's signature of authentication. SECTION 5.05. Compensation and Indemnity. The Company agrees to pay to the Warrant Agent from time to time such compensation for its services as shall be agreed to in writing from time to time by the Company and the Warrant Agent. The Company shall reimburse the Warrant Agent upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation, expenses, disbursements and advances of the Warrant Agent's agents and counsel. The Company shall indemnify the Warrant Agent and any predecessor Warrant Agent against, and hold it harmless from, any and all loss, liability or expense (including reasonable agents' and attorneys' fees and expenses), including taxes (other than taxes based upon, measured by, or determined by the income of the Warrant Agent) incurred by it without negligence or bad faith on its part arising out of or in connection with the acceptance or performance of its duties under this Note Warrant Agreement. The Warrant Agent shall notify the Company promptly of any claim for which it may seek indemnity promptly upon obtaining actual notice thereof; provided, however, that any failure so to notify the Company shall not relieve the Company of its indemnity obligations hereunder. The Company shall defend the claim and the Warrant Agent shall provide reasonable cooperation at the Company's expense in the defense. The Warrant Agent may have separate counsel and the Company shall pay the fees and expenses of such counsel; provided, however, that the Company shall not be required to pay such fees and expenses if it assumes the Warrant Agent's defense and, in the Warrant Agent's reasonable judgment, there is no conflict of interest between the Company and the Warrant Agent in connection with such defense. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Warrant Agent through the Warrant Agent's wilful misconduct, negligence or bad faith. The Company's payment obligations pursuant to this Section 5.05 shall survive the termination of this Note Warrant Agreement and the resignation or removal of the Warrant Agent. To secure the Company's payment obligations under this Note Warrant Agreement, the Warrant Agent shall have a lien prior to the Holders on all money or property held or collected by the Warrant Agent. SECTION 5.06. Successor Warrant Agent. (a) The Company To Provide and Maintain Warrant Agent. The Company agrees for the benefit of the Holders that there shall at all times be a Warrant Agent hereunder until all the Note Warrants have been exercised or are no longer exercisable. (b) Resignation and Removal. The Warrant Agent may at any time resign by giving written notice to the Company of such intention on its part, specifying the date on which its desired resignation shall become effective; provided, however, that such date shall not be less than 30 days after the date on which such notice is given unless the 28 28 Company otherwise agrees. The Warrant Agent hereunder may be removed at any time by the filing with it of an instrument in writing signed by or on behalf of the Company and specifying such removal and the date when it shall become effective, which date shall not be less than 30 days after such notice is given unless the Warrant Agent otherwise agrees. Any removal under this Section 5.06 shall take effect upon the appointment by the Company as hereinafter provided of a successor Warrant Agent (which shall be a bank or trust company authorized under the laws of the jurisdiction of its organization to exercise corporate trust powers) and the acceptance of such appointment by such successor Warrant Agent. At any time that the Warrant Agent is also acting as Trustee under the Indenture and holders of the Notes remove the Trustee pursuant to Section 7.08 of the Indenture, the Company shall remove the Warrant Agent pursuant to this Section 5.06(b). (c) The Company To Appoint Successor. In the event that at any time the Warrant Agent shall resign, or shall be removed, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or shall commence a voluntary case under the Federal bankruptcy laws, as now or hereafter constituted, or under any other applicable Federal or state bankruptcy, insolvency or similar law or shall consent to the appointment of or taking possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the Warrant Agent or its property or affairs, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall take corporate action in furtherance of any such action, or a decree or order for relief by a court having jurisdiction in the premises shall have been entered in respect of the Warrant Agent in an involuntary case under the Federal bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency or similar law, or a decree or order by a court having jurisdiction in the premises shall have been entered for the appointment of a receiver, custodian, liquidator, assignee, trustee, sequestrator (or similar official) of the Warrant Agent or of its property or affairs, or any public officer shall take charge or control of the Warrant Agent or of its property or affairs for the purpose of rehabilitation, conservation, winding up or liquidation, a successor Warrant Agent, qualified as aforesaid, shall be appointed by the Company by an instrument in writing, filed with the successor Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent and acceptance by the successor Warrant Agent of such appointment, the Warrant Agent shall cease to be Warrant Agent hereunder; provided, however, that in the event of the resignation of the Warrant Agent under this subsection (c), such resignation shall be effective on the earlier of (i) the date specified in the Warrant Agent's notice of resignation and (ii) the appointment and acceptance of a successor Warrant Agent hereunder. (d) Successor To Expressly Assume Duties. Any successor Warrant Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Company an instrument accepting such appointment hereunder, and thereupon such successor Warrant Agent, without any further act, deed or conveyance, shall become vested with all the rights and obligations of such predecessor with like effect as if originally named as Warrant Agent hereunder, and such predecessor, upon payment of its charges and disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Warrant Agent shall be entitled to receive, all monies, securities and other property on deposit with or held by such predecessor, as Warrant Agent hereunder. 29 29 (e) Successor by Merger. If the Warrant Agent consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Warrant Agent. In case at the time such successor or successors by merger, conversion or consolidation to the Warrant Agent shall succeed to the agency created by this Note Warrant Agreement, any of the Note Warrant Certificates shall have been authenticated but not delivered, any such successor to the Warrant Agent may adopt the certificate of authentication of any predecessor Warrant Agent, and deliver such Note Warrant Certificates so authenticated; and in case at that time any of the Note Warrant Certificates shall not have been authenticated, any successor to the Warrant Agent may authenticate such Note Warrant Certificates either in the name of any predecessor hereunder or in the name of the successor to the Warrant Agent; and in all such cases such certificates shall have the full force which it is anywhere in the Note Warrant Certificates or in this Note Warrant Agreement provided that the certificate of the Warrant Agent shall have. ARTICLE VI Miscellaneous SECTION 6.01. SEC Reports. Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act the Company shall file with the SEC (if permitted by SEC practice and applicable laws and regulations) and provide the Warrant Agent and Holders within 15 days after it files them with the SEC (or if not permitted, within 15 days after it would have otherwise been required to file them with the SEC), copies of its annual report and the information, documents and other reports that are specified in Sections 13 and 15(d) of the Exchange Act. In addition, after the Common Stock of the Company is Publicly Traded, the Company shall furnish to the Warrant Agent and the Holders, promptly upon their becoming available, copies of the annual report to shareholders and any other information provided by the Company to its public shareholders generally. Delivery of such reports, information and documents to the Warrant Agent is for informational purposes only and the Warrant Agent's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Warrant Agent is entitled to rely exclusively on Officers' Certificates). SECTION 6.02. Persons Benefitting. Nothing in this Note Warrant Agreement is intended or shall be construed to confer upon any Person other than the Company, the Warrant Agent and the Holders any right, remedy or claim under or by reason of this Note Warrant Agreement or any part hereof. SECTION 6.03. Rights of Holders. Holders of unexercised Note Warrants are not entitled to (i) receive dividends or other distributions, (ii) receive notice of or vote at any meeting of the stockholders, (iii) consent to any action of the 30 30 stockholders, (iv) receive notice of any other proceedings of the Company, (v) exercise any preemptive right or (vi) exercise any other rights whatsoever as stockholders of the Company. SECTION 6.04. Amendment. This Note Warrant Agreement may be amended by the parties hereto without the consent of any Holder for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect to matters or questions arising under this Note Warrant Agreement as the Company and the Warrant Agent may deem necessary or desirable (including without limitation any addition or modification to provide for compliance with the transfer restrictions set forth herein); provided, however, that such action shall not adversely affect the rights of any of the Holders. Any amendment or supplement to this Note Warrant Agreement that has an adverse effect on the interests of the Holders shall require the written consent of the Holders of a majority of the then outstanding Note Warrants. The consent of each Holder affected shall be required for any amendment pursuant to which the Exercise Price would be increased or the number of Note Warrant Shares issuable upon exercise of Note Warrants would be decreased (other than pursuant to adjustments provided herein). In determining whether the Holders of the required number of Note Warrants have concurred in any direction, waiver or consent, Note Warrants owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company (other than CSI) shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Warrant Agent shall be protected in relying on any such direction, waiver or consent, only Note Warrants which the Warrant Agent actually knows are so owned shall be so disregarded. Also, subject to the foregoing, only Note Warrants outstanding at the time shall be considered in any such determination. SECTION 6.05. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company: Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, Utah 84108 Attention of: General Counsel if to the Warrant Agent: The Bank of New York 101 Barclay Street, Floor 21W New York, NY 10286 Attention of: Corporate Trust Administration The Company or the Warrant Agent by notice to the other may designate additional or different addresses for subsequent notices or communications. 31 31 Any notice or communication mailed to a Holder shall be mailed to the Holder at the Holder's address as it appears on the records of the Warrant Agent and shall be sufficiently given if so mailed within the time prescribed. At the Company's request, the Warrant Agent shall give the notice of the Exercise Event required by Section 3.02(b), the notice of the Expiration Date required by Section 3.03 and any other notice to be provided to the Holders by the Company under this Warrant Agreement, in all such cases, in the Company's name and at the Company's expense. In such event, the Company shall provide the Warrant Agent with the form of notice. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 6.06. Governing Law. THIS NOTE WARRANT AGREEMENT AND THE NOTE WARRANTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 6.07. Successors. All agreements of the Company in this Note Warrant Agreement and the Note Warrant Certificates shall bind its successors. All agreements of the Warrant Agent in this Agreement shall bind its successors. SECTION 6.08. Multiple Originals. The parties may sign any number of copies of this Note Warrant Agreement. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Note Warrant Agreement. SECTION 6.09. Table of Contents. The table of contents and headings of the Articles and Sections of this Note Warrant Agreement have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. SECTION 6.10. Severability. The provisions of this Note Warrant Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Note Warrant Agreement in any jurisdiction. 32 32 IN WITNESS WHEREOF, the parties have caused this Note Warrant Agreement to be duly executed as of the date first written above. HUNTSMAN PACKAGING CORPORATION, by /s/ RICHARD P. DURHAM --------------------------- Name: Richard P. Durham Title: President and CEO THE BANK OF NEW YORK, as Warrant Agent, by /s/ MICHELE L. RUSSO -------------------------- Name: Michele L. Russo Title: Assistant Vice President 33 33 APPENDIX PROVISIONS RELATING TO NOTE WARRANTS 1. Definitions 1.1 Definitions For the purposes of this Appendix A the following additional terms shall have the meanings indicated below: "Definitive Note Warrant" means a certificated Note Warrant (bearing the Restricted Note Warrant Legend if the transfer of such Note Warrant is restricted by applicable law) that does not include the Global Note Warrant Legend. "Depositary" means The Depository Trust Company, its nominees and their respective successors. "Global Note Warrant Legend" means the legend set forth under that caption in Exhibit A to this Note Warrant Agreement. "IAI" means an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Purchase Agreement" means the Purchase Agreement dated May 25, 2000, among the Company, the Note Guarantors and the Initial Purchasers. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Restricted Warrant Legend" means the legend set forth in Section 2.3(d)(i) herein. "Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Rule 144A" means Rule 144A under the Securities Act. "Rule 144A Note Warrants" means all Note Warrants offered and sold to QIBs in reliance on Rule 144A. "Separability Legend" means the separability legend set forth in Section 2.3(d)(i). 34 34 "Transfer Restricted Note Warrants" means Global Note Warrants, Definitive Note Warrants and any other Note Warrants that bear or are required to bear the Restricted Warrant Legend. "Warrant Custodian" means the custodian with respect to a Global Note Warrant (as appointed by the Depositary) or any successor person thereto, who shall initially be the Warrant Agent. 1.2 Other Definitions. Defined in Section: Term: "Agent Members" 2.1(b) "IAI Global Note Warrant 2.1(a) "Global Units" 2.1 "Global Note Warrant" 2.1(a) "Notes Transfer Agent" 2.1 "Rule 144A Global Note Warrant" 2.1(a) 2. The Securities 2.1 Form and Dating Each Note Warrant shall initially be issued as part of a Unit consisting of one Note and one Note Warrant. The Units issued on the date hereof (the "Global Units") will be offered and sold by the Company pursuant to the Purchase Agreement and will be resold, initially, to QIBs in reliance on Rule 144A. Such Units may thereafter be transferred to, among others, QIBs and, except as set forth below, IAIs in accordance with Rule 501. Prior to the Separation Date, the Note Warrants may not be transferred or exchanged separately from, but may be transferred or exchanged only together with, the Notes attached to such Note Warrants. Prior to the Separation Date, the registrar for the Notes shall act as transfer agent ("Notes Transfer Agent") for both the Note Warrants and the Notes. Any request for transfer of a Note Warrant prior to the Separation Date made to the Note Transfer Agent shall be accompanied by the Note attached thereto and the Note Transfer Agent will not execute any such transfer without such Note attached thereto. Such Note will be duly endorsed and accompanied by a written instrument of transfer in form satisfactory to the Company, duly executed by the Holder thereof or the Holder's attorneys duly authorized in writing. All such transfers shall meet the requirements set forth in the Indenture and the Global Units. In the event of (i) the effectiveness of a registration statement with respect to the Notes or a Registered Exchange Offer, (ii) a Change of Control or (iii) an Event of Default the Company shall provide notice to the Note Transfer Agent and the Warrant Agent of the Separation Date not less than two Business Days prior to such date and the Company will cause the Note Transfer Agent to notify the Depositary of such date. In the event of a determination by CSI to separate the Note Warrants and the Notes, the Company shall promptly, but in no event later than the next following Business Day after receiving notice of such determination, provide notice to the Note Transfer Agent and the Warrant Agent of the Separation Date and cause the Note Transfer Agent to notify the Depositary of such date. If the Separation Date has not otherwise occurred prior to the 180th day after the date hereof, 35 35 the Separation Date shall occur on such day and the Company shall provide notice of the Separation Date to the Note Transfer Agent and the Warrant Agent and the Company will cause the Note Transfer Agent to notify the Depositary of such date. In acting as the transfer agent for the Note Warrants prior to the Separation Date, the Note Transfer Agent shall be entitled to all the rights, privileges and immunities to which the Warrant Agent is entitled in performing such role pursuant to the terms of this Note Warrant Agreement. After the Separation Date, the Note Warrants may only be sold or transferred in accordance with this Appendix. (a) Global Note Warrants. Rule 144A Note Warrants shall be issued initially in the form of one or more permanent global Note Warrants in definitive, fully registered form (collectively, the "Rule 144A Global Note Warrant"), without interest coupons and bearing the Global Note Warrant Legend, the Restricted Warrant Legend and the Separability Legend, which shall be deposited on behalf of the purchasers of the Note Warrants represented thereby with the Warrant Custodian, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Warrant Agent as provided in this Note Warrant Agreement to accommodate transfers of beneficial interests in the Note Warrants to IAIs subsequent to the initial distribution. One or more global Note Warrants in definitive, fully registered form bearing the Global Note Warrant Legend, the Restricted Warrant Legend and the Separability Legend (collectively, the "IAI Global Note Warrant") shall also be issued on the Closing Date and deposited on behalf of the purchasers of the Note Warrants represented thereby with the Warrant Custodian, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Warrant Agent as provided in this Note Warrant Agreement. The Rule 144A Global Note Warrant and the IAI Global Note Warrant are each referred to herein as a "Global Note Warrant" and are collectively referred to herein as "Global Note Warrants." The number of Note Warrants represented by the Global Note Warrants may from time to time be increased or decreased by adjustments made on the records of the Warrant Agent and the Depositary or its nominee and on the schedules thereto as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Note Warrant deposited with or on behalf of the Depositary. The Company shall execute and the Warrant Agent shall, in accordance with this Section 2.1(b) and Section 2.2 and pursuant to an order of the Company signed by two Officers, authenticate and deliver initially one or more Global Note Warrants that (a) shall be registered in the name of the Depositary for such Global Note Warrant or Global Note Warrants or the nominee of such Depositary and (b) shall be delivered by the Warrant Agent to such Depositary or pursuant to such Depositary's instructions or held by the Warrant Agent as Warrant Custodian. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Note Warrant Agreement with respect to any Global Note Warrants held on their behalf by the Depositary or by the Warrant Agent as Warrant Custodian or under such Global Note Warrant, and the Depositary may be treated by the Company, the Warrant Agent and any agent of the Company or the Warrant Agent as the absolute owner of such Global Note Warrants for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Warrant Agent or any agent of the Company or the Warrant Agent from giving effect to any written certification, proxy or other authorization 36 36 furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Note Warrants. (c) Definitive Note Warrants. Except as provided in Section 2.3 or 2.4, owners of beneficial interests in Global Note Warrants will not be entitled to receive physical delivery of certificated Note Warrants. 2.2 Authentication. The Warrant Agent shall authenticate and make available for delivery upon a written order of the Company, signed by two Officers, Note Warrant Certificates entitling the Holders therefor to purchase in the aggregate not more than 18,532 Note Warrant Shares, subject to adjustment, as set forth in this Note Warrant Agreement. 2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive Note Warrants. When Definitive Note Warrants are presented to the Warrant Registrar with a request: (i) to register the transfer of such Definitive Note Warrants; or (ii) to exchange such Definitive Note Warrants for an equal amount of Definitive Note Warrants of other authorized denominations, the Warrant Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Note Warrants surrendered for transfer or exchange: (1) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Warrant Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (2) in the case of Definitive Note Warrants which are Transfer Restricted Note Warrants, are accompanied by the following additional information and documents, as applicable: (A) if such Definitive Note Warrants are being delivered to the Warrant Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in the form set forth on the reverse side of the Note Warrant Certificate); or (B) if such Definitive Note Warrants are being transferred to the Company, a certification to that effect (in the form set forth on the reverse side of the Note Warrant Certificate); or (C) if such Definitive Note Warrants are being transferred pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or in reliance upon another exemption from the registration requirements of the Securities Act, (x) a certification to that effect (in the form set forth on the reverse side of the Note Warrant Certificate), (y) if the Company so requests, an Opinion of Counsel or other evidence reasonably satisfactory to it as to the compliance with the 37 37 restrictions set forth in the legend set forth in Section 2.3(d)(i) and (z) in the case of a transfer to an IAI, a signed letter substantially in the form of Exhibit B. (b) Restrictions on Transfer of a Definitive Note Warrant for a Beneficial Interest in a Global Note Warrant. A Definitive Note Warrant may not be exchanged for a beneficial interest in a Global Note Warrant except upon satisfaction of the requirements set forth below. Upon receipt by the Warrant Agent of a Definitive Note Warrant, duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Warrant Registrar, together with: (i) certification (in the form set forth on the reverse side of the Note Warrant Certificate) that such Definitive Note Warrant is being transferred (1) to a QIB in accordance with Rule 144A or (2) to an IAI that has furnished to the Warrant Agent a signed letter substantially in the form of Exhibit B, and in the case of clause (2), an opinion of counsel or other evidence reasonably satisfactory to the Warrant Agent as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i); and (ii) written instructions directing the Warrant Agent to make, or to direct the Warrant Custodian to make, an adjustment on its books and records with respect to such Global Note Warrant to reflect an increase in the aggregate amount of the Note Warrants represented by the Global Note Warrant, such instructions to contain information regarding the Depositary account to be credited with such increase, then the Warrant Agent shall cancel such Definitive Note Warrant and cause, or direct the Warrant Custodian to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Warrant Custodian, the aggregate amount of Note Warrants represented by the Global Note Warrant to be increased by the aggregate amount of the Definitive Note Warrant to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Note Warrant equal to the amount of the Definitive Security so canceled. If no Global Note Warrants are then outstanding and the Global Note Warrant has not been previously exchanged for certificated Note Warrants pursuant to Section 2.4, the Company shall issue and the Warrant Agent shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Global Note Warrant in the appropriate amount. (c) Transfer and Exchange of Global Note Warrants. (i) The transfer and exchange of a Global Note Warrant or beneficial interests therein shall be effected through the Depositary, in accordance with this Note Warrant Agreement (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor. A transferor of a beneficial interest in a Global Note Warrant shall deliver a written order given in accordance with the Depositary's procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in such Global Note Warrant or another Global Note Warrant and such account shall be credited in accordance with such order with a beneficial interest in the applicable Global Note Warrant and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Note Warrant being transferred. In the case of a transfer of a beneficial interest in the Rule 144A Global Note Warrant for an interest in the IAI Global Note Warrant, the transferee must furnish a signed letter substantially in the form of Exhibit B to the Warrant Agent and an opinion of counsel or other evidence reasonably satisfactory 38 38 to the Warrant Agent as to compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i). (ii) If the proposed transfer is a transfer of a beneficial interest in one Global Note Warrant to a beneficial interest in another Global Note Warrant, the Warrant Registrar shall reflect on its books and records the date and an increase in the amount of the Global Note Warrant to which such interest is being transferred in an amount equal to the amount of the interest to be so transferred, and the Warrant Registrar shall reflect on its books and records the date and a corresponding decrease in the amount of Global Note Warrant from which such interest is being transferred. (iii) Notwithstanding any other provisions of this Appendix (other than the provisions set forth in Section 2.4), a Global Note Warrant may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. (iv) In the event that a Global Note Warrant is exchanged for Definitive Note Warrants pursuant to Section 2.4, such Note Warrants may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Note Warrant Certificate intended to ensure that such transfers comply with Rule 144A or such other applicable exemption from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company. (d) Legend. (i) Except as permitted by the following paragraphs (ii), (iii) or (iv), each Note Warrant Certificate evidencing the Global Note Warrants and the Definitive Note Warrants (and all Note Warrants issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form (each defined term in the legend being defined as such for purposes of the legend only): "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR 39 39 ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTE WARRANTS ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN A MINIMUM NUMBER OF NOTE WARRANTS OF (I) 250 PRIOR TO THE SEPARATION OF THE NOTE WARRANTS FROM THE NOTES AND (II) 25,000 AFTER SUCH SEPARATION, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING THE EXEMPTION PROVIDED FOR BY RULE 144 THEREUNDER (IF AVAILABLE), SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. Each Definitive Security will also bear the following additional legend: "IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE WARRANT AGENT AND THE WARRANT REGISTRAR SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH WARRANT AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS." Each Note Warrant Certificate issued prior to the Separation Date will also bear the following Separability Legend: "THE NOTE WARRANTS EVIDENCED BY THIS CERTIFICATE WERE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF ONE 13% SENIOR SUBORDINATED NOTE DUE 2010 OF HUNTSMAN PACKAGING CORPORATION WITH A PRINCIPAL AMOUNT AT MATURITY OF $1,000 (A "NOTE") AND ONE NOTE WARRANT. THE NOTES AND NOTE WARRANTS WILL NOT TRADE SEPARATELY UNTIL THE EARLIEST OF (I) 180 DAYS AFTER THE DATE OF THE NOTE WARRANT AGREEMENT, (II) A CHANGE OF CONTROL, (III) THE OCCURRENCE OF AN EVENT OF 40 40 DEFAULT, (IV) THE DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A REGISTERED EXCHANGE OFFER FOR THE NOTES IS DECLARED EFFECTIVE AND (V) SUCH EARLIER DATE AS DETERMINED BY CSI IN ITS DISCRETION." (ii) Upon any sale or transfer of a Transfer Restricted Note Warrant that is a Definitive Note Warrant, the Warrant Registrar shall permit the Holder thereof to exchange such Transfer Restricted Note Warrant for a Definitive Note Warrant that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Note Warrant if the Holder certifies in writing to the Warrant Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Note Warrant Certificate) and delivers an opinion of counsel or other evidence reasonably satisfactory to the Warrant Registrar as to compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i). (iii) On or after the Separation Date, the Holder of a Note Warrant Certificate containing a Separability Legend may surrender such Note Warrant Certificate accompanied by a written application to the Warrant Agent, duly executed by the Holder thereof, for a new Note Warrant Certificate or certificates not containing the Separability Legend. (e) Cancelation or Adjustment of Global Note Warrant. At such time as all beneficial interests in a Global Note Warrant have either been exchanged for Definitive Note Warrants, transferred, redeemed, repurchased, canceled or exercised such Global Note Warrant shall be returned by the Depositary to the Warrant Agent for cancelation or retained and canceled by the Warrant Agent. At any time prior to such cancelation, if any beneficial interest in a Global Note Warrant is exchanged for Definitive Note Warrants, transferred in exchange for an interest in another Global Note Warrant, redeemed, repurchased, canceled or exercised the number of Note Warrants represented by such Global Note Warrant shall be reduced and an adjustment shall be made on the books and records of the Warrant Agent (if it is then the Warrant Custodian for such Global Note Warrant) with respect to such Global Note Warrant, by the Warrant Agent or the Warrant Custodian, to reflect such reduction. (f) Obligations with Respect to Transfers and Exchanges of Note Warrants. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Warrant Agent shall authenticate, Definitive Note Warrants and Global Note Warrants at the Warrant Registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments, or similar governmental charge payable upon exchanges to be registered in the name of the registered Holder effecting the exchange pursuant to Section 2.05 of this Note Warrant Agreement). (iii) Prior to the due presentation for registration of transfer of any Note Warrant, the Company, the Warrant Agent and the Warrant Registrar may deem and 41 41 treat the person in whose name a Note Warrant is registered as the absolute owner of such Note Warrant for all purposes whatsoever, and none of the Company, the Warrant Agent or the Warrant Registrar shall be affected by notice to the contrary. (iv) All Note Warrants issued upon any transfer or exchange pursuant to the terms of this Note Warrant Agreement shall evidence the same terms and shall be entitled to the same benefits under this Note Warrant Agreement as the Note Warrants surrendered upon such transfer or exchange. (g) No Obligation of the Warrant Agent. (i) The Warrant Agent shall have no responsibility or obligation to any beneficial owner of a Global Note Warrant, a member of, or a participant in the Depositary or any other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Note Warrants or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice or the payment of any amount, under or with respect to such Note Warrants. All notices and communications to be given to the Holders under the Note Warrants shall be given only to the registered Holders (which shall be the Depositary or its nominee in the case of a Global Note Warrant). The rights of beneficial owners in any Global Note Warrant shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Warrant Agent may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners. (ii) The Warrant Agent shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Note Warrant Agreement or under applicable law with respect to any transfer of any interest in any Note Warrant (including any transfers between or among Depositary participants, members or beneficial owners in any Global Note Warrant) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Note Warrant Agreement, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Definitive Note Warrants. (a) A Global Note Warrant deposited with the Depositary or with the Warrant Agent as Warrant Custodian pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of Definitive Note Warrants in an aggregate amount equal to the amount of such Global Note Warrant, in exchange for such Global Note Warrant, only if such transfer complies with Section 2.3 and (i) the Depositary notifies the Company that it is unwilling or unable to continue as a Depositary for such Global Note Warrant or if at any time the Depositary ceases to be a "clearing agency" registered under the Exchange Act, and a successor depositary is not appointed by the Company within 90 days of such notice, or after the Company becomes aware of such cessation or (ii) an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Warrant Agent in writing that it elects to cause the issuance of Definitive Note Warrants under this Note Warrant Agreement. 42 42 (b) Any Global Note Warrant that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to the Warrant Agent, to be so transferred, in whole or from time to time in part, without charge, and the Warrant Agent shall authenticate and deliver, upon such transfer of each portion of such Global Note Warrant, an equal number of Definitive Note Warrants. Any certificated Note Warrant in the form of a Definitive Note Warrant delivered in exchange for an interest in the Global Note Warrant shall, except as otherwise provided by Section 2.3(d), bear the Restricted Warrant Legend. (c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Note Warrant may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Note Warrant Agreement or the Note Warrants. (d) In the event of the occurrence of any of the events specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to the Warrant Agent a reasonable supply of Definitive Note Warrants in fully registered form. 43 43 EXHIBIT A [FORM OF FACE OF NOTE WARRANT CERTIFICATE] [Separability Legend] THE NOTE WARRANTS EVIDENCED BY THIS CERTIFICATE WERE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF ONE 13% SENIOR SUBORDINATED NOTE DUE 2010 OF HUNTSMAN PACKAGING CORPORATION WITH A PRINCIPAL AMOUNT OF $1,000 (A "NOTE") AND ONE NOTE WARRANT. THE NOTES AND NOTE WARRANTS WILL NOT TRADE SEPARATELY UNTIL THE EARLIEST OF (I) 180 DAYS AFTER THE DATE OF THE NOTE WARRANT AGREEMENT, (II) A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES (THE "INDENTURE")), (III) THE OCCURRENCE OF AN EVENT OF DEFAULT (AS DEFINED IN THE INDENTURE), (IV) THE DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO THE NOTES OR A REGISTERED EXCHANGE OFFER (AS DEFINED IN THE INDENTURE) FOR THE NOTES IS DECLARED EFFECTIVE AND (V) SUCH EARLIER DATE AS DETERMINED BY CSI IN ITS DISCRETION. [Global Note Warrant Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER OR EXCHANGE, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE WARRANT SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE WARRANT SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE NOTE WARRANT AGREEMENT REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN "ACCREDITED 44 44 INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN A MINIMUM NUMBER OF NOTE WARRANTS OF (I) 250 PRIOR TO THE SEPARATION OF THE NOTE WARRANTS FROM THE NOTES AND (II) 25,000 AFTER SUCH SEPARATION, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, INCLUDING THE EXEMPTION PROVIDED FOR BY RULE 144 (IF AVAILABLE), SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. [Definitive Note Warrants Legend] IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE WARRANT AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH WARRANT AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.(1) - ----------------- (1) To be included only if the Note Warrant is in definitive form. 45 45 No. [ ] CUSIP No. ______________ WARRANTS TO PURCHASE COMMON STOCK OF HUNTSMAN PACKAGING CORPORATION THIS CERTIFIES THAT [ ], or its registered assigns, is the registered holder of [ the number of Note Warrants set forth in the Schedule of Increases or Decreases in Global Note Warrant attached hereto](2) [___ Note Warrants](3) (the "Note Warrants"). Each Note Warrant entitles the holder thereof (the "Holder"), at its option and subject to the provisions contained herein and in the Note Warrant Agreement referred to below, to purchase from HUNTSMAN PACKAGING CORPORATION, a Utah corporation ("the Company"), 0.08424 shares of Common Stock, no par value, of the Company (the "Common Stock") at the per share exercise price of $.01 (the "Exercise Price"), or by Cashless Exercise referred to below. This Note Warrant Certificate shall terminate and become void as of the close of business on June 1, 2010 (the "Expiration Date") or upon the exercise hereof as to all the shares of Common Stock subject hereto. The number of shares issuable upon exercise of the Note Warrants and the Exercise Price per share shall be subject to adjustment from time to time as set forth in the Note Warrant Agreement (as defined). This Note Warrant Certificate is issued under and in accordance with a Note Warrant Agreement dated as of May 31, 2000 (the "Note Warrant Agreement"), between the Company and The Bank of New York, as Warrant Agent (the "Warrant Agent", which term includes any successor Warrant Agent under the Note Warrant Agreement), and is subject to the terms and provisions contained in the Note Warrant Agreement, to all of which terms and provisions the Holder of this Note Warrant Certificate consents by acceptance hereof. The Note Warrant Agreement is hereby incorporated herein by reference and made a part hereof. Reference is hereby made to the Note Warrant Agreement for a full statement of the respective rights, limitations of rights, duties and obligations of the Company, the Warrant Agent and the Holders of the Note Warrants. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Note Warrant Agreement. A copy of the Note Warrant Agreement may be obtained for inspection by the Holder hereof upon written request to the Warrant Agent at 101 Barclay Street, Floor 21W, New York, New York 10286, Attention: Corporate Trust Administration. Subject to the terms of the Note Warrant Agreement, the Note Warrants may be exercised in whole or in part (i) by presentation of this Note Warrant Certificate with the Election to Purchase attached hereto duly executed and with the simultaneous payment of the Exercise Price (subject to adjustment) to the Warrant Agent for the account of the Company at the office of the Warrant Agent or (ii) by Cashless Exercise. Payment of the Exercise Price (other than by Cashless Exercise) shall be made in cash or by certified or official bank check payable to the order of the Company or by wire transfer of funds to an account designated by the Company for such purpose. Payment by Cashless Exercise shall be made without the payment of cash by reducing the amount of Common Stock which would be obtainable upon the exercise of a Note Warrant and payment of the Exercise Price solely in cash so as to yield a number of shares of Common Stock upon the exercise of such Note Warrant equal to the product of (1) the number of shares of Common Stock issuable as of the Exercise Date upon the exercise of such Note Warrant (if payment of the Exercise Price were being made in cash) and (2) a fraction, the numerator of which is the excess of the Current Market Value per share of Common Stock on the Exercise Date over the Exercise Price per share as of the Exercise Date and the denominator of which is the Current Market Value per share of the Common Stock on the Exercise Date. Until such time, if any, that a registration statement covering the issuance of Note Warrant Shares to the Holders upon exercise of the Note Warrants by the Holders thereof (a "Common Registration Statement") has been filed and declared effective, and at any time that such Common Registration Statement shall cease to be in effect, the Company may require that any Holder exercising a Note Warrant must do so through a Cashless Exercise, and may amend such Note Warrant to eliminate the requirement for payment of the Exercise Price with respect to a Cashless Exercise. As provided in the Note Warrant Agreement and subject to the terms and conditions therein set forth, the Note Warrants shall be exercisable at any time and from time to time on any Business Day after the Exercisability Date; provided, however, that no Note Warrant shall be exercisable after June 1, 2010. - ----------------------- 2(2) Insert if Global Note Warrant. 3(3) Insert if Definitive Note Warrant. 46 46 In the event the Company shall consolidate, with, merge with or into, or sell all or substantially all of its assets or property to, another Person, then in each such case, effective as of the effective date of such event retroactive to the record date, if any, of such event, each Note Warrant shall be exercisable for the kind and number of shares of stock, other securities, cash or other property to which the holder of the number of Note Warrant Shares issuable upon exercise of such Note Warrant would have been entitled to receive and/or continue to hold upon such event. As provided in the Note Warrant Agreement, the number of shares of Common Stock issuable upon the exercise of the Note Warrants and the Exercise Price are subject to adjustment upon the happening of certain events. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with the transfer or exchange of the Note Warrant Certificates pursuant to Section 2.3 of the Appendix to the Note Warrant Agreement, but not for any exchange or original issuance (not involving a transfer) with respect to temporary Note Warrant Certificates, the exercise of the Note Warrants or the Note Warrant Shares. Upon any partial exercise of the Note Warrants, there shall be authenticated and issued to the Holder hereof a new Note Warrant Certificate representing those Note Warrants which were not exercised. This Note Warrant Certificate may be exchanged at the office of the Warrant Agent by presenting this Note Warrant Certificate properly endorsed with a request to exchange this Note Warrant Certificate for other Note Warrant Certificates evidencing an equal number of Note Warrants. No fractional Note Warrant Shares will be issued upon the exercise of the Note Warrants, but the Company shall pay an amount in cash equal to the Current Market Value per Note Warrant Share, as determined on the day immediately preceding the date the Note Warrant is presented for exercise, multiplied by the fraction of a Note Warrant Share that would be issuable on the exercise of any Note Warrant, computed to the nearest whole cent. All shares of Common Stock issuable by the Company upon the exercise of the Note Warrants shall, upon such issue, be duly and validly issued and fully paid and non-assessable. The Holder in whose name the Note Warrant Certificate is registered may be deemed and treated by the Company and the Warrant Agent as the absolute owner of the Note Warrant Certificate for all purposes whatsoever and neither the Company nor the Warrant Agent shall be affected by notice to the contrary. The Note Warrants do not entitle any Holder hereof to any of the rights of a stockholder of the Company. This Note Warrant Certificate shall not be valid or obligatory for any purpose until it shall have been authenticated by the Warrant Agent. HUNTSMAN PACKAGING CORPORATION, by ---------------------------- Name: Title: Attest: - ----------------------- Name: Title: 47 47 DATED: Warrant Agent's Certificate of Authentication THE BANK OF NEW YORK, as Warrant Agent, by -------------------------- Authorized Signatory 48 48 FORM OF ELECTION TO PURCHASE NOTE WARRANT SHARES (to be executed only upon exercise of Note Warrants) HUNTSMAN PACKAGING CORPORATION The undersigned hereby irrevocably elects to exercise __________________ Note Warrants to acquire shares of Common Stock, no par value, of Huntsman Packaging Corporation either (i) at an exercise price per share of Common Stock of $.01 or (ii) through Cashless Exercise and otherwise on the terms and conditions specified in the Note Warrant Certificate and the Note Warrant Agreement, surrenders this Note Warrant Certificate and all right, title and interest therein to Huntsman Packaging Corporation and directs that the shares of Common Stock deliverable upon the exercise of such Note Warrants be registered or placed in the name and at the address specified below and delivered thereto. Check method of exercise: Cash Exercise _ Cashless Exercise _ In the event that the Company has not elected pursuant to Section 3.04 of the Note Warrant Agreement to require any Holder exercising a Note Warrant to do so through a Cashless Exercise and eliminate the requirement for payment of the Exercise Price with respect to a Cashless Exercise, the undersigned represents and warrants that it (a) is not acquiring the Note Warrant Shares with a view to transferring such Note Warrant Shares in violation of the Securities Act of 1933, as amended (the "Securities Act"), (b) acknowledges that the issuance of the Note Warrant Shares has not been registered under the Securities Act and that the Note Warrant Shares may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption therefrom is available and (c) is an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3), or (7) under the Securities Act (or an entity in which all of the equity owners are accredited investors of such types). Date: , -------------- 4 - ------------------------- (Signature of Owner) - ------------------------------ (Street Address) - ------------------------------ (City) (State) (Zip Code) Signature Guaranteed by: - ------------------------------ - -------------------- (4) The signature must correspond with the name as written upon the face of the Note Warrant Certificate in every particular, without alteration or enlargement or any change whatever, and must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Warrant Agent. 49 49 Securities and/or check to be issued to: Please insert social security or identifying number: Name: ---------------------------------- Street Address: -------------------------------- City, State and Zip Code: ----------------------------- A new Note Warrant Certificate evidencing any unexercised Note Warrants evidenced by the within Note Warrant Certificate is to be issued to: Please insert social security or identifying number: Name: ---------------------------------- Street Address: -------------------------------- City, State and Zip Code: ----------------------------- 50 50 ASSIGNMENT FORM To assign this Note Warrant, fill in the form below: I or we assign and transfer this Note Warrant to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Note Warrant on the books of the Company. The agent may substitute another to act for him. - ----------------------------------------------------------------- Date: Your Signature: ---------- ----------------------- Signature Guaranteed by: - ------------------------ - ----------------------------------------------------------------- The signature must correspond with the name as written upon the face of the Note Warrant Certificate in every particular, without alteration or enlargement or any change whatever, and must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Warrant Agent. 51 51 CERTIFICATE TO BE DELIVERED UPON TRANSFER OF TRANSFER RESTRICTED NOTE WARRANTS This certificate relates to _______ Note Warrants held in (check applicable space) ___ book-entry or ___ definitive form by the undersigned. The undersigned (check one box below) _ has requested the Warrant Agent by written order to deliver in exchange for its beneficial interest in the Global Note Warrant held by the Depositary a Note Warrant or Note Warrants in definitive, registered form of authorized denominations and an aggregate amount equal to its beneficial interest in such Global Note Warrant (or the portion thereof indicated above); _ has requested the Warrant Agent by written order to exchange or register the transfer of a Note Warrant or Note Warrants. In connection with any transfer of any of the Note Warrants evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act, the undersigned confirms that such Note Warrants are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1) _ to the Company; or (2) _ pursuant to an effective registration statement under the Securities Act of 1933; or (3) _ inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4) _ to an institutional "accredited investor" (as defined in Rule 501(a)(1),(2),(3) or (7) under the Securities Act of 1933) that has furnished to the Warrant Agent a signed letter containing certain representations and agreements; or (5) _ pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. Unless one of the boxes is checked, the Warrant Agent will refuse to register any of the Note Warrants evidenced by this certificate in the name of any Person other than the registered holder thereof; provided, however, that if box (4) or (5) is checked, the Warrant Agent may require, prior to registering any such transfer of the Note Warrants, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an 52 52 exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. ------------------------ Your Signature Signature Guarantee: Date: ---------------------- -------------------------- Signature must be guaranteed Signature of Signature by a participant in a Guarantee recognized signature guaranty medallion program or other signature guarantor acceptable to the Warrant Agent ------------------------------------------------------------ 53 53 TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Note Warrant for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ---------------- ------------------------------ NOTICE: To be executed by an executive officer 54 54 [TO BE ATTACHED TO GLOBAL NOTE WARRANT] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE WARRANT The initial amount of this Global Note Warrant is 220,000 Note Warrants. The following increases or decreases in this Global Note Warrant have been made: Date of Amount of decrease in Number Amount of increase in Number Number of Note Warrants in Signature of authorized Exchange of Note Warrants in this of Note Warrants in this this Global Note Warrant signatory of Warrant Agent Global Note Warrant Global Note Warrant following such decrease or increase
55 55 EXHIBIT B Form of Transferee Letter of Representation Huntsman Packaging Corporation c/o The Bank of New York 101 Barclay Street, Floor 21W New York, New York 10286 Ladies and Gentlemen: This certificate is delivered to request a transfer of ________ Note Warrants to purchase Common Stock ("Note Warrants") of Huntsman Packaging Corporation (the "Company"). Upon transfer, the Note Warrants would be registered in the name of the new beneficial owner as follows: Name: ------------------------ Address: --------------------- Taxpayer ID Number: ---------- The undersigned represents and warrants to you that: 1. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the "Securities Act")), purchasing for our own account or for the account of such an institutional "accredited investor" at least (A) 250 Note Warrants prior to the separation of the Note Warrants from the Notes or (B) 25,000 after such separation, and we are acquiring the Note Warrants not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Note Warrants, and we invest in or purchase securities similar to the Note Warrants in the normal course of our business. We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment. 2. We understand that the Note Warrants have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Note Warrants to offer, sell or otherwise transfer such Note Warrants prior to the date that is two years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Note Warrants (or any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement that has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act ("Rule 144A"), to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that is purchasing for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) to an institutional "accredited investor" within the meaning 56 56 of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional "accredited investor," in a minimum number of Note Warrants of (A) 250 prior to the separation of the Note Warrants from the Notes or (B) 25,000 after such separation, or (e) pursuant to any other available exemption from the registration requirements of the Securities Act, including the exemption provided for by Rule 144 thereunder (if available), subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Note Warrants is proposed to be made pursuant to clause (d) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Company and the Warrant Agent, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Note Warrants for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company and the Warrant Agent reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Note Warrants pursuant to clause (d) or (e) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Company and the Warrant Agent. TRANSFEREE: , ----------------- by: ----------------------- EX-10.2 9 ex10-2.txt STOCKHOLDERS' AGREEMENT 1 EXHIBIT 10.2 ================================================================================ HUNTSMAN PACKAGING CORPORATION STOCKHOLDERS' AGREEMENT DATED AS OF MAY 31, 2000 ================================================================================ 2 TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION........................................................1 1.1 DEFINITIONS...........................................................................1 1.2 RULES OF CONSTRUCTION.................................................................9 ARTICLE II ISSUANCES AND TRANSFERS OF SECURITIES....................................................9 2.1 ISSUANCES AND TRANSFERS OF SECURITIES.................................................9 2.2 CERTAIN TRANSFERS....................................................................10 2.3 CO-SALE RIGHTS.......................................................................10 2.4 RIGHT OF FIRST REFUSAL...............................................................11 2.5 REQUIRED SALE IN CONNECTION WITH A SALE OF THE COMPANY...............................12 ARTICLE III RIGHTS TO SUBSCRIBE FOR SECURITIES.....................................................14 3.1 GENERAL..............................................................................14 3.2 EXCLUDED SECURITIES..................................................................15 ARTICLE IV BOARD...................................................................................16 4.1 ELECTION OF DIRECTORS, VOTING........................................................16 4.2 VOTING AGREEMENT.....................................................................18 4.3 MEETINGS.............................................................................18 4.4 NOTICE OF MEETINGS...................................................................18 4.5 QUORUM FOR MEETINGS..................................................................18 ARTICLE V ADDITIONAL AGREEMENTS....................................................................19 5.1 INFORMATION RIGHTS...................................................................19 5.2 ACCESS TO RECORDS AND PROPERTIES.....................................................19 5.3 CONFIDENTIAL INFORMATION.............................................................19 5.4 CHANGE OF CONTROL....................................................................20 5.5 REGULATORY MATTERS...................................................................20 5.6 SPECIAL MEETINGS OF STOCKHOLDERS.....................................................20 5.7 NOTICE REQUIREMENTS IN CONNECTION WITH ACTION BY WRITTEN CONSENT.....................20 ARTICLE VI SECURITIES LAW COMPLIANCE; LEGENDS......................................................21 6.1 RESTRICTION ON TRANSFER AND UTAH BUSINESS CORPORATION ACT............................21 6.2 RESTRICTIVE LEGENDS..................................................................21 6.3 NOTICE OF TRANSFER...................................................................21 6.4 REMOVAL OF LEGENDS, ETC..............................................................22 6.5 ADDITIONAL LEGEND....................................................................22 ARTICLE VII AMENDMENT AND WAIVER...................................................................23 7.1 AMENDMENT............................................................................23 7.2 WAIVER...............................................................................23 ARTICLE VIII TERMINATION...........................................................................23 ARTICLE IX MISCELLANEOUS...........................................................................24 9.1 SEVERABILITY.........................................................................24 9.2 ENTIRE AGREEMENT.....................................................................24 9.3 INDEPENDENCE OF AGREEMENTS, COVENANTS, REPRESENTATIONS AND WARRANTIES................24 9.4 SUCCESSORS AND ASSIGNS...............................................................24 9.5 COUNTERPARTS; FACSIMILE SIGNATURES; VALIDITY.........................................25 9.6 REMEDIES.............................................................................25 9.7 NOTICES..............................................................................25
3 9.8 GOVERNING LAW........................................................................26 9.9 WAIVER OF JURY TRIAL.................................................................27 9.10 CONSENT TO JURISDICTION..............................................................27 9.11 FURTHER ASSURANCES...................................................................27 9.12 CONFLICTING AGREEMENTS...............................................................27 9.13 THIRD PARTY RELIANCE.................................................................27 9.14 REPURCHASE RIGHT OF THE COMPANY......................................................28
(ii) 4 STOCKHOLDERS' AGREEMENT dated as of May 31, 2000, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), and the STOCKHOLDERS (as hereinafter defined). Each Stockholder currently owns (or has the right to acquire) the number of shares of the Common Stock and/or the Common Stock Warrants (collectively, the "Warrants") issued pursuant to the Warrant Agreement, in each case, as set forth opposite the name of such Stockholder on Schedule I. The parties hereto desire to provide for the terms with respect to certain matters regarding the relationship between the Company and the Stockholders and the relationship among the Stockholders. ACCORDINGLY, in consideration of the mutual covenants and agreements contained in this Agreement, the sufficiency of which is hereby acknowledged, the parties agree as set forth below. ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION 1.1 DEFINITIONS. The capitalized terms used in this Agreement have the meanings set forth below. "Affiliate" means, with respect to any Person, a Person that directly, or indirectly through one or more intermediaries, Controls, or is Controlled by, or is under common Control with, such Person. "Approved Sale" has the meaning ascribed to it in Section 2.5(a). "Authorized Representative" has the meaning ascribed to it in Section 5.2. "Board" unless otherwise specified, means the Board of Directors of the Company. "Business Day" means any day that is not (a) Pioneer Day in the State of Utah, (b) a Saturday, Sunday, or legal holiday or (c) a day on which banks are not required to be open in New York, New York. "By-laws" means the By-laws of the Company, as amended, modified, supplemented or restated and in effect from time to time. "Chase" means Chase Domestic Investments, L.L.C., a Delaware limited liability company. "Closing Date" has the meaning given to such term in the Recapitalization Agreement. 5 "Commission" means the Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act. "Common Stockholder" means, collectively, the Investor Stockholders, the Trust Holders, the Warrantholders and the Management Stockholders. "Common Stock" means, collectively, all of the common stock of the Company, of any class and any other class of capital stock of the Company hereafter authorized that is not limited to a fixed sum or percentage of par or stated value with respect to the rights of the holders thereof to participate in dividends and in the distribution of assets upon any liquidation, dissolution or winding up of the Company. "Common Stock Equivalent" means, at any time, one share of Common Stock or the right to acquire, whether or not such right is immediately exercisable, one share of Common Stock, whether evidenced by an option, warrant, convertible security or other instrument or agreement including, without limitation, the Warrants. "Company" has the meaning ascribed to it in the Preamble. "Control" means, (including, with correlative meaning, the terms "controlling," "controlled by" and "under common control with") with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or investment decisions of such Person, whether through the ownership of voting securities, by contract or otherwise. "Directors" has the meaning ascribed to it in Section 4.1(d). "Document(s)" means, individually or collectively, this Agreement, the By-laws, the Registration Rights Agreement, the Restated Charter, the Warrant Agreement and the Recapitalization Agreement. "Drag Notice" has the meaning ascribed to it in Section 2.5(b). "Equity Incentive Plan" means any Company option or similar plan for the benefit of employees, officers, directors and/or consultants of the Company (including, without limitation, the Company's 2000 Incentive Stock Plan). "Excluded Securities" has the meaning ascribed to it in Section 3.2. "Excluded Stockholder Shares" means all shares of Common Stock issued to Management Stockholders pursuant to the terms of the Restricted Stock Agreements which have not been released from the Repurchase Option (as defined in the Restricted Stock Agreements) on the date on which the calculation of Stockholder Shares is being determined. "Fair Market Value" shall mean, with respect to any Stockholder Share, as of any date of determination, the fair value of each Stockholder Share (or, with respect to a warrant or option, the fair value of each Stockholder Share obtainable upon exercise thereof net of the exercise price), determined in accordance with the terms hereof. At any time that the Fair -2- 6 Market Value shall be required to be determined hereunder, the Board shall make a good faith determination (the "Board's Determination") of the fair market value of each Stockholder Share within thirty (30) days of the delivery by the Company of the Repurchase Notice (without taking into account that the Stockholder Shares may be "restricted securities" and without any discount for the minority position represented by the Stockholder Shares) and shall provide within such 30-day period to the Management Stockholder or its Permitted Transferees with respect to whose Stockholder Shares such determination is being made, a written notice thereof which notice shall set forth supporting data in respect of such calculation (the "Determination Notice"). The Management Stockholder or such Permitted Transferee shall have thirty (30) days following receipt of the Determination Notice within which to deliver to the Company a written notice (the "Objection Notice") of an objection, if any, to the Board's Determination, which Objection Notice shall set forth the Management Stockholder's or such Permitted Transferee's good faith determination (the "Stockholder's Determination") of the fair value of each Stockholder Share. The failure by the Management Stockholder and/or such Permitted Transferee, as applicable, to deliver the Objection Notice within such 30-day period shall constitute such Person's acceptance of the Board's Determination as conclusive. In the event of the timely delivery of an Objection Notice, the Company and the Management Stockholder (and/or the applicable Permitted Transferees) shall attempt in good faith to arrive at an agreement with respect to the Fair Market Value, which agreement shall be set forth in writing within fifteen (15) days following delivery of the Objection Notice. If the Company and the Management Stockholder (and/or the applicable Permitted Transferees) are unable to reach an agreement within such 15-day period, the matter shall be promptly referred for determination to a regionally or nationally recognized investment banking or valuation firm (the "Valuer") reasonably acceptable to the Company and the Management Stockholder (and/or the applicable Permitted Transferees). The Company and the Management Stockholder (and/or the applicable Permitted Transferees) will cooperate with each other in good faith to select such Valuer. The Valuer may select the Board's Determination or the Stockholder's Determination as the Fair Market Value or may select any other number or value (determined without taking into account that the Stockholder Shares may be "restricted securities" and without any discount for the minority position represented by such Stockholder Shares). The Valuer's selection will be furnished to the Company and the Management Stockholder (and/or the applicable Permitted Transferees) in writing and will be conclusive and binding upon the Company and the Management Stockholder (and/or the applicable Permitted Transferees). The fees and expenses of the Valuer shall be borne equally by the Company, on the one hand, and the Management Stockholder (and/or the applicable Permitted Transferees), on the other. "First Refusal Offer" has the meaning ascribed to it in Section 2.4(b). "GAAP" means generally accepted accounting principles in the United States, as in effect from time to time, consistently applied. "Initial Subscribing Stockholder" has the meaning ascribed to it in Section 3.1(d). "Investor Directors" means the directors appointed by the Requisite Investor Holders pursuant to Section 4.1(a), from time to time. -3- 7 "Investor Stockholders" means, collectively, (a) the Persons listed on Schedule I attached hereto under the heading "Investor Stockholders," (b) any Person who is or becomes a holder of Stockholder Shares and who is, at the time of such Transfer, a Permitted Transferee of such Investor Stockholder, (c) any successor to any Investor Stockholder and (d) any Person who becomes a party to this Agreement as a Investor Stockholder pursuant to Sections 2.1 or 2.2(b). "Joinder Agreement" has the meaning ascribed to it in Section 2.1. "Management Directors" means the director(s) appointed pursuant to Section 4.1(a), from time to time, who are not Investor Directors or Trust Directors. "Management Stockholders" means, collectively, (a) the Persons listed on Schedule I attached hereto under the heading "Management Stockholders," (b) any Person who is or becomes a holder of Stockholder Shares and who is, at the time of such Transfer, a Permitted Transferee of such Management Stockholder, (c) any successor to any Management Stockholder and (d) any Person who becomes a party to this Agreement as a Management Stockholder pursuant to Sections 2.1 or 2.2(b). "New Investor" has the meaning ascribed to it in Section 3.1(c). "Observer" has the meaning ascribed to it in Section 4.3. "Offer" has the meaning ascribed to it in Section 2.4(b). "Offered Securities" has the meaning ascribed to it in Section 3.1(a). "Other Stockholders" has the meaning ascribed to it in Section 2.3(a). "Percentage Ownership" means with respect to any Stockholder, the fraction, expressed as a percentage, the numerator of which is the total number of Stockholder Shares held by such Stockholder and the denominator of which is the total number of Stockholder Shares issued and outstanding at the time of determination (excluding, in each case any options, warrants or similar Securities and Excluded Stockholder Shares, but specifically including in such determination the issued or unissued Warrant Shares). "Permitted Transfer" means (a) with respect to a Management Stockholder, any Transfer by a Management Stockholder to (i) the spouse or any lineal descendant (including adopted children) of such Management Stockholder, (ii) any trust solely for the benefit of such Management Stockholder or the spouse or lineal descendants (including adopted children) of such Management Stockholder, (iii) a family trust, partnership or limited liability company established solely for the benefit of such Management Stockholder or such Management Stockholder's spouse or lineal descendants (including adopted children) or for estate planning purposes provided such trust, family trust, partnership or limited liability company remains under the Control of such Management Stockholder, (iv) the estate of such Management Stockholder or (v) any Transferee approved by the Requisite Common Holders, (b) with respect to a Common Stockholder who is not a Management Stockholder any Transfer by such Common Stockholder to (i) any Affiliates of such Stockholder or (ii) any Transferee approved by the Requisite Common Holders, (c) with respect to a Warrantholder, any Transfer made in compliance with -4- 8 Article II hereof and (d) with respect to Chase, any Transfer in connection with its syndication of Stockholder Shares purchased on the Closing Date provided such Transfer is executed within 120 days of the Closing Date; provided, however, that, in each case, such Permitted Transfer must be made in accordance with Section 2.2(b). "Permitted Transferee" means any Person to whom a Permitted Transfer is made. "Person" shall be construed as broadly as possible and shall include an individual or natural person, a partnership (including a limited liability partnership), a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental authority. "Preemptive Offer Acceptance Notice" has the meaning ascribed to it in Section 3.1(b). "Preemptive Offer Notice" has the meaning ascribed to it in Section 3.1(a). "Preemptive Offer Period" has the meaning ascribed to it in Section 3.1(a). "Proportionate Percentage" means with respect to any Stockholder, the fraction, expressed as a percentage, the numerator of which is the total number of Stockholder Shares held by such Stockholder and the denominator of which is the total number of Stockholder Shares issued and outstanding at the time of determination held by all Offerees (excluding, in each case any options, warrants or similar Securities and Excluded Stockholder Shares, but specifically including in such determination any issued or unissued Warrant Shares). "Proposed Transferee" has the meaning ascribed to it in Section 2.4(b). "Public Offering" means the closing of a public offering of Common Stock pursuant to a registration statement declared effective under the Securities Act, except that a Public Offering shall not include an offering of securities to be issued as consideration in connection with a business acquisition or an offering of securities issuable pursuant to an employee benefit plan. "Public Sale" means any sale, occurring simultaneously with or after a Public Offering, of Securities to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker (pursuant to the provisions of Rule 144 or otherwise). "Qualified Public Offering" means an underwritten Public Offering of shares of Common Stock registered pursuant to the Securities Act involving aggregate gross proceeds to the Company of at least $100 million and which values all Common Stock Equivalents of the Company at a pre-money valuation of at least $500 million. "Recapitalization Agreement" means the Recapitalization Agreement, dated as of March 31, 2000, by and among the Company and the Persons named therein, as such agreement may from time to time be amended, modified or supplemented in accordance with its terms. -5- 9 "Refused Securities" has the meaning ascribed to it in Section 3.1(c). "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date hereof, among the Company, the Stockholders and other parties named therein, as amended, modified or supplemented from time to time in accordance with the terms therein. "Registration Statement" has the meaning given to such term in the Registration Rights Agreement. "Repurchase Notice" means the written notice of the Company notifying a Management Stockholder of the Company's, or its designees, intent to exercise its rights under Section 9.14 and the number of Stockholder Shares to be repurchased. "Requisite Common Holders" means, at any point in time, those Common Stockholders who hold in the aggregate in excess of fifty percent (50%) of the outstanding Common Stock Equivalents held by all Common Stockholders at such time. "Requisite Investor Holders" means, at any point in time, those Investor Stockholders who hold in the aggregate in excess of fifty percent (50%) of the outstanding Common Stock Equivalents held by all Investor Stockholders at such time. "Requisite Management Holders" means, at any point in time, those Management Stockholders who hold in the aggregate in excess of fifty percent (50%) of the outstanding Common Stock Equivalents held by all Management Stockholders at such time. "Requisite Trust Holders" means, at any point in time, those Trust Holders who hold in the aggregate in excess of fifty percent (50%) of the outstanding Common Stock Equivalents held by all Trust Holders at such time. "Requisite Warrantholders" means, as of any date of determination, Warrantholders holding Warrants or Warrant Shares representing at least sixty percent (60%) of the Warrant Shares that are either (a) previously issued and are then outstanding or (b) issuable upon exercise of Warrants then outstanding. "Restated Charter" means the amended and restated certificate or articles of incorporation of the Company, as in effect at the time in question, including any certificates of designation or articles of amendment filed with the Secretary of State of the State of Utah pursuant to the terms thereof. "Restricted Securities" means all Stockholder Shares, in each case which have not theretofore been transferred in a Public Sale. "Restricted Stock Agreements" means, collectively, the Restricted Stock Purchase Agreements dated as of the date hereof between the Company and each of Richard P. Durham, Jack E. Knott, Scott K. Sorensen and Ronald G. Moffitt, and any similar agreements executed and delivered by the Company and any employee of the Company after the date hereof, as each such agreement is amended, modified or supplemented from time to time in accordance with the terms thereof. -6- 10 "Rule 144" means Rule 144 (including Rule 144(k) and all other subdivisions thereof) promulgated by the Commission under the Securities Act, as such rule may be amended from time to time, or any similar or successor rule then in force. "Sale Notice" has the meaning ascribed to it in Section 2.3(a). "Sale of the Company" means the sale of the Company (in one or a series of transactions) to a third party or group of third parties, whether by way of the sale of all or substantially all of the assets of the Company, sale of Stockholder Shares (whether directly or indirectly or by way of merger, consolidation, recapitalization, reorganization or otherwise) resulting in such third party or parties acquiring voting Stockholder Shares which enable such third party or parties to elect a majority of the Board. "Securities" means "securities" as defined in Section 2(1) of the Securities Act and includes, with respect to any Person, such Person's capital stock or other equity interests or any options, warrants or other securities that are directly or indirectly convertible into, or exercisable or exchangeable for, such Person's capital stock or other equity or equity-linked interests, including phantom stock and stock appreciation rights. Whenever a reference herein to Securities is referring to any derivative Securities, the rights of a Stockholder shall apply to such derivative Securities and all underlying Securities directly or indirectly issuable upon conversion, exchange or exercise of such derivative securities. "Securities Act" means the Securities Act of 1933, as amended, or any successor Federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Senior Subordinated Notes" means the Senior Subordinated Notes issued pursuant to that certain Indenture, dated as of May 31, 2000, among the Company, the Note Guarantors listed therein, and The Bank of New York, as Trustee (as amended, modified or supplemented from time to time, the "Indenture"). "Stockholder Shares" means (a) any Common Stock purchased or otherwise acquired by any Stockholder, (b) any Warrants and Warrant Shares and (c) any capital stock or other equity securities issued or issuable directly or indirectly with respect to the securities referred to in clauses (a) and (b) above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, reclassification, merger, consolidation or other reorganization. As to any particular shares constituting Stockholder Shares, such shares shall cease to be Stockholder Shares when they have been (x) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them or (y) sold to the public through a broker, dealer or market maker pursuant to Rule 144 (or any similar provision then in force) under the Securities Act in a Public Sale. "Stockholders" means the holders of Common Stock Equivalents in each case, who are parties hereto, and shall include any other Person who hereafter becomes a party to this Agreement as a Stockholder pursuant to a Joinder Agreement executed and delivered pursuant to Section 2.1 or 2.2(b). "Subscribing Stockholders" has the meaning ascribed to it in Section 3.1(a). -7- 11 "Subsidiary" means, at any time, with respect to any Person (the "Subject Person"), (a) any Person of which either (x) more than fifty percent (50%) of the Securities or other interests entitled to vote in the election of directors or comparable Persons performing similar functions (excluding Securities or other interests entitled to vote only upon the failure to pay dividends thereon or other contingencies) or (y) more than a 50% interest in the profits or capital of such Person, are at the time owned or controlled directly or indirectly by the Subject Person or through one or more Subsidiaries of the Subject Person or by the Subject Person and one or more Subsidiaries of the Subject Person or (b) any Person whose assets, or portions thereof, are consolidated with the assets of the Subject Person and are recorded on the books of the Subject Person for financial reporting purposes in accordance with GAAP. "Tag-Along Notice" has the meaning ascribed to it in Section 2.3(b). "Transfer" of Securities shall be construed broadly and shall include any issuance, sale, assignment, transfer, participation, gift, bequest, distribution, or other disposition thereof, or any pledge or hypothecation thereof, placement of a lien thereon or grant of a security interest therein or other encumbrance thereon, in each case whether voluntary or involuntary or by operation of law or otherwise. Notwithstanding anything to the contrary contained herein, Transfer shall not include (a) an exchange of Warrants effectuated in accordance with Section 4.2 of the Warrant Agreement, (b) the exercise of the right to acquire Common Stock pursuant to the terms of any option or other convertible security granted by the Company or (c) the sale or transfer of Stockholder Shares by any Management Stockholder to the Company or any of its designees hereunder or pursuant to any employment, option or restricted stock purchase agreement (including, without limitation, a Restricted Stock Purchase Agreement) between the Company and such Management Stockholder or any plan relating to the foregoing. "Transferee" means a Person acquiring Securities through a Transfer. "Transferor" means a Person Transferring Securities. "Transferring Stockholder" has the meaning ascribed to it in Section 2.3(a). "Trust Directors" means the directors appointed by the Requisite Trust Holders pursuant to Section 4.1(a), from time to time "Trust Holders" means, collectively, (a) the Persons listed on Schedule I attached hereto under the heading "Trust Holders," (b) any Person who is or becomes a holder of Stockholder Shares and who is, at the time of such Transfer, a Permitted Transferee of such Trust Holder, (c) any successor to any Trust Holder and, (d) any Person who becomes a party to this Agreement as a Trust Holder pursuant to Sections 2.1 or 2.2(b). "Warrant Agreement" means the Warrant Agreement, dated as of the date hereof, among the Company and the Stockholders named therein, as amended, modified or supplemented from time to time in accordance with the terms therein. "Warrant Shares" has the meaning ascribed to such term in the Warrant Agreement. -8- 12 "Warrantholders" means, collectively, (a) the Persons listed on Schedule I attached hereto under the heading "Warrantholders," (b) any Person who is or becomes a holder of Stockholder Shares and who is, at the time of such Transfer, a Permitted Transferee of such Warrantholder, (c) any successor to any Warrantholder and, (d) any Person who becomes a party to this Agreement as a Warrantholder pursuant to Sections 2.1 or 2.2(b). "Warrants" has the meaning set forth in the Preamble to this Agreement. 1.2 RULES OF CONSTRUCTION. The use in this Agreement of the term "including" means "including, without limitation." The words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole, including the schedules and exhibits, as the same may from time to time be amended, modified, supplemented or restated, and not to any particular section, subsection, paragraph, subparagraph or clause contained in this Agreement. All references to sections, schedules and exhibits mean the sections of this Agreement and the schedules and exhibits attached to this Agreement, except where otherwise stated. The title of and the section and paragraph headings in this Agreement are for convenience of reference only and shall not govern or affect the interpretation of any of the terms or provisions of this Agreement. The use herein of the masculine, feminine or neuter forms shall also denote the other forms, as in each case the context may require. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement has been chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. Unless expressly provided otherwise, the measure of a period of one month or year for purposes of this Agreement shall be that date of the following month or year corresponding to the starting date, provided that if no corresponding date exists, the measure shall be that date of the following month or year corresponding to the next day following the starting date. For example, one month following February 18 is March 18, and one month following March 31 is May 1. ARTICLE II ISSUANCES AND TRANSFERS OF SECURITIES 2.1 ISSUANCES AND TRANSFERS OF SECURITIES. The Company shall not, without the prior written consent of the Requisite Investor Holders, issue or sell, or otherwise permit or record the Transfer of, any Stockholder Share to any Person (other than pursuant to a Public Sale) unless such Person is already a party to this Agreement or first executes and delivers to the Company a joinder agreement in substantially the form attached hereto as Exhibit A (a "Joinder Agreement"), pursuant to which such Person will thereupon become a party to, and be bound by and obligated to comply with the terms and provisions of, this Agreement. -9- 13 2.2 CERTAIN TRANSFERS. (a) The provisions regarding Transfers of Securities contained in this Article II shall apply to all Stockholder Shares now owned or hereafter acquired by a Stockholder, including Stockholder Shares acquired by reason of original issuance, dividend, distribution, exchange, conversion and acquisition of outstanding Stockholder Shares from another Person, and such provisions shall apply to any Stockholder Shares obtained by a Stockholder upon the exercise, exchange or conversion of any option, warrant or other derivative Security. (b) Except for Transfers that constitute Public Sales, no Stockholder shall Transfer any Stockholder Shares to a Person not already a party to this Agreement as a Stockholder unless and until (i) such Person executes and delivers to the Company a Joinder Agreement, pursuant to which such Person will thereupon become a party to, and be bound by and obligated to comply with the terms and provisions of, this Agreement, as a Stockholder hereunder and (ii) such Transfer is a Permitted Transfer or is made in compliance with this Article II. No Person who is not a Stockholder hereunder who acquires Stockholder Shares in a Public Sale shall be permitted or required to execute a Joinder Agreement. (c) None of Richard P. Durham, Scott K. Sorensen or Ronald G. Moffitt shall Transfer, or permit any Person to Transfer, other than in a Permitted Transfer, any interest in Durham Capital, Ltd., Sorensen Capital, LLC, Ronald G. Moffitt IRA (DLJ Securities Corp. Custodian) or Moffitt Capital, LLC, respectively, unless such Transfer is consented to in writing by the Requisite Investor Holders. Each of Richard P. Durham, Scott K. Sorensen and Ronald G. Moffitt severally represent and warrant to the Company that he has the respective ability to enforce the Transfer restrictions contained in this Section 2.2(c). (d) Notwithstanding anything to the contrary contained herein, no Warrantholder shall Transfer any Warrants or Warrant Shares to any Person who is not primarily a financial institution. 2.3 CO-SALE RIGHTS. (a) After satisfying the obligations set forth in Section 2.4, if at any time a Stockholder (other than a Warrantholder, solely with respect to the Warrants and Warrant Shares) proposes to Transfer, other than pursuant to a Permitted Transfer, any Stockholder Shares (in each case, such Stockholder shall be deemed, a "Transferring Stockholder"), then at least thirty (30) days prior to the closing of such Transfer, such Transferring Stockholder shall deliver a written notice (the "Sale Notice") to all holders of Stockholder Shares (other than such Transferring Stockholder) (the "Other Stockholders") offering such Other Stockholders the option to participate in such proposed Transfer. Such Sale Notice shall specify in reasonable detail the identity of the prospective Transferee and the terms and conditions of the Transfer. (b) Any Other Stockholder may, within fifteen (15) days of the receipt of a Sale Notice, give written notice (each, a "Tag-Along Notice") to the Transferring Stockholder stating that such Other Stockholder wishes to participate in such proposed Transfer and specifying the amount and class of Stockholder Shares such Other Stockholder desires to include in such proposed Transfer. Such Other Stockholder shall include, at such Other Stockholder's option, (i) -10- 14 Stockholder Shares of the same class of Stockholder Shares being transferred by the Transferring Stockholder or (ii) if the Stockholder Shares described in the Sale Notice are Common Stock Equivalents, then such Other Stockholders may include Warrants held by such Other Stockholder and the Transferring Stockholder shall use all commercially reasonable efforts to cause the Warrants to be transferred without exercise thereof; provided that the consideration received on such Transfer by such Other Stockholder will be net of any exercise price of such Warrants. (c) If none of the Other Stockholders gives the Transferring Stockholder a timely Tag-Along Notice with respect to the Transfer proposed in the Sale Notice, the Transferring Stockholder may thereafter Transfer the Stockholder Shares specified in the Sale Notice on the same terms and conditions set forth in the Sale Notice. If one or more Other Stockholders give the Transferring Stockholder a timely Tag-Along Notice, then the Transferring Stockholder shall use all reasonable efforts to cause the prospective Transferee(s) to agree to acquire all Stockholder Shares identified in all Tag-Along Notices that are timely given to the Transferring Stockholder, upon the same terms and conditions as applicable to the Transferring Stockholder's Stockholder Shares. If the prospective Transferee(s) are unwilling or unable to acquire all Stockholder Shares proposed to be included in such sale upon such terms, then the Transferring Stockholder may elect either to cancel such proposed Transfer or to allocate the maximum number of Stockholder Shares that each prospective Transferee is willing to purchase among the Transferring Stockholder and the Stockholders giving timely Tag-Along Notices in proportion to such Stockholders' Percentage Ownership. (d) Each Transferring Stockholder shall cooperate in any reasonable manner to allow any Other Stockholder to Transfer Warrants held by such Other Stockholder pursuant to the Tag-Along Notice in lieu of Transferring Common Stock pursuant to Section 2.3(b) hereof. 2.4 RIGHT OF FIRST REFUSAL. (a) Except to the extent otherwise expressly permitted herein, no Stockholder (other than a Warrantholder, solely with respect to the Warrants and the Warrant Shares) shall Transfer, other than pursuant to a Permitted Transfer, any Stockholder Shares except in compliance with the procedures set forth in this Section 2.4 (and the other applicable provisions of this Agreement). (b) If any Stockholder shall receive a bona fide written offer (an "Offer"), from a Person (a "Proposed Transferee") to purchase all or a portion of the Stockholder Shares then owned by such Stockholder and such Stockholder desires to accept the Offer, such Stockholder (the "Offeror") shall, before accepting the Offer, first deliver to the Company and each of the other Stockholders (other than the Offeror and any Stockholder owning less than ten percent (10%) of the outstanding Common Stock (the "Offerees")) a written notice (the "Notice of Offer"), which shall include all relevant terms of the Offer and shall be irrevocable for a period of thirty (30) days after delivery thereof (the "Offer Period"), offering (the "First Refusal Offer") to the Offerees all of the Stockholder Shares proposed to be Transferred by the Offeror at the purchase price and on the terms specified in the Offer. The Offeror shall also furnish to the Offerees such additional information in the Offeror's possession relating to the Offer as the Offerees may reasonably request. The Offerees shall have the first right and option, for a period -11- 15 of thirty (30) days after delivery of the Notice of Offer by the Offeror, (x) to accept all, or any portion, of their respective Proportionate Percentages of the Stockholder Shares so offered at the purchase price and on the terms stated in the Notice of Offer and (y) to offer, in any written notice of acceptance, to purchase any Stockholder Shares not accepted by the other Offerees, in which case the Stockholder Shares not accepted by the other Offerees shall be deemed, on the same terms and conditions, to be re-offered from time to time during such thirty (30) day period to, and accepted by, the other Offerees who exercised their option under this clause (y) pro rata in accordance with their respective Proportionate Percentages (computed without including the other Offerees who have not exercised their option to purchase Stockholder Shares under this clause (y)), until all such Stockholder Shares are fully subscribed or until all such other Offerees have subscribed for all such offered Stockholder Shares which they desire to purchase. (c) Transfers of Stockholder Shares under the terms of this Section 2.4 shall be made at the offices of the Company on a mutually satisfactory Business Day within fifteen (15) days after the expiration of the Offer Period. Delivery of certificates or other instruments evidencing such Stockholder Shares, duly endorsed for transfer and free and clear of all liens, claims and other encumbrances, shall be made on such date against payment of the purchase price therefor. (d) If the Offerees shall not have accepted all of the Stockholder Shares offered for sale pursuant to the Notice of Offer, then the Offeror may Transfer to the Proposed Transferee that number of the Stockholder Shares not accepted by the Offerees in accordance with the terms set forth in the Notice of Offer, at any time within ninety (90) days after the expiration of the First Refusal Offer required by Section 2.4(a). Any such Transfer shall be in compliance with Section 2.2 and Section 2.3. In the event the Stockholder Shares are not Transferred by the Offeror to the Proposed Transferee on such terms during such 90-day period, the restrictions of this Section 2.4 shall again become applicable to any Transfer of Stockholder Shares by the Offeror. 2.5 REQUIRED SALE IN CONNECTION WITH A SALE OF THE COMPANY. (a) Option. Subject to the provisions of this Section 2.5, if the Board approves a Sale of the Company (an "Approved Sale"), each Stockholder shall consent to and raise no objections against the Approved Sale, and if the Approved Sale is structured as a sale of the issued and outstanding capital stock of the Company (whether by merger, recapitalization, consolidation or sale or Transfer of Stockholder Shares or otherwise), then each Stockholder shall waive any dissenters rights, appraisal rights or similar rights in connection with such Sale of the Company and each Stockholder shall agree to sell its Stockholder Shares on the terms and conditions approved by the Board. Each Stockholder shall take all necessary and desirable actions in connection with the consummation of the Approved Sale, including, but not limited to, the execution of such agreements and instruments and other actions necessary to provide the representations, warranties, indemnities, covenants, conditions, escrow agreements and other provisions and agreements relating to such Approved Sale. In the event that any Stockholder fails for any reason to take any of the foregoing actions after reasonable notice thereof, he, she or it hereby grants an irrevocable power of attorney and proxy to the Chairman of the Board of the Company or an assignee of such Person to take all necessary actions and execute and deliver all documents deemed by such Person to effectuate the terms of this Section 2.5. The restrictions on -12- 16 Transfers of Stockholder Shares set forth in Sections 2.1, 2.2, 2.3 and 2.4 shall not apply in connection with an Approved Sale. Notwithstanding anything to the contrary contained herein, prior to the second anniversary of the date hereof, a Sale of the Company that is not approved by all of the Investor Directors and all of the Trust Directors shall not be deemed to be an "Approved Sale." (b) Procedure. The Company shall deliver written notice to each Stockholder setting forth in reasonable detail the terms (including price, time and form of payment) of any Approved Sale (the "Drag Notice"). Within twenty (20) days following receipt of the Drag Notice, each of such Stockholders shall deliver to the Company written notice setting forth such holders' agreement to consent to and raise no objections against, or impediments to, the Approved Sale (including, waiving all dissenter's and similar rights) and (ii) if the Approved Sale is structured as a sale of stock, to sell its Stockholder Shares on the terms and conditions set forth in the Drag Notice. (c) Conditions to Obligation. The obligations of the Stockholders to participate in any Approved Sale pursuant to this Section 2.5 are subject to the satisfaction of the following conditions: (i) (x) if any Stockholders are given an option as to the form and amount of consideration to be received with respect to shares in a class, all holders of shares of such class will be given the same option and (y) each Stockholder shall receive the same amount of consideration per Stockholder Share; (ii) subject to Section 2.5(d), as applicable, all holders of then-currently exercisable Common Stock Equivalents will be given an opportunity to either (A) exercise such rights prior to the consummation of an Approved Sale (but only to the extent such Common Stock Equivalents are then vested or would be vested on an accelerated basis pursuant to the Equity Incentive Plan or other relevant plan) and participate in such sale as Stockholders or (B) upon the consummation of the Approved Sale, receive in exchange for such currently exercisable Common Stock Equivalents consideration equal to the product of (x) the same amount of consideration per Stockholder Share (of the same class as that for which the Common Stock Equivalent is exercisable) received by the holders of such class of capital stock in connection with the Approved Sale (less the exercise price per Common Stock Equivalent) and (y) the number of Common Stock Equivalents (but only to the extent such Common Stock Equivalents are then vested); (iii) no Stockholder shall be obligated to pay more than his, her or its pro rata share (based upon the number of Common Stock Equivalents held by such Stockholder) of reasonable expenses incurred in connection with a consummated Approved Sale to the extent such expenses are incurred for the benefit of all Stockholders and are not otherwise paid by the Company or the acquiring party (expenses incurred by or on behalf of a Stockholder for its, her or his sole benefit not being considered expenses incurred for the benefit of all Stockholders); and -13- 17 (iv) in the event that the Stockholders are required to provide any representations or indemnities in connection with an Approved Sale (other than representations and indemnities on a several basis concerning each Stockholder's valid ownership of his, her or its Stockholder Shares and/or Common Stock Equivalents, free of all liens and encumbrances, enforceability and each Stockholder's authority, power, and right to enter into and consummate agreements relating to such Approved Sale without violating applicable law or any other agreement), then each Stockholder shall not be liable for more than his, her or its pro rata share (based upon the number of Common Stock Equivalents held by such Stockholder) of any liability for misrepresentation or indemnity (except in respect of such several representations and warranties) and such liability shall not exceed the total purchase price received by such Stockholder (net of broker fees) from such purchaser for his, her or its Stockholder Shares and/or Common Stock Equivalents (including the exercise price thereof), and, to the extent that an indemnification escrow has been established, such liability shall be satisfied solely out of any funds escrowed for such purpose prior to recourse against such Stockholder. (d) Ability to Transfer Warrants. Each Stockholder shall cooperate in any reasonable manner to allow any Stockholder to Transfer any Warrants held by such Stockholder pursuant to the Drag Notice in lieu of Transferring Common Stock; provided that the consideration received on such Transfer by such Stockholder will be net of any exercise price of such Warrants. ARTICLE III RIGHTS TO SUBSCRIBE FOR SECURITIES 3.1 GENERAL. (a) Prior to the occurrence of a Qualified Public Offering, in the event that the Company proposes to issue any equity Securities (the "Offered Securities"), other than Excluded Securities, the Company shall deliver to each holder of Stockholder Shares (collectively, the "Subscribing Stockholders") a written notice (which notice shall state the number or amount of the Offered Securities proposed to be issued, the purchase price therefor and any other terms or conditions of the proposed issuance, including any linked or grouped Securities which comprise Offered Securities) of such issuance (the "Preemptive Offer Notice")) at least thirty (30) days prior to the date of the proposed issuance (the "Preemptive Offer Period"). (b) Each Subscribing Stockholder shall have the option (provided, however, that the Company may exclude for all purposes hereunder any Subscribing Stockholder who is not an accredited investor (as such term is defined in Rule 501 under the Securities Act)), exercisable at any time during the Preemptive Offer Period by delivering written notice to the Company (a "Preemptive Offer Acceptance Notice") (i) to subscribe for the number or amount of such Offered Securities up to its Percentage Ownership of the total number or amount of Offered Securities proposed to be issued and (ii) to offer to subscribe (in cash and or such other terms and conditions set forth in the Preemptive Offer Notice) for up to its Percentage Ownership of the Offered Securities not subscribed for by other Subscribing Stockholders (as further described below). Any Offered Securities not subscribed for by a Subscribing Stockholder shall be -14- 18 deemed to be re-offered to and accepted by the Subscribing Stockholders exercising their options specified in clause (ii) of the immediately preceding sentence with respect to the lesser of (A) the amount specified in their respective Preemptive Offer Acceptance Notices and (B) an amount equal to their respective Percentage Ownerships (computed without including Stockholders who have not exercised their option specified in clause (ii) of the immediately preceding sentence) with respect to such deemed re-offer. Such deemed re-offer and acceptance procedures described in the immediately preceding sentence shall be deemed to be repeated until either (x) all of the Offered Securities are accepted by the Subscribing Stockholders or (y) no Subscribing Stockholders desire to subscribe for more Offered Securities. The Company shall notify each Subscribing Stockholder within five (5) days following the expiration of the Preemptive Offer Period of the number or amount of Offered Securities which such Subscribing Stockholder has subscribed to purchase. (c) If Preemptive Offer Acceptance Notices are not given by the Subscribing Stockholders for all the Offered Securities, the Company may issue the part of such Offered Securities as to which Preemptive Offer Acceptances Notices have not been given by the Subscribing Stockholders (the "Refused Securities") to any Person (a "New Investor") in accordance with the terms and conditions set forth in the Preemptive Offer Notice. Upon the closing, the Subscribing Stockholders shall purchase from the Company, and the Company shall sell to, the Subscribing Stockholders, the Offered Securities with respect to which Preemptive Offer Acceptance Notices were delivered by the Stockholders, at the terms specified in the Preemptive Offer Notice. In each case, any Refused Securities not purchased by one or more New Investors in accordance with this Section 3.1 within 120 days after the date of the Preemptive Offer Notice may not be sold or otherwise disposed of until they are again offered to the Subscribing Stockholders under the procedures specified in this Section 3.1. (d) Notwithstanding anything to the contrary contained herein, the Company may, in order to expedite the issuance of the Offered Securities hereunder, issue all of the Offered Securities to one or more Stockholders (the "Initial Subscribing Stockholders"), without complying with the provisions of this Section 3.1, provided that the Initial Subscribing Stockholders agree to offer to sell to the other Stockholders (who are accredited investors (as such term is defined in Rule 501 under the Securities Act)) their respective Percentage Ownerships of the Offered Securities on the same terms and conditions as issued to the Initial Subscribing Stockholders. The Initial Subscribing Stockholders shall offer to sell the Offered Securities to the other Stockholders (who are accredited investors (as such term is defined in Rule 501 under the Securities Act)) within thirty (30) days after the closing of the purchase of the Offered Securities by the Initial Subscribing Stockholders. The Initial Subscribing Stockholders shall offer to sell the Offered Securities to the other Stockholders in a manner which provides such other Stockholders with rights substantially similar to the rights outlined in Sections 3.1(b) and 3.1(c). 3.2 EXCLUDED SECURITIES. The rights of the Subscribing Stockholders under Section 3.1 shall not apply to the following Securities issued by the Company (the "Excluded Securities"): -15- 19 (a) Securities of the Company issued or granted pursuant to the Equity Incentive Plan; (b) Securities of the Company issued upon the exercise, conversion or exchange of any Common Stock Equivalents outstanding on the Closing Date and other derivative Securities of the Company, in each case issued in compliance with (or not otherwise in violation of) this Article III; (c) Securities of the Company issued as a stock dividend or distribution or upon any stock split, recapitalization or other subdivision or combination of Common Stock; (d) Securities of the Company issued to sellers in connection with a Board-approved acquisition or merger by the Company; (e) Securities of the Company issued in a Public Offering; and (f) Securities of the Company issued as a bona-fide "equity kicker" to a lender or placement agent in connection with a debt financing. ARTICLE IV BOARD 4.1 ELECTION OF DIRECTORS, VOTING. (a) Subject to the provisions of Section 4.1(c) hereof and as otherwise stated herein, each holder of Stockholder Shares hereby covenants and agrees to vote all of his, her or its Stockholder Shares to cause (i) the number of directors constituting the Board to be seven (7) and (ii) the Company to comply with all obligations under the Documents. At each annual meeting of the holders of any class of Stockholder Shares, and at each special meeting of the holders of any class of Stockholder Shares called for the purpose of electing directors of the Company, and at any time at which holders of any class of Stockholder Shares shall have the right to, or shall, vote for or consent in writing to the election of seven (7) directors of the Company, then, and in each such event, the holders of Stockholder Shares shall vote all of the Stockholder Shares owned by them for, or consent in writing with respect to such shares in favor of, the election of a Board constituted as follows: (i) four (4) representatives designated by the Requisite Investor Holders, the initial representatives of whom shall be Donald J. Hofmann, Jr., Timothy J. Walsh, John M. B. O'Connor and Richard D. Waters; (ii) two (2) representatives designated by the Requisite Trust Holders, the initial representatives of whom shall be Richard P. Durham and Scott K. Sorensen; and (iii) one (1) representative appointed by the Board, who shall be a member of the senior management of the Company, the initial representative of whom shall be Jack E. Knott. -16- 20 At the request of the Requisite Investor Holders, the number of members constituting the Board shall be increased to nine (9) in which event each holder of Stockholder Shares hereby covenants and agrees to vote all of his, her or its Stockholder Shares to cause (i) the number of directors constituting the Board to be nine (9) and (ii) the Company to comply with all obligations under the Documents. Thereafter, at each annual meeting of the holders of any class of Stockholder Shares, and at each special meeting of the holders of any class of Stockholder Shares called for the purpose of electing directors of the Company, and at any time at which holders of any class of Stockholder Shares shall have the right to, or shall, vote for or consent in writing to the election of nine (9) directors of the Company, then, and in each such event, the holders of Stockholder Shares shall vote all of the Stockholder Shares owned by them for, or consent in writing with respect to such shares in favor of, the election of a Board constituted as follows: (i) five (5) representatives designated by the Requisite Investor Holders; (ii) two (2) representatives designated by the Requisite Trust Holders; and (iii) (A) one (1) representative who shall be the Chief Executive Officer of the Company and (B) one (1) representative appointed by the other members of the Board, who shall be a member of the senior management of the Company. Notwithstanding anything to the contrary contained herein, the number of members constituting the Board may be increased from time to time, in accordance with the Restated Charter and By-laws provided that at all times the Requisite Investor Holders shall be entitled to designate a majority of the members of the Board. At no time may any individual serve as an appointee of more than one class of Stockholders hereunder. (b) Any committee created by the Board shall have at least one Investor Director as a member. (c) The holders of Stockholder Shares shall vote their shares (i) to remove any director whose removal is required by the party or parties with the power to nominate such director and (ii) to fill any vacancy created by the removal, resignation or death of a director, in each case for the election of a new director designated, if approval is required, in accordance with the provisions of this Section 4.1. Vacancies of the Board shall be filled within thirty (30) days of the date such vacancy is created or immediately before the first action to be taken by the Board after the date such vacancy is created. (d) The Company shall pay the reasonable out-of-pocket expenses incurred by each of the Investor Directors, the Trust Directors and the Management Directors (collectively the "Directors") in connection with (i) attending the meetings of the Board and all committees thereof and (ii) conducting any other Company business requested by the Company. So long as any Director serves on the Board and for three (3) years thereafter, the Company shall maintain directors and officers indemnity insurance coverage reasonably satisfactory to the Directors, and the Company's Restated Charter and By-laws shall provide for indemnification and exculpation of Directors to the fullest extent permitted under applicable law. -17- 21 4.2 VOTING AGREEMENT. Each Stockholder shall use all reasonable efforts to cause each Director nominated by such Stockholder to vote for the election to the Board of all individuals designated in accordance with Section 4.1. 4.3 MEETINGS. The Warrantholders shall have the right to have one representative designated by the Requisite Warrantholders (the "Observer") present at all meetings of the Board and all committees of the Board. The Company will give the Observer reasonable prior notice (it being agreed that substantially the same prior notice given to the members of the Board shall be deemed reasonable prior notice) of the time and place of any proposed meeting of the Board or any applicable committee thereof. The Company will deliver to the Observer copies of all material documentation distributed from time to time to the members of the Board or any applicable committee thereof, at such time as such documents are so distributed to them, including copies of any written consent. The Company reserves the right to withhold any information and to exclude the Observer from any meeting or portion thereof if the Company reasonably determines in good faith that (i) access to such information or attendance at such meeting could be reasonably expected to adversely affect the attorney-client privilege between the Company and its counsel or (ii) such disclosure is prohibited by an agreement with a third party; provided that in the case of this clause (ii), the Company will use commercially reasonable efforts to provide such information or allow the Observer to attend such meeting, which requirement shall be satisfied if the Observer is offered the opportunity to obtain such information or attend such meeting by undertaking to be bound by the confidentiality restrictions on substantially the same terms (including any standstill provisions) as are applicable to the Company. Notwithstanding anything to the contrary contained in this Agreement, the Observer may not use or disclose any information received by the Observer, except on a confidential basis within the Observer's employer or firm or to the extent required by law or unless and except to the extent that such use or disclosure could have been made by a director of the Company in compliance with all laws and duties applicable to a director as such under such circumstances. The Company shall pay the reasonable out-of-pocket expenses incurred by the Observer in connection with (i) attending the meetings of the Board and all committees thereof and (ii) conducting any other Company business requested by the Company. 4.4 NOTICE OF MEETINGS. Notice of any meeting of the Board shall be deemed to be effective at the earliest of the following: (1) when received; (2) five (5) days after it is mailed; (3) the date shown on the return receipt if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the director or (4) when it is sent (with confirmation of sending) to the telecopier number or e-mail address provided by that Director to the Company. 4.5 QUORUM FOR MEETINGS. A majority of the number of Directors prescribed by resolution (or if no number is prescribed, the number in office immediately before the meeting begins), shall constitute a -18- 22 quorum for the transaction of business at any meeting of the Board of Directors, unless the Restated Charter requires a greater number. ARTICLE V ADDITIONAL AGREEMENTS 5.1 INFORMATION RIGHTS. Until the consummation of a Qualified Public Offering, the Company shall furnish to each Stockholder holding in excess of ten percent (10%) of the outstanding Stockholder Shares, simultaneously with the delivery to the holders of the Company's Senior Subordinated Notes, all reports and documents prepared for or delivered to such holders by the Company or any of its Authorized Representatives under the Indenture. 5.2 ACCESS TO RECORDS AND PROPERTIES. Until the consummation of a Qualified Public Offering, the Company shall permit any Stockholder (other than Management Stockholders) and his, her or its employees, counsel and other authorized representatives, (collectively, "Authorized Representatives") during normal business hours and upon reasonable advance notice (which shall not be less than one-day's prior notice) to (a) visit and inspect the assets and properties of the Company, (b) examine the books of accounts and records of the Company and (c) make copies of such records and (d) discuss all aspects of the Company with any officers, employees or accountants of the Company; provided, however, that such investigation shall not unreasonably interfere with the operations of the Company. The Company will instruct its accountants to discuss such aspects of the financial condition of the Company with any such holder and its Authorized Representatives as such Stockholder may reasonably request, and to permit such holder and its Authorized Representatives to inspect, copy and make extracts from such financial statements, analyses, and other documents and information (including electronically stored documents and information) prepared by the accountants with respect to the Company as such holder may reasonably request. All costs and expenses incurred by such Stockholder and its Authorized Representatives in connection with exercising such rights of access shall be borne by such Persons, and all out-of-pocket costs and expenses incurred by the Company in complying with any extraordinary requests by such Persons and its representatives in connection with exercising such access rights shall be borne by such Persons. 5.3 CONFIDENTIAL INFORMATION. Except as otherwise required by law, each Stockholder and Authorized Representative shall hold in confidence all nonpublic information of the Company provided or made available to such Stockholder and Authorized Representative pursuant to this Article V until such time as such information has become publicly available other than as a consequence of any breach by such Stockholder or Authorized Representative of its confidentiality obligations hereunder (provided that such information may be disclosed to any other Stockholder or Authorized Representative who is bound by this provision) and shall not use such information for any -19- 23 purpose other than exercise of its rights as a holder of Stockholder Shares and its rights under the Documents. 5.4 CHANGE OF CONTROL. The Company shall not, and the Stockholders shall insure that the Company does not, effect a Change of Control (as defined in the Restated Charter) until all requirements set forth in Section 3.3 (b)(iv) of the Restated Charter have been satisfied or waived. 5.5 REGULATORY MATTERS. (a) COOPERATION OF OTHER STOCKHOLDERS. Each Stockholder agrees to cooperate with the Company in all reasonable respects in complying with the terms and provisions of the letter agreement between the Company and Chase, a copy of which is attached hereto as Exhibit B, regarding regulatory matters (the "Regulatory Sideletter"), including without limitation, voting to approve amending the Company's Restated Charter, the Company's by-laws or this Agreement in a manner reasonably acceptable to the Stockholders and Chase or any Affiliate of Chase entitled to make such request pursuant to the Regulatory Sideletter in order to remedy a Regulatory Problem (as defined in the Regulatory Sideletter). Anything contained in this Section 5.5 to the contrary notwithstanding, no Stockholder shall be required under this Section 5.5 to take any action that would adversely affect in any material respect such Stockholder's rights under this Agreement or as a Stockholder of the Company. (b) COVENANT NOT TO AMEND. The Company and each Stockholder agree not to amend or waive the voting or other provisions of the Company's Restated Charter, the Company's by-laws or this Agreement if such amendment or waiver would cause Chase or any its Affiliates to have a Regulatory Problem (as defined in the Regulatory Sideletter). Chase agrees to notify the Company as to whether or not it would have a Regulatory Problem promptly after Chase has notice of such amendment or waiver. 5.6 SPECIAL MEETINGS OF STOCKHOLDERS. Notwithstanding Section 16-10a-702 of the Utah Revised Business Corporation Act, a special meeting of the stockholders may only be called in the manner provided in the Bylaws of the Company or if the holders of Common Stock representing at least ten (10%) of the Common Stock entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date, and deliver to the Company's secretary one or more written demands for the meeting, stating the purpose or purposes for which it is held. 5.7 NOTICE REQUIREMENTS IN CONNECTION WITH ACTION BY WRITTEN CONSENT. Unless written consents of all shareholders entitled to vote on a matter have been obtained, the Company shall give notice of any shareholder approval without a meeting taken under Section 16-10a-704 of the Utah Revised Business Corporation Action within ten (10) days of the taking of the corporate action by written consent to: (1) Those shareholders entitled to vote who have not consented in writing; and -20- 24 (2) those shareholders not entitled to vote and to whom the Utah Revised Business Corporation Act requires notice be given. Such notice shall contain or be accompanied by the same material that would have been required if a formal meeting had been called to consider the action. ARTICLE VI SECURITIES LAW COMPLIANCE; LEGENDS 6.1 RESTRICTION ON TRANSFER AND UTAH BUSINESS CORPORATION ACT. In addition to any other restrictions on the Transfer of any Stockholder Shares contained in this Agreement, the Stockholders shall not Transfer any Restricted Securities except in compliance with the conditions specified in this Article VI. This Agreement is intended to be governed by Section 16-10a-627 and Section 16-10a-732 of the Utah Business Corporation Act. 6.2 RESTRICTIVE LEGENDS. Each certificate for the Restricted Securities shall (unless otherwise provided by the provisions of Section 6.4) be stamped or otherwise imprinted with a legend in substantially the following terms: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR LAWS." 6.3 NOTICE OF TRANSFER. The holder of any Restricted Securities, by his, her or its acceptance or purchase thereof, agrees, prior to any Transfer of any such Restricted Securities (except pursuant to an effective Registration Statement), to give written notice to the Company of such holder's intention to effect such Transfer and agrees to comply in all other respects with the provisions of this Article VI. Each such notice shall describe the manner and circumstances of the proposed Transfer and, if reasonably requested by the Company, shall be accompanied by the written opinion, addressed to the Company, of counsel for the holder of such Restricted Securities (which counsel shall be reasonably satisfactory to the Company and which counsel may be the in-house counsel of such holder), stating that in the opinion of such counsel (which opinion shall be reasonably satisfactory to the Company) such proposed Transfer does not involve a transaction requiring registration of such Restricted Securities under the Securities Act. Subject to complying with the other applicable provisions hereof, such holder of Restricted Securities shall be entitled to consummate such Transfer in accordance with the terms of the notice delivered by him, her or it to the Company if the Company does not reasonably object (on the basis that such Transfer violates the provisions of this Article VI) to such Transfer within five (5) days after the delivery of such notice. Each certificate or other instrument evidencing the Restricted Securities issued -21- 25 upon the Transfer of any Restricted Securities (and each certificate or other instrument evidencing any untransferred balance of such Restricted Securities) shall bear the legend set forth in Section 6.2) unless (i) in such opinion of such counsel registration of future transfer is not required by the applicable provisions of the Securities Act or (ii) the Company shall have waived the requirement of such legend. 6.4 REMOVAL OF LEGENDS, ETC. Notwithstanding the foregoing provisions of this Article VI, the restrictions imposed by Sections 6.1, 6.2 and 6.3 upon the transferability of any Restricted Securities shall cease and terminate when (a) such Restricted Securities are sold or otherwise disposed of in accordance with the intended method of disposition by the seller or sellers thereof set forth in a Registration Statement or are sold or otherwise disposed of in a transaction contemplated by Section 6.3 which does not require that the Restricted Securities transferred bear the legend set forth in Section 6.2, or (b) the holder of such Restricted Securities has met the requirement of Transfer of such Restricted Securities pursuant to subparagraph (k) of Rule 144. Whenever the restrictions imposed by Sections 6.1, 6.2 and 6.3 shall terminate, as herein provided, the holder of any Restricted Securities shall be entitled to receive from the Company, without expense, a new certificate not bearing the restrictive legend set forth in Section 6.2 and not containing any other reference to the restrictions imposed by Sections 6.1, 6.2 and 6.3. 6.5 ADDITIONAL LEGEND. (a) Each certificate evidencing Stockholder Shares and each certificate issued in exchange for or upon the Transfer of any Stockholder Shares (if such shares remain Stockholder Shares as defined herein after such Transfer) shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS' AGREEMENT DATED AS OF MAY 31, 2000 (THE "AGREEMENT"), AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS. THE TERMS OF SUCH STOCKHOLDERS' AGREEMENT INCLUDES, AMONG OTHER THINGS, RESTRICTIONS ON TRANSFERS. A COPY OF SUCH STOCKHOLDERS' AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST. THE AGREEMENT IS INTENDED TO BE AN AGREEMENT GOVERNED BY SECTION 16-10a-732 AND SECTION 16-10a-627 OF THE UTAH BUSINESS CORPORATION ACT." (b) The Company shall imprint such legends on certificates evidencing shares outstanding prior to the date hereof. The legend set forth above shall be removed from the certificates evidencing any shares which cease to be Stockholder Shares in accordance with the terms of this Agreement. -22- 26 ARTICLE VII AMENDMENT AND WAIVER 7.1 AMENDMENT. Except as expressly set forth herein, the provisions of this Agreement may only be amended or waived with the prior written consent of (a) the Company, (b) the Requisite Trust Holders and (c) the Requisite Investor Holders; provided, however, that (i) any such amendment, modification, or waiver that would adversely affect the rights hereunder of any Stockholder, in its capacity as a Stockholder, without similarly affecting the rights hereunder of all Stockholders of the same class, in their capacities as Stockholders of such class, shall not be effective as to such Stockholder without its prior written consent, (ii) any such amendment, modification, or waiver that would adversely affect the rights hereunder of the Warrantholders as a class, without similarly affecting the rights hereunder of other classes of Stockholders, shall not be effective as to the Warrantholders without the prior written consent of the Requisite Warrantholders, and (iii) Schedule I to this Agreement shall be deemed to be automatically amended from time to time to reflect Transfers of Securities made in compliance with Article II without requiring the consent of any party, and the Company will, from time to time, distribute to the Stockholders a revised Schedule I to reflect any such changes. 7.2 WAIVER. No course of dealing between the Company and the Stockholders (or any of them) or any delay in exercising any rights hereunder will operate as a waiver of any rights of any party to this Agreement. The failure of any party to enforce any of the provisions of this Agreement will in no way be construed as a waiver of such provisions and will not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms ARTICLE VIII TERMINATION The provisions of this Agreement, except as otherwise expressly provided herein, shall terminate upon the first to occur of (a) the twentieth anniversary of the date hereof, (b) the dissolution, liquidation or winding-up of the Company, (c) the Sale of the Company or a Qualified Public Offering or (d) the approval of such termination by (i) the Company, (ii) the Requisite Trust Holders (iii) the Requisite Management Holders, (iv) the Requisite Investor Holders and (v) the Requisite Warrantholders. Anything contained herein to the contrary notwithstanding, as to any particular Stockholder, this Agreement shall no longer be binding or of further force or effect as to such Stockholder, except as otherwise expressly provided herein, as of the date such Stockholder has Transferred all of such Stockholder's interest in the Stockholder Shares and the Transferees of such Stockholder Shares have, if required by Section 2.2(b) hereof, executed Joinder Agreements. -23- 27 ARTICLE IX MISCELLANEOUS 9.1 SEVERABILITY. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 9.2 ENTIRE AGREEMENT. This Agreement and the other Documents or agreements referred to herein and to be executed and delivered in connection herewith embody the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede and preempt any and all prior and contemporaneous understandings, agreements, arrangements or representations by or among the parties, written or oral, which may relate to the subject matter hereof or thereof in any way. Other than this Agreement, the other Documents and the other agreements or instruments referred to herein and to be executed and delivered in connection herewith, there are no other agreements continuing in effect relating to the subject matter hereof, including preemptive rights, rights of first refusal, voting of capital stock of the Company or election of members of the Board. 9.3 INDEPENDENCE OF AGREEMENTS, COVENANTS, REPRESENTATIONS AND WARRANTIES. All agreements and covenants hereunder shall be given independent effect so that if a certain action or condition constitutes a default under a certain agreement or covenant, the fact that such action or condition is permitted by another agreement or covenant shall not affect the occurrence of such default, unless expressly permitted under an exception to such initial agreement or covenant. In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of or a breach of a representation and warranty hereunder. The exhibits and schedules attached hereto are hereby made part of this Agreement in all respects. 9.4 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement will bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and the Stockholders and any -24- 28 subsequent holders of Stockholder Shares and the respective successors and assigns of each of them, so long as they hold Stockholder Shares. None of the provisions hereof shall create, or be construed or deemed to create, any right to employment in favor of any Person by the Company or any of its Subsidiaries. 9.5 COUNTERPARTS; FACSIMILE SIGNATURES; VALIDITY. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Facsimile counterpart signatures to this Agreement shall be acceptable and binding. The failure of any Stockholder to execute this agreement does not make it invalid as against any other Stockholder. 9.6 REMEDIES. (a) Each Stockholder shall have all rights and remedies reserved for such Stockholder pursuant to this Agreement and all rights and remedies which such holder has been granted at any time under any other agreement or contract and all of the rights which such holder has under any law or equity. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or equity. (b) The parties hereto agree that if any parties seek to resolve any dispute arising under this Agreement pursuant to a legal proceeding, the prevailing parties to such proceeding shall be entitled to receive reasonable fees and expenses (including reasonable attorneys' fees and expenses) incurred in connection with such proceedings. (c) It is acknowledged that it will be impossible to measure in money the damages that would be suffered by any party hereto if any Person also party hereto fails to comply with any of the obligations imposed on it upon them in this Agreement or in the Restated Charter or By-laws and that in the event of any such failure, the aggrieved party will be irreparably damaged and will not have an adequate remedy at law. Any such aggrieved party shall, therefore, be entitled to equitable relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. 9.7 NOTICES. All notices, claims, requests, demands or other communications which are required or otherwise delivered hereunder shall be deemed to be sufficient and duly given if contained in a written instrument (a) personally delivered or sent by telecopier, (b) sent by nationally-recognized overnight courier guaranteeing next Business Day delivery or (c) sent by first class registered or certified mail, postage prepaid, return receipt requested, addressed as follows: (a) if to the Company, to: -25- 29 Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, Utah 84108 Telephone: 801-532-5200 Telecopier: 801-584-5783 Attention: Chief Executive Officer with copies to: Chase Domestic Investments, L.L.C. c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020 Telephone: 212-899-3400 Telecopier: 212-899-3401 Attention: Timothy J. Walsh and O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza, 41st Floor New York, New York 10112 Telephone: 212-408-2400 Telecopier: 212-728-5950 Attention: Ilan S. Nissan, Esq.; (b) if to any Trust Holder or Management Holder, to it at its address set forth on Schedule I attached hereto; (c) if to any Investor Stockholder or Warrantholder, to it at its address set forth on Schedule I attached hereto; or to such other address as the party to whom notice is to be given may have furnished to each other party in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (i) when delivered, if personally delivered or sent by telecopier, (ii) on the first Business Day after dispatch, if sent by nationally recognized, overnight courier guaranteeing next Business Day delivery and (iii) on the third Business Day following the date on which the piece of mail containing such communication is posted, if sent by mail. 9.8 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of New York, except that to the extent this Agreement relates to the internal affairs of the Company which internal affairs of the Company shall be governed by and construed in accordance with the domestic laws of the State of Utah. -26- 30 9.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. 9.10 CONSENT TO JURISDICTION. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or the transactions contemplated hereby. Each of the parties hereto further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth in Section 9.7 shall be effective service of process for any action, suit or proceeding in the State of New York with respect to any matters to which it has submitted to jurisdiction in this Section 9.10. Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby and thereby in (a) the Supreme Court of the State of New York, New York County or (b) the United States District Court for the Southern District of New York, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 9.11 FURTHER ASSURANCES. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement, the Documents and the consummation of the transactions contemplated hereby. 9.12 CONFLICTING AGREEMENTS. No Stockholder shall enter into any stockholder agreements or arrangements of any kind with any Person with respect to any Stockholder Shares on terms inconsistent with the provisions of this Agreement (whether or not such agreements or arrangements are with other Stockholders or with Persons that are not parties to this Agreement), including agreements or arrangements with respect to the acquisition or disposition of Stockholder Shares in a manner which is inconsistent with this Agreement. 9.13 THIRD PARTY RELIANCE. Anything contained herein to the contrary notwithstanding, except for Section 5.4 hereof the covenants of the Company contained in this Agreement (a) are being given by the Company as an inducement to the Stockholders to enter into this Agreement and the other Documents (and the Company acknowledges that the Stockholders have expressly relied thereon) and (b) are solely for the benefit of the Stockholders. Accordingly, no third party (including, without limitation, any holder of capital stock of the Company) or anyone acting on behalf of any thereof -27- 31 other than the Stockholders, shall be a third party or other beneficiary of such covenants and no such third party shall have any rights of contribution against the Stockholders or the Company with respect to such covenants or any matter subject to or resulting in indemnification under this Agreement or otherwise. The agreements set forth in Section 5.4 hereof shall be for the benefit of the holders of the Company's Series A Cumulative Exchangeable Redeemable Preferred Stock and, accordingly, the holders thereof shall be third party beneficiaries of Section 5.4, entitled to fully enforce any failure of the parties hereto to comply therewith, in accordance with the terms and provisions of this Agreement. 9.14 REPURCHASE RIGHT OF THE COMPANY. (a) Unless otherwise covered in the Management Stockholder's written employment agreement with the Company, in the event that a Management Stockholder's employment with the Company is terminated for whatever reason, the Company or its designee shall have the right (but not the obligation), upon delivery of a Repurchase Notice to the Management Stockholder, to repurchase from such Management Stockholder and (each of his or her Permitted Transferees) all or any part of the Stockholder Shares owned by such Management Stockholder (and each of his or her Permitted Transferees) at any time. The price per Stockholder Share to be paid by the Company shall be the Fair Market Value as of the last day of the calendar month ending on, or immediately before, the date the Management Stockholder's employment with the Company is terminated. The purchase price to be paid by the Company for any repurchase of Stockholder Shares pursuant to this Section 9.14 shall be paid in cash. (b) The purchasers of any Stockholder Shares pursuant to this Section 9.14 will be entitled to require all of the sellers of Stockholder Shares to provide representations and warranties from such seller regarding (i) such seller's power, authority and legal capacity to enter into such sale and to transfer valid right, title and interest in such Stockholder Shares, (ii) such seller's ownership of such Stockholder Shares and the absence of any liens, pledges, and other encumbrances on such Stockholder Shares and (iii) the absence of any violation, default, or acceleration of any agreement or instrument pursuant to which such seller or the assets of such seller are bound as the result of such sale. (c) Should the Company or any of its designees elect to exercise the repurchase rights pursuant to this Section 9.14 and any seller fails to deliver all of such Stockholder Shares in accordance with the terms hereof, the purchaser of such Stockholder Shares hereunder may, at its option, in addition to all other remedies it may have, deposit the repurchase price in an escrow account administered by an independent third party (to be held for the benefit of and payment over to such seller in accordance herewith), whereupon the Company shall by written notice to such seller (i) cancel on its books the certificates(s) representing such Stockholder Shares registered in the name of such seller and (ii) issue to the purchaser, in lieu thereof, new certificate(s) representing such Stockholder Shares registered in the purchaser's name, and all of the seller's right, title, and interest in and to such Stockholder Shares shall terminate in all respects. * * * * * -28- 32 IN WITNESS WHEREOF, the undersigned have duly executed this Stockholders' Agreement as of the date first written above. HUNTSMAN PACKAGING CORPORATION By: /s/ SCOTT K. SORENSEN --------------------------------- Name: Scott K. Sorensen Title: Chief Financial Officer CHASE DOMESTIC INVESTMENTS, L.L.C. By: Chase Capital Investments, L.P., its sole Member By: Chase Capital Partners, as Investment Manager By: /s/ TIMOTHY J. WALSH --------------------------------- Name: Timothy J. Walsh Title: General Partner THE CHRISTENA KAREN H. DURHAM TRUST By: /s/ MARK DRESCHLER --------------------------------- Name: Mark Dreschler Title: Trustee 33 DURHAM CAPITAL, LTD. By: /s/ RICHARD P. DURHAM --------------------------------- Name: Richard P. Durham Title: FIRST UNION CAPITAL PARTNERS, LLC By: /s/ ROBERT G. CALTON III --------------------------------- Name: Robert G. Calton III Title: Senior Vice President SORENSEN CAPITAL, LLC By: /s/ SCOTT K. SORENSEN --------------------------------- Name: Scott K. Sorensen Title: MOFFITT CAPITAL, LLC By: /s/ RONALD G. MOFFITT --------------------------------- Name: Ronald G. Moffitt Title: RONALD G. MOFFITT IRA (DLJ SECURITIES CORP CUSTODIAN) By: /s/ RONALD G. MOFFITT --------------------------------- Name: Ronald G. Moffitt Title: 34 NEW YORK LIFE CAPITAL PARTNERS, L.P. BY: NYLCAP MANAGER LLC, ITS INVESTMENT MANAGER By: /s/ STEVE BENEVENTO --------------------------------- Name: Steve Benevento Title: Its Authorized Representative THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By: /s/ RICHARD A. STRAIT --------------------------------- Name: Richard A. Strait Title: Its Authorized Representative /s/ JACK E. KNOTT ------------------------------------- Jack E. Knott /s/ RICHARD P. DURHAM ------------------------------------- Richard P. Durham /s/ SCOTT K. SORENSEN ------------------------------------- Scott K. Sorensen /s/ RONALD G. MOFFITT ------------------------------------- Ronald G. Moffitt 35 SCHEDULE I STOCKHOLDERS NUMBER OF STOCKHOLDER NAME AND ADDRESS OF STOCKHOLDER SHARES(1) INVESTOR STOCKHOLDERS Chase Domestic Investments, L.L.C. 317,306 c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020 Telephone: 212-899-3400 Telecopier: 212-899-3401 Attention: Timothy Walsh with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza, 41st Floor New York, New York 10112 Telephone: 212-408-2400 Telecopier: 212-728-5950 Attention: Ilan S. Nissan, Esq. - -------------------------- (1) In addition to the Stockholder Shares, each of Chase Domestic Investments, L.L.C., First Union Capital Partners, LLC, New York Life Capital Partners, L.P. and The Northwestern Mutual Life Insurance Company own, respectively, 52,000 shares, 24,000 shares, 12,000 shares and 12,000 shares of the Company's Series A Cumulative Exchangeable Redeemable Preferred Stock, no par value. -i- 36 NUMBER OF STOCKHOLDER NAME AND ADDRESS OF STOCKHOLDER SHARES(1) First Union Capital Partners, LLC 6,210 301 South College Street One First Union Center, 5th Floor Charlotte, NC 28288-0732 Telephone: 704-715-1481 Telecopier: 704-374-6711 Attention: Robert G. Calton III with a copy to: Kennedy Covington Lobdell & Hickman, L.L.P. Bank of America Corporate Center, Suite 4200 100 North Tryon Street Charlotte, North Carolina 28202-4006 Attention: J. Norfleet Pruden, III Telephone: 704--331-7442 Telecopier: 704-331-7598 -ii- 37 NUMBER OF STOCKHOLDER NAME AND ADDRESS OF STOCKHOLDER SHARES(1) New York Life Capital Partners, L.P. 12,419 51 Madison Avenue Suite 3009 New York, New York 10010 Attention: Steve Benevento Telephone: 212-576-7000 Telecopier: 212-576-5591 with a copy to: Office of the General Counsel New York Life Insurance Company 51 Madison Avenue Suite 1104 New York, New York 10010 Attention: Steve Benevento Telephone: 212-576-7000 Telecopier: 212-576-8340 and a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue, 19th Floor New York, New York 10022 Attention: Edward D. Sopher, Esq. Telephone: 212-872-1026 Telecopier: 212-407-3226 -iii- 38 NUMBER OF STOCKHOLDER NAME AND ADDRESS OF STOCKHOLDER SHARES(1) The Northwestern Mutual Life Insurance Company 6,210 720 East Wisconsin Avenue Milwaukee, WI 53202 Attention: Dave Barras Telephone: 414-299-1618 Telecopier: 414-299-7124 with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue, 19th Floor New York, New York 10022 Attention: Edward D. Sopher, Esq. Telephone: 212-872-1026 Telecopier: 212-407-3226 TRUST HOLDERS The Christena Karen H. Durham Trust 158,917 500 Huntsman Way Salt Lake City, Utah 84108 Telephone: 801-584-5700 Telecopier: 801-584-5783 Attention: Richard P. Durham with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Telephone: 312-558-5600 Telecopier: 312-558-5700 Attention: John L. MacCarthy MANAGEMENT STOCKHOLDERS -iv- 39 NUMBER OF STOCKHOLDER NAME AND ADDRESS OF STOCKHOLDER SHARES(1) Durham Capital, Ltd. and Richard P. Durham 42,789 500 Huntsman Way Salt Lake City, Utah 84108 Telephone: 801-584-5700 Telecopier: 801-584-5783 Attention: Richard P. Durham with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Telephone: 312-558-5600 Telecopier: 312-558-5700 Attention: John L. MacCarthy Jack E. Knott 7,750 72 Brinker Road Barrington Hills, Illinois 60010 Telephone: 847-382-0873 with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Telephone: 312-558-5600 Telecopier: 312-558-5700 Attention: John L. MacCarthy Sorensen Capital, LLC and Scott K. Sorensen 14,173 3276 E. Walker Oaks Court Salt Lake City, Utah 84121 Telephone: 801-943-4707 Attention: Scott K. Sorensen -v- 40 NUMBER OF STOCKHOLDER NAME AND ADDRESS OF STOCKHOLDER SHARES(1) with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Telephone: 312-558-5600 Telecopier: 312-558-5700 Attention: John L. MacCarthy Moffitt Capital, LLC and Ronald G. Moffitt 4,882 6758 S. Vista Grande Drive Salt Lake City, Utah 84121 Telephone: 801-942-2443 Attention: Ronald G. Moffitt with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Telephone: 312-558-5600 Telecopier: 312-558-5700 Attention: John L. MacCarthy Ronald G. Moffitt IRA (DLJ Securities Corp. Custodian) 1,700 6758 S. Vista Grande Drive Salt Lake City, Utah 84121 Telephone: 801-942-2443 Attention: Ronald G. Moffitt with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Telephone: 312-558-5600 Telecopier: 312-558-5700 Attention: John L. MacCarthy -vi- 41 NUMBER OF STOCKHOLDER NAME AND ADDRESS OF STOCKHOLDER SHARES(1) WARRANTHOLDERS Chase Domestic Investments, L.L.C. 22,486 c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020 Telephone: 212-899-3400 Telecopier: 212-899-3401 Attention: Richard D. Waters with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza, 41st Floor New York, New York 10112 Telephone: 212-408-2400 Telecopier: 212-728-5950 Attention: Frederick M. Bachman, Esq. First Union Capital Partners, LLC 5,189 301 South College Street One First Union Center, 5th Floor Charlotte, NC 28288-0732 Telephone: 704-715-1481 Telecopier: 704-374-6711 Attention: Robert G. Calton III with a copy to: Kennedy Covingotn Lobdell & Hickman, L.L.P. Bank of America Corporate Center, Suite 4200 100 North Tryon Street Charlotte, North Carolina 28202-4006 Attention: J. Norfleet Pruden, III Telephone: 704--331-7442 Telecopier: 704-331-7598 -vii- 42 NUMBER OF STOCKHOLDER NAME AND ADDRESS OF STOCKHOLDER SHARES(1) New York Life Capital Partners, L.P. 10,378 51 Madison Avenue Suite 3009 New York, New York 10010 Attention: Steve Benevento Telephone: 212-576-7000 Telecopier: 212-576-5591 with a copy to: Office of the General Counsel New York Life Insurance Company 51 Madison Avenue Suite 1104 New York, New York 10010 Attention: Steve Benevento Telephone: 212-576-7000 Telecopier: 212-576-8340 and a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue, 19th Floor New York, New York 10022 Attention: Edward D. Sopher, Esq. Telephone: 212-872-1026 Telecopier: 212-407-3226 -viii- 43 NUMBER OF STOCKHOLDER NAME AND ADDRESS OF STOCKHOLDER SHARES(1) The Northwestern Mutual Life Insurance Company 5,189 720 East Wisconsin Avenue Milwaukee, WI 53202 Attention: Dave Barras Telephone: 414-299-1618 Telecopier: 414-299-7124 with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue, 19th Floor New York, New York 10022 Attention: Edward D. Sopher, Esq. Telephone: 212-872-1026 Telecopier: 212-407-3226 -ix- 44 EXHIBIT A JOINDER AGREEMENT The undersigned is executing and delivering this Joinder Agreement pursuant to the Stockholders' Agreement dated as of May 31, 2000 (as the same may hereafter be amended, the "Stockholders' Agreement"), among Huntsman Packaging Corporation, a Utah company (the "Company") and the Stockholders named therein. By executing and delivering this Joinder Agreement to the Company, the undersigned hereby agrees to become a party to, to be bound by, and to comply with the provisions of the Stockholders' Agreement in the same manner as if the undersigned were an original signatory to such agreement. The undersigned agrees that the undersigned shall be [a] [an] [Investor Stockholder] [Management Stockholder] [Trust Holder] [Warrantholder], as such term is defined in the Stockholders' Agreement.(2) Accordingly, the undersigned has executed and delivered this Joinder Agreement as of the __ day of ______, _______. ----------------------------- Signature of Stockholder ----------------------------- Print Name of Stockholder - ----------------------------- (2) TYPE OF STOCKHOLDER SHALL BE THE SAME AS THE TRANSFEROR OF THE TRANSFERRED COMMON STOCK. 45 EXHIBIT B REGULATORY AGREEMENT dated as of May 31, 2000, by and between CHASE DOMESTIC INVESTMENTS, L.L.C., a Delaware limited liability company (the "the Investor"), and HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company") WHEREAS, the Investor is a regulated entity and an indirect subsidiary of The Chase Manhattan Corporation and in connection therewith the Investor is subject to various regulations that may impose restrictions on the type and terms of the Investor's investment in the Company; NOW THEREFORE, in connection with the foregoing, the parties hereby agree as set forth below. SECTION 1. REGULATORY COOPERATION. (a) In the event that the Investor reasonably determines that it has a Regulatory Problem, the Company agrees to take all such actions as are reasonably requested by the Investor in order (i) to effectuate and facilitate any transfer by the Investor of any securities of the Company then held by the Investor to any Person designated by the Investor, (ii) to permit the Investor (or any of its Affiliates) to exchange all or any portion of the voting securities then held by such Person on a share-for-share basis for shares of a class of non-voting securities of the Company, which non-voting securities shall be identical in all respects to such voting securities, except that such new securities shall be non-voting and shall be convertible into voting securities on such terms as are requested by the Investor and reasonably acceptable to the Company in light of regulatory considerations then prevailing and (iii) to grant the Investor or its designee the reasonable equivalent of any voting rights arising out of the Investor's ownership of voting securities and/or provided for in the Stockholders Agreement that were diminished as a result of the transfers and amendments referred to above. If the Investor elects to transfer securities of the Company in order to avoid a Regulatory Problem to an Affiliate subject to limitations on its voting or total ownership interest in the Company, the Company and such Affiliate shall enter into such mutually acceptable agreements as such Affiliate may reasonably request in order to assist such Affiliate in complying with Laws to which it is subject. Such agreements may include restrictions on the redemption, repurchase or retirement of securities of the Company that would result or be reasonably expected to result in such Affiliate holding more voting securities or total securities (equity and debt) than it is permitted to hold under such laws and regulations. (b) In the event the Investor has the right to acquire any of the Company's securities from the Company or any other Person (as the result of a preemptive offer, pro rata offer or otherwise), and the Investor reasonably determines that it has a Regulatory 46 Problem, at the Investor's request the Company will offer to sell to the Investor non-voting securities (or, if the Company is not the proposed seller, will arrange for the exchange of any voting securities for non-voting securities immediately prior to or simultaneous with such sale) on the same terms as would have existed had the Investor acquired the securities so offered and immediately requested their exchange for non-voting securities pursuant to Section 1(a). (c) In the event that any Affiliate of the Company ever offers to issue any of its securities to the Investor, then the Company will cause such Affiliate to enter into an agreement with the Investor substantially similar to this Agreement. SECTION 2. CROSS MARKETING ACTIVITIES. (a) Neither the Company nor any of its subsidiaries (i) offers or markets, directly or through any arrangement, any product or service of any Depository Institution which the Company knows is owned by The Chase Manhattan Corporation, or (ii) permits any of its products or services to be offered or marketed, directly or through any arrangement, by or through any Depository Institution which the Company knows is owned by The Chase Manhattan Corporation. (b) The Company shall give the Investor thirty (30) days prior notice before taking any affirmative steps which would cause the representations and warranties contained in this Section 2 to be untrue. (c) The Company shall use its best efforts to notify the Investor promptly at any time in which the Company reasonably believes the representations contained in this Section 2 to be untrue whether as a result of the Company's affirmative action or otherwise. SECTION 3. LENDING ACTIVITIES. The Company will use reasonable efforts to notify the Investor if it or any of its subsidiaries enters into a loan facility, credit facility, debt financing, line of credit or any other extension of credit from any Depository Institution which the Company knows is owned by The Chase Manhattan Corporation at least 30 days prior thereto. Any failure by the Company to comply with this Section 3 shall not be deemed to be a violation of, or default under, this Section 3. SECTION 4. DEFINITIONS. "Affiliate" means, with respect to any Person, (a) a director or executive officer of such Person or any Person identified in clause (c) below, and (b) any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person. When such term is used in the context of a Regulatory Problem, it also has the meaning ascribed to it in any Law. "Law," with respect to any Person, means all provisions of all laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any governmental 47 authority applicable to such Person or any of its assets or property or to which such Person or any of its assets or property is subject, and all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which such Person is a party or by which it or any of its assets or properties is or may be bound or subject. "Control" means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Depository Institution" means an institution organized under the laws of the United States, any State of the United States, the District of Colombia, any territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands which both (i) accepts demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others; and (ii) is engaged in the business of making commercial loans. The Chase Manhattan Corporation is not a Depository Institution. "Person" shall be construed as broadly as possible and shall include an individual or natural person, a partnership (including a limited liability partnership), a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental authority. "Regulatory Problem" means any set of facts or circumstances in which the Investor's ownership of securities issued by the Company (a) gives rise to a material violation of Law by the Investor or any of its Affiliates, or gives rise to a reasonable belief by the Investor that such a violation is likely to occur or (b) gives rise to a limitation in Law that will impair materially the ability of the Investor or any Affiliate to conduct its business or gives rise to a reasonable belief by the that such a limitation is likely to arise. "Stockholders Agreement" means the Stockholders Agreement to be entered into on the date of the Closing among the Company and certain shareholders of the Company. SECTION 5. AMENDMENTS; BENEFIT. The terms and provisions of this Agreement may not be modified or amended, unless pursuant to a written agreement executed by each of the parties hereof. This Agreement shall be for the benefit of the Investor and its Affiliates and shall apply to each acquisition of securities issued by the Company to the Investor or its Affiliates. SECTION 6. COUNTERPARTS, FACSIMILE SIGNATURES. This Agreement may be executed in any number of counterparts, including by means of facsimile, and each counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. ******** 48 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. CHASE DOMESTIC INVESTMENTS, L.L.C. By: Chase Capital Investments, L.P., as Sole Member By: Chase Capital Partners, as Investment Manager By: ---------------------------------- Name: Timothy J. Walsh Title: General Partner HUNTSMAN PACKAGING CORPORATION By: ---------------------------------- Name: Richard P. Durham Title: Chief Executive Officer and President EX-10.3 10 ex10-3.txt REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10.3 ================================================================================ HUNTSMAN PACKAGING CORPORATION REGISTRATION RIGHTS AGREEMENT MAY 31, 2000 ================================================================================ 2 TABLE OF CONTENTS
PAGE ---- Section 1. Definitions...................................................................................1 Section 2. Required Registration.........................................................................7 Section 3. Piggyback Registration........................................................................9 Section 4. Registrations on Form S-3....................................................................10 Section 5. Holdback Agreement...........................................................................11 Section 6. Preparation and Filing.......................................................................12 Section 7. Expenses.....................................................................................14 Section 8. Indemnification..............................................................................14 Section 9. Underwriting Agreement.......................................................................17 Section 10. Suspension...................................................................................17 Section 11. Information by Holder........................................................................18 Section 12. Exchange Act Compliance......................................................................18 Section 13. No Conflict of Rights........................................................................18 Section 14. Termination..................................................................................18 Section 15. Successors and Assigns.......................................................................18 Section 16. Assignment...................................................................................18 Section 17. Notices......................................................................................19 Section 18. Modifications; Amendments; Waivers...........................................................20 Section 19. Severability.................................................................................21 Section 20. Counterparts and Facsimile Execution.........................................................21 Section 21. Governing Law................................................................................21 Section 22. Waiver of Jury Trial.........................................................................21 Section 23. Consent to Jurisdiction......................................................................21 Section 24. Entire Agreement.............................................................................22
i 3 Section 25. Headings.....................................................................................22
ii 4 REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of May 31, 2000, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), the STOCKHOLDERS (as defined below) other than the NOTE WARRANTHOLDERS (as defined below), THE INITIAL PURCHASERS (as defined below), and THE BANK OF NEW YORK (solely for the purpose of receiving notices under Section 17). The Stockholders own, or have the right to purchase or otherwise acquire (by the exercise, exchange or conversion of shares of the Company's capital stock and/or warrants owned by the Stockholders that are exercisable or exchangeable for or convertible into Common Stock (as hereinafter defined) without regard to any restrictions on the ability of any Stockholder to exercise such rights exercise, exchange or conversion), shares of the Common Stock ("Common Stock"), of the Company (or such other class of common stock of the Company into which the Common Stock may be converted or reclassified, and all references herein to the Common Stock shall include such other class of common stock of the Company, if applicable). The Company and the Stockholders deem it to be in their respective best interests to set forth the rights of the Stockholders in connection with public offerings and sales of the capital stock of the Company. The Initial Purchasers, the Company and the Note Guarantors have entered into the Purchase Agreement (as hereinafter defined). As an inducement to the Initial Purchasers to consummate the transactions contemplated by the Purchase Agreement, and in satisfaction of a condition to the obligations of the Initial Purchasers thereunder, the Company, for the benefit of the Note Warrantholders (including the Initial Purchasers), agrees to the matters set forth herein. ACCORDINGLY, in consideration of the premises and mutual covenants and obligations hereinafter set forth, the parties hereto hereby agree as set forth below. Section 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Affiliate" means, with respect to any Person, a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. For the purpose of this definition, the term "control" (including, with correlative meaning, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or investment decisions of such Person, whether through the ownership of voting securities or other ownership interests, by contract or otherwise. 5 "Board of Directors" means the board of directors of the Company. "Business Day" means any day that is not (a) Pioneer Day in the State of Utah, (b) a Saturday, Sunday or legal holiday or (c) a day on which banks are not required to be open in New York, New York. "Commission" means the Securities and Exchange Commission or any other Governmental Authority at the time administering the Securities Act. "Common Stock" has the meaning given to it in the Preamble. "Common Stock Equivalent" means, at any time, one share of Common Stock or the right to acquire, whether or not such right is immediately exercisable, one share of Common Stock, whether evidenced by an option, warrant, convertible security or other instrument or agreement, including, without limitation the Warrants and the Note Warrants. "Company" has the meaning set forth in the caption. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor Federal statute then in force, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Excluded Shares" means all shares of Common Stock issued to Other Holders pursuant to the terms of the Restricted Stock Agreements which have not been released from the Repurchase Option (as defined in the Restricted Stock Agreements) on the date on which the calculation of Registrable Shares is being determined. "Governmental Authority" means any domestic or foreign government or political subdivision thereof, whether on a federal, state or local level and whether executive, legislative or judicial in nature, including any agency, authority, board, bureau, commission, court, department or other instrumentality thereof. "Indenture" means the Indenture dated as of May 31, 2000, between the Company, the Note Guarantors and the Trustee, with respect to the Notes, as it may be amended, modified or supplemented from time to time. "Information" has the meaning ascribed to such term in Section 6(i). "Initial Public Offering" means the initial underwritten Public Offering of Common Stock for the account of the Company pursuant to a registration statement effective under the Securities Act. "Initial Purchasers" means Chase Securities Inc. and Deutsche Bank Securities Inc. "Inspectors" has the meaning ascribed to such term in Section 6(i). - 2 - 6 "Investor Stockholders" means, collectively, (a) the Persons listed as Investor Stockholders on Schedule I attached to this Agreement for so long as such Persons hold Restricted Securities and (b) any successor to, or permitted assignee or transferee in accordance with the Stockholders' Agreement of Restricted Securities originally held by a Person referred to in clause (a), provided that such successor, assignee or transferee agrees in writing to be treated as an Investor Stockholder hereunder and to be bound by and comply with all of the applicable terms and provisions hereof. "Liquidity Event" means the consummation of the first to occur of the following (a) the Initial Public Offering or (b) a Sale of the Company. "Material Transaction" means any material transaction in which the Company or any of its subsidiaries proposes to engage or is engaged, including a purchase or sale of assets or securities, financing, merger, tender offer or any other transaction that would require disclosure pursuant to the Exchange Act, and with respect to which the Board of Directors reasonably has determined in good faith that compliance with this Agreement may reasonably be expected to either materially interfere with the Company's or such subsidiary's ability to consummate such transaction in a timely fashion or require the Company to disclose material, non-public information prior to such time as it would otherwise be required to be disclosed. "NASDAQ" means The Nasdaq Stock Market, Inc. "NMS" has the meaning ascribed to such term in Section 6(n). "Note Guarantors" shall have the meaning assigned to it in the Indenture. "Note Warrants" means the warrants to purchase Common Stock issued pursuant to the Note Warrant Agreement. "Note Warrant Agent" means The Bank of New York, a New York banking corporation, in its capacity as agent for the Note Warrantholders. "Note Warrant Agreement" means the Note Warrant Agreement dated as of May 31, 2000, between the Company and the Note Warrant Agent, as amended, modified or supplemented from time to time. "Note Warrantholder" means any Person that holds Note Warrants, whether on the Closing Date or at any time thereafter, for so long as such Person holds Restricted Securities, and so long as each such Person agrees (whether pursuant to the Note Warrant Agreement or otherwise) to be treated as a Note Warrantholder and to be bound by and comply with all of the applicable terms and provisions hereof. "Note Warrant Shares" has the meaning ascribed to such term in the Note Warrant Agreement. "Other Holders" means those Persons holding Registrable Shares other than the Investor Stockholders, the Warrantholders, the Note Warrantholders and the Trust Holders. - 3 - 7 "Other Shares" means at any time those shares of Common Stock which do not constitute Registrable Shares or Primary Shares. "Person" shall be construed as broadly as possible and shall include an individual person, a partnership (including a limited liability partnership), a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a Governmental Authority. "Primary Shares" means, at any time, the authorized but unissued shares of Common Stock or shares of Common Stock held in the treasury of the Company. "Prospectus" means the prospectus included in a Registration Statement, including any amendment or prospectus subject to completion, and any such prospectus as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Shares and, in each case, by all other amendments and supplements to such prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Public Offering" means the closing of a public offering of Common Stock pursuant to a Registration Statement declared effective under the Securities Act, except that a Public Offering shall not include an offering of securities to be issued as consideration in connection with a business acquisition or an offering of securities issuable pursuant to an employee benefit plan. "Purchase Agreement" means the Purchase Agreement dated as of May 25, 2000, among the Company, the Note Guarantors and the Initial Purchasers relating to the Units, as amended, modified or supplemented from time to time. "Recapitalization Agreement" means the Recapitalization Agreement, dated as of March 31, 2000, by and among the Company and the Persons named therein, as such agreement may from time to time be amended in accordance with its terms. "Records" has the meaning ascribed to such term in Section 6(i). "Registrable Shares" means at any time, and with respect to any Stockholder, the shares of Common Stock held by, or issuable to, such Stockholder which constitute Restricted Securities other than the Excluded Shares. As to any particular Registrable Shares, once issued, such Registrable Shares shall cease to be Registrable Shares (a) when an offering of such Registrable Shares has been registered under the Securities Act, the Registration Statement in connection therewith has been declared effective and such Registrable Shares have been disposed of pursuant to and in the manner described in such effective Registration Statement, (b) when such Registrable Shares are sold or distributed to the public, or eligible to be sold or distributed, through a broker, dealer or market maker pursuant to Rule 144(k) (in the case of Warrants, Note Warrants or other rights to acquire Common Stock, assuming that such Warrants, Note Warrants or other rights to acquire Common Stock are exercised through a "cashless exercise" provision) or (c) when such Registrable Shares have ceased to be outstanding. - 4 - 8 "Registration Date" means the date upon which the Registration Statement filed by the Company to effect its Initial Public Offering shall have been declared effective by the Commission. "Registration Statement" means any registration statement of the Company which covers an offering of any of the Registrable Shares, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Representative" of a Person shall be construed broadly and shall include such Person's partners, members, officers, directors, managers, investment advisors, employees, agents, advisors, counsel, accountants and other representatives. "Requesting Group" means, with respect to any Requesting Stockholder, all members of the same class of Stockholders as the Requesting Stockholder. "Requesting Stockholders" means, on the date of determination, any of the Persons requesting a registration pursuant to in Sections 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv). "Requisite Investor Stockholders" means, on the date of determination, those Investor Stockholders who hold in the aggregate in excess of fifty percent (50%) of the Restricted Securities held by all of the Investor Stockholders. "Requisite Note Warrantholders" means, on the date of determination, those Note Warrantholders who hold in the aggregate in excess of sixty percent (60%) of the Restricted Securities held by all of the Note Warrantholders. "Requisite Trust Holders" means, on the date of determination, those Trust Holders who hold in the aggregate in excess of fifty percent (50%) of the Restricted Securities held by all of the Trust Holders. "Requisite Warrantholders" means, on the date of determination, those Warrantholders who hold in the aggregate in excess of sixty percent (60%) of the Restricted Securities held by all of the Warrantholders. "Restricted Securities" means, at any time and with respect to any Stockholder, the Common Stock, the Warrants and the Note Warrants and any other securities received or receivable with respect to any such Common Stock, Warrants (including Warrant Shares) and Note Warrants (including Note Warrant Shares), which are held by such Stockholder and which theretofore have not been sold to the public pursuant to an effective Registration Statement or pursuant to Rule 144. "Restricted Stock Agreements" means, collectively, the Restricted Stock Purchase Agreements dated as of the date hereof between the Company and each of Richard P. Durham, Jack E. Knott, Scot K. Sorensen and Ronald G. Moffitt, and any similar agreements executed and delivered by the Company and any employee of the Company after the date hereof, as each such - 5 - 9 agreement is amended, modified or supplemented from time to time in accordance with the terms thereof. "Rule 144" means Rule 144 promulgated under the Securities Act or any successor rule thereto. "Sale of the Company" means the sale of the Company (in one transaction or a series of transactions) to a third party or parties, whether by way of the sale of all or substantially all of the assets of the Company, sale of securities (whether directly or indirectly or by way of merger, consolidation or reorganization) resulting in such third party or parties acquiring voting securities which enable such third party or parties to elect a majority of the Board of Directors. "Securities Act" means the Securities Act of 1933, as amended, or any successor Federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Stockholders" means each of the Investor Stockholders, the Trust Holders, the Warrantholders, the Note Warrantholders and the Other Holders. "Stockholders' Agreement" means the Stockholders' Agreement dated as of the date hereof among the Company, the Stockholders (other than the Note Warrantholders) and the other Persons party thereto, as amended, modified or supplemented from time to time. "Stockholders' Counsel" has the meaning ascribed to it in Section 6. "Suspension Period" means the meaning ascribed to it in Section 10. "Transfer" means any disposition of any Restricted Securities or of any interest therein which would constitute a sale thereof within the meaning of the Securities Act, other than any such disposition pursuant to a Registration Statement and in compliance with all applicable state securities and "blue sky" laws. Notwithstanding anything to the contrary contained herein, Transfer shall not include an exchange of Warrants or Note Warrants, as applicable, effectuated in accordance with (i) Section 4.2 of the Warrant Agreement or (ii) Section 3.4 of the Note Warrant Agreement. "Trust Holders" means, collectively, (a) the Persons listed as Trust Holders on Schedule I attached to this Agreement for so long as such Persons hold Restricted Securities and (b) any successor to, or permitted assignee or transferee in accordance with the Stockholders' Agreement of Restricted Securities originally held by a Person referred to in clause (a), provided that such successor, assignee or transferee agrees in writing to be treated as a Trust Holder hereunder and to be bound by and comply with all of the applicable terms and provisions hereof. "Unit" shall have the meaning assigned to it in the Purchase Agreement. "Warrant Agreement" means the Warrant Agreement, dated as of the date hereof, among the Company and the Stockholders named therein, as amended, modified or supplemented from time to time in accordance with the terms thereof. - 6 - 10 "Warrantholders" means, collectively, (a) the Persons listed as Warrantholders on Schedule I attached to this Agreement for so long as such Persons hold Restricted Securities and (b) any successor to, or permitted assignee or transferee of Restricted Securities originally held by a Person referred to in clause (a), provided that such successor, assignee or transferee agrees in writing to be treated as a Warrantholder hereunder and to be bound by and comply with all of the applicable terms and provisions hereof. "Warrants" means the Common Stock Warrants issued pursuant to the Warrant Agreement dated as of the date hereof by and among the Company and the Stockholders party thereto. "Warrant Shares" has the meaning ascribed to such term in the Warrant Agreement. SECTION 2. REQUIRED REGISTRATION. (a) (i) If, at any time, the Company shall be requested by the Requisite Investor Stockholders to effect the registration under the Securities Act of an offering of Registrable Shares; or (ii) if, at any time after sixty (60) days following the date upon which the Registration Statement used in the Initial Public Offering shall have been declared effective, the Company shall be requested by the Requisite Warrantholders to effect the registration under the Securities Act of an offering of Registrable Shares; or (iii) if, at any time after sixty (60) days following the date upon which the Registration Statement used in the Initial Public Offering shall have been declared effective, the Company shall be requested by the Requisite Note Warrantholders to effect the registration under the Securities Act of an offering of Registrable Shares; or (iv) if, (A) a Liquidity Event has not occurred on or prior to the fifth anniversary of the date hereof and (B) after such date the Company shall be requested by the Requisite Trust Holders to effect the registration under the Securities Act of an offering of Registrable Shares, then the Company shall promptly give written notice to the other Stockholders of its requirement to so register such offering and, upon the written request, delivered to the Company within thirty (30) days after delivery of any such notice by the Company, of the other Stockholders to include in such registration Registrable Shares (which request shall specify the number of Registrable Shares proposed to be included in such registration), the Company shall, whether or not any other Stockholders request to include any Registrable Shares in such registration, subject to Section 2(b) below, promptly use its best efforts to effect such registration under the Securities Act of an offering of the Registrable Shares which the Company has been so requested to register for sale in accordance with the method of distribution specified in the initiating request. (b) Anything contained in Section 2(a) to the contrary notwithstanding, the Company shall not be obligated to effect pursuant to Section 2(a) any registration under the Securities Act except in accordance with the following provisions: - 7 - 11 (i) the Company shall not be obligated to use its best efforts to file and cause to become effective: (A) more than (w) two (2) registrations on Registration Statements on Form S-1 (or any successor form thereto) initiated by the Requisite Investor Stockholders pursuant to Section 2(a)(i) hereof, (x) one (1) registration on a Registration Statement on Form S-1 (or any successor form thereto) initiated by the Requisite Warrantholders pursuant to Section 2(a)(ii), (y) one (1) registration on a Registration Statement on Form S-1 (or any successor form thereto) initiated by the Requisite Note Warrantholders pursuant to Section 2(a)(iii) or (z) one (1) registration on a Registration Statement on Form S-1 (or any successor form thereto) initiated by the Requisite Trust Holders pursuant to Section 2(a)(iv) hereof; provided, however, if such Requesting Stockholders are unable to sell at least seventy-five percent (75%) of the Registrable Shares requested by such Requesting Stockholders to be included in any registration pursuant to Section 2(a) as a result of an underwriter's cutback pursuant to Section 2(b)(iii), then such registration shall not count as a requested registration for purposes of this clause (A) or (B) any Registration Statement during any period in which any other registration statement (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto) pursuant to which Primary Shares are to be or were offered and sold has been filed and not withdrawn or has been declared effective within the prior 180 days; (ii) the Company may delay the filing or effectiveness of any Registration Statement for a period of up to ninety (90) days after the date of a request for registration pursuant to Section 2(a) if at the time of such request, the Company is engaged in a Material Transaction; provided, however, the Company may not utilize this right more than once in any twelve-month period; and (iii) with respect to any registration pursuant to Section 2(a), the Company may include in such registration any Registrable Shares, Primary Shares or Other Shares; provided, however, that if the managing underwriter advises the Company that the inclusion of all Registrable Shares, Primary Shares, and Other Shares proposed to be included in such registration would materially adversely affect the offering and sales (including pricing) of all such securities, then the number of Registrable Shares, Primary Shares, and Other Shares proposed to be included in such registration shall be included in the following order: (A) first, the Registrable Shares owned by all members of the Requesting Group, pro rata based upon the number of Registrable Shares owned by each member of the Requesting Group at the time of such registration; (B) second, the Registrable Shares owned by all Stockholders (other than the members of the Requesting Group), pro rata based upon the - 8 - 12 number of Registrable Shares owned by each such Stockholder at the time of such registration; (C) third, the Primary Shares; and (D) fourth, the Other Shares. (c) A requested registration under Section 2(a) may be rescinded at least twenty (20) days prior to the filing of a Registration Statement by written notice to the Company from the Requesting Stockholders holding a majority of the Registrable Shares requested to be registered; provided, however, that such rescinded registration shall not count as a requested registration pursuant to Section 2(a) for purposes of Section 2(b)(i)(A) above if the Company shall have been reimbursed (pro rata by the Requesting Stockholders holding a majority of the Registrable Shares requested to be registered or in such other proportion as such Requesting Stockholders or Stockholders may agree) for all out-of-pocket expenses incurred by the Company in connection with such rescinded registration. SECTION 3. PIGGYBACK REGISTRATION. (a) If the Company at any time proposes for any reason to register Primary Shares or Other Shares under the Securities Act (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto), it shall promptly give written notice to each Stockholder of its intention so to register the Primary Shares or Other Shares and, upon the written request, given within twenty (20) days after delivery of any such notice by the Company, of any such Stockholder to include in such registration Registrable Shares (which request shall specify the number of Registrable Shares proposed to be included in such registration), the Company shall use its best efforts to cause all such Registrable Shares requested to be included in such registration on the same terms and conditions as the securities otherwise being sold in such registration; provided, however, that if the managing underwriter advises the Company that the inclusion of all Registrable Shares or Other Shares proposed to be included in such registration would interfere with the successful offering and sale (including pricing) of Primary Shares proposed to be offered and sold by the Company, then the number of Primary Shares, Registrable Shares and Other Shares proposed to be included in such registration shall be included in the following order: (i) first, the Primary Shares; (ii) second, the Registrable Shares held by the Stockholders requesting their Registrable Shares be included in such registration pursuant to the terms of this Section 3, pro rata based upon the number of Registrable Shares owned by each such Stockholder at the time of such registration; and (iii) third, the Other Shares. (b) The number of requests permitted by the Stockholders pursuant to this Section 3 shall be unlimited. - 9 - 13 (c) Notwithstanding anything to the contrary contained herein, no Other Holder shall have any rights under this Section 3 with respect to the Initial Public Offering. SECTION 4. REGISTRATIONS ON FORM S-3. (a) Subject to Section 4(c), at such time as the Company shall have qualified for the use of Form S-3 promulgated under the Securities Act or any successor form thereto, each Stockholder shall have the right to request in writing registrations on Form S-3, or such successor form, and to effect a registration under the Securities Act of Registrable Shares in accordance with this Section 4. (b) If the Company shall be requested by any Stockholder to effect a registration under the Securities Act of Registrable Shares in accordance with this Section 4, then the Company shall promptly give written notice of such proposed registration to all Stockholders and shall offer to include in such proposed registration any Registrable Shares requested to be included in such proposed registration by such Stockholders who respond in writing to the Company's notice within thirty (30) days after delivery of such notice (which response shall specify the number of Registrable Shares proposed to be included in such registration). The Company shall promptly use its commercially reasonable efforts to effect such registration on Form S-3 of the Registrable Shares which the Company has been so requested to register. (c) The Company shall not be obligated to effect any registration under the Securities Act requested by the Stockholders under this Section 4 except in accordance with the following provisions: (i) the Company shall not be obligated to effect any such registration initiated pursuant to this Section 4 if (A) the anticipated gross offering price of all Registrable Shares to be included therein would be less than $5,000,000 or (B) the Company shall have effected four (4) or more Registration Statements on Form S-3 pursuant to this Section 4 during the twelve month period prior to the date of such request for registration (unless the Company shall have waived such limitation); (ii) the Company may delay the filing or effectiveness of any Registration Statement for a period not to exceed ninety (90) days after the date of a request for registration pursuant to this Section 4 if (A) the Company's Board of Directors has determined that such registration would have a material adverse effect upon the Company or its then current business plans or (B) at the time of such request the Company is engaged in a Material Transaction; provided, however, that the Company may not utilize this right more than once in any twelve-month period; and (iii) with respect to any registration pursuant to this Section 4, the Company may include in such registration any Registrable Shares, Primary Shares or Other Shares; provided, however, that if the managing underwriter advises the Company that the inclusion of all Registrable Shares, Primary Shares and Other Shares proposed to be included in such registration would materially adversely affect the offering or sale (including pricing) of all such securities, then the number of Registrable Shares, Primary - 10 - 14 Shares and Other Shares proposed to be included in such registration shall be included in the following order: (A) first, the Registrable Shares, pro rata based upon the number of Registrable Shares owned by each Stockholder at the time of such registration; (B) second, the Primary Shares; and (C) third, the Other Shares. (d) The number of requests permitted by the Stockholders pursuant to this Section 4 shall be unlimited. SECTION 5. HOLDBACK AGREEMENT. (a) If the Company at any time shall register an offering and sale of shares of Common Stock under the Securities Act in an underwritten offering (i) pursuant to an Initial Public Offering or (ii) pursuant to any other registration under the Securities Act (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto), the Stockholders (other than the Note Warrantholders, unless the depositary or depositaries and custodian or custodians for all Restricted Securities shall provide written notice to the Company and the Note Warrantholders that such depositary or depositaries and custodian or custodians is able to effectuate the provisions of this Section 5) shall not sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any Restricted Securities (other than (A) those Registrable Shares included in such registration pursuant to Sections 2, 3 or 4, (B) a transfer without consideration by a Stockholder that is a limited liability company or limited partnership to its members, partners or investment advisors or (C) subject to the consent of the underwriters, a Permitted Transfer (as defined in the Stockholders' Agreement)) without the prior written consent of the Company for a period as shall be determined by the managing underwriters, which period cannot begin more than seven (7) days prior to the effectiveness of such Registration Statement and cannot last more than ninety (90) days (180 days in the case of the Company's Initial Public Offering) after the effective date of such Registration Statement. (b) If the Company at any time pursuant to Section 2 of this Agreement shall register under the Securities Act an offering and sale of Registrable Shares held by Stockholders for sale to the public pursuant to an underwritten offering, the Company shall not, without the prior written consent of the lead underwriters for such offering, effect any public sale or distribution of securities similar to those being registered, or any securities convertible into or exercisable or exchangeable for such securities, for such period as shall be determined by the managing underwriters, which period shall not begin more than seven (7) days prior to the effectiveness of the Registration Statement pursuant to which such public offering shall be made and shall not last more than ninety (90) days (180 days in the case of the Company's Initial Public Offering) after the closing of sale of shares pursuant to such Registration Statement (except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form). - 11 - 15 SECTION 6. PREPARATION AND FILING. If and whenever the Company is under an obligation pursuant to the provisions of this Agreement to use its best efforts to effect the registration of an offering and sale of any Registrable Shares, the Company shall, as expeditiously as practicable: (a) use its best efforts to cause a Registration Statement that registers such offering of Registrable Shares to become and remain effective for a period of 120 days or until all of such Registrable Shares have been disposed of (if earlier); (b) furnish, at least five (5) Business Days before filing a Registration Statement that registers such Registrable Shares, a Prospectus relating thereto and any amendments or supplements relating to such Registration Statement or Prospectus, to one counsel selected by the Requesting Stockholders (the "Stockholders' Counsel"), copies of all such documents proposed to be filed (it being understood that such five-Business-Day period need not apply to successive drafts of the same document proposed to be filed so long as such successive drafts are supplied to such counsel in advance of the proposed filing by a period of time that is customary and reasonable under the circumstances) and shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as the Stockholders whose Registrable Shares are to be covered by such Registration Statement may reasonably propose; (c) prepare and file with the Commission such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for at least a period of 120 days or until all of such Registrable Shares have been disposed of (if earlier) and to comply with the provisions of the Securities Act with respect to the offering and sale or other disposition of such Registrable Shares; (d) notify the Stockholders' Counsel promptly in writing (A) of any comments by the Commission with respect to such Registration Statement or Prospectus, or any request by the Commission for the amending or supplementing thereof or for additional information with respect thereto, (B) of the issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement or Prospectus or any amendment or supplement thereto or the initiation of any proceedings for that purpose and (C) of the receipt by the Company of any notification with respect to the suspension of the qualification of such Registrable Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purposes; (e) use its best efforts to register or qualify such Registrable Shares under such other securities or blue sky laws of such jurisdictions as any seller of Registrable Shares reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller of Registrable Shares to consummate the disposition in such jurisdictions of the Registrable Shares owned by such seller; provided, however, that the Company will not be required to qualify generally to do business, subject itself to general taxation or consent to general service of process in any jurisdiction where it would not otherwise be required to do so but for this Section 6(e); - 12 - 16 (f) furnish to each seller of such Registrable Shares such number of copies of a summary Prospectus or other Prospectus, including a preliminary Prospectus, in conformity with the requirements of the Securities Act, and such other documents as such seller of Registrable Shares may reasonably request in order to facilitate the public offering and sale or other disposition of such Registrable Shares; (g) use its best efforts to cause such offering and sale of Registrable Shares to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the seller or sellers thereof to consummate the disposition of such Registrable Shares; (h) notify on a timely basis each seller of such Registrable Shares at any time when a Prospectus relating to such Registrable Shares is required to be delivered under the Securities Act within the appropriate period mentioned in clause Section 6(b) of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing and, at the request of such seller, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the offerees of such shares, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (i) make available for inspection by any seller of such Registrable Shares, any underwriter participating in any disposition pursuant to such Registration Statement and any attorney, accountant or other agent retained by any such seller or underwriter (collectively, the "Inspectors"), all pertinent financial, business and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information (together with the Records, the "Information") reasonably requested by any such Inspector in connection with such Registration Statement (and any of the Information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, shall not be disclosed by the Inspectors unless (A) the disclosure of such Information is necessary to avoid or correct a misstatement or omission in the Registration Statement, (B) the release of such Information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (C) such Information has been made generally available to the public, and (D) the seller of Registrable Shares agrees that it will, upon learning that disclosure of such Information is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company's expense, to undertake appropriate action to prevent disclosure of the Information deemed confidential); (j) use its best efforts to obtain from its independent certified public accountants a "cold comfort" letter in customary form and covering such matters of the type customarily covered by cold comfort letters; - 13 - 17 (k) use its best efforts to obtain, from its counsel, an opinion or opinions in customary form (which shall also be addressed to the Stockholders selling Registrable Shares in such registration); (l) provide a transfer agent and registrar (which may be the same entity and which may be the Company) for such Registrable Shares; (m) issue to any underwriter to which any seller of Registrable Shares may sell shares in such offering certificates evidencing such Registrable Shares; (n) list such Registrable Shares on any national securities exchange on which any shares of the Common Stock are listed or, if the Common Stock is not listed on a national securities exchange, use its best efforts to qualify such Registrable Shares for quotation on the automated quotation system of the NASDAQ, National Market System ("NMS"), or such other national securities exchange as the holders of a majority of such Registrable Shares included in such registration shall request; (o) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable but not later than eighteen (18) months after the effective date, earnings statements which need not be audited covering a period of twelve (12) months beginning within three (3) months after the effective date of the Registration Statement, which earnings statements shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and (p) use its best efforts to take all other steps necessary to effect the registration of such Registrable Shares contemplated hereby. SECTION 7. EXPENSES. All expenses incurred by the Company in complying with Section 6, including, without limitation, all registration and filing fees (including all expenses incident to filing with the National Association of Securities Dealers, Inc.), fees and expenses of complying with securities and blue sky laws, printing expenses, fees and expenses of the Company's counsel and accountants and fees and expenses of the Stockholders' Counsel shall be paid by the Company; provided, however, that all underwriting discounts and selling commissions applicable to the Registrable Shares and Other Shares shall not be borne by the Company but shall be borne by the seller or sellers thereof, in proportion to the number of Registrable Shares and Other Shares sold by such seller or sellers. SECTION 8. INDEMNIFICATION. (a) In connection with any registration of any offering and sale of Registrable Shares under the Securities Act pursuant to this Agreement, the Company shall indemnify and hold harmless the seller of such Registrable Shares, each underwriter, broker or any other Person acting on behalf of such seller, each other Person, if any, who controls any of the foregoing Persons within the meaning of the Securities - 14 - 18 Act and each Representative of any of the foregoing Persons, against any losses, claims, damages or liabilities, joint or several, to which any of the foregoing Persons may become subject, whether commenced or threatened, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement under which such Registrable Shares were registered, any preliminary Prospectus or final Prospectus contained therein, any amendment or supplement thereto or any document incident to registration or qualification of any offering and sale of any Registrable Shares, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or, with respect to any Prospectus, necessary to make the statements therein in light of the circumstances under which they were made not misleading, or any violation by the Company of the Securities Act or state securities or blue sky laws applicable to the Company and relating to action or inaction required of the Company in connection with such registration or qualification under such state securities or blue sky laws, and the Company shall promptly reimburse such seller, such underwriter, such broker, such controlling Person or such Representatives for any legal or other expenses incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable to any such Person to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in said Registration Statement, preliminary Prospectus, amendment thereto, or any document incident to registration or qualification of any Registrable Shares in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such Person, or a Person duly acting on their behalf, specifically for use in the preparation thereof; provided, further, however, that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any untrue statement or allegedly untrue statement in, or omission or alleged omission made in any preliminary Prospectus but eliminated or remedied in the final Prospectus (filed pursuant to Rule 424 of the Securities Act), such indemnity agreement shall not inure to the benefit of any indemnified party from whom the Person asserting any loss, claim, damage, liability or expense purchased the Registrable Shares which are the subject thereof, if a copy of such final Prospectus had been timely made available to such indemnified person and such final Prospectus was not delivered to such Person with or prior to the written confirmation of the sale of such Registrable Shares to such Person. (b) In connection with any registration of an offering and sale of Registrable Shares under the Securities Act pursuant to this Agreement, each seller of Registrable Shares shall indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 8(a)) the Company, each underwriter or broker involved in such offering, each other seller of Registrable Shares under such Registration Statement, each Person who controls any of the foregoing Persons within the meaning of the Securities Act and any Representative of the foregoing Persons with respect to any untrue statement or allegedly untrue statement in or omission or alleged omission from such Registration Statement, any preliminary Prospectus or final Prospectus contained therein, any amendment or supplement thereto or any document incident to registration or qualification of any such offering and sale of Registrable Shares, if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company or such underwriter through an instrument duly executed by such seller or a Person duly acting on its behalf specifically for use in connection with the preparation of such Registration Statement, preliminary Prospectus, final Prospectus, amendment or supplement; provided, however, that the maximum amount of liability in respect of such - 15 - 19 indemnification shall be limited, in the case of each seller of Registrable Shares, to an amount equal to the net proceeds actually received by such seller from the sale of Registrable Shares effected pursuant to such registration. (c) Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in the preceding paragraphs of this Section 8, such indemnified party will, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action (provided, however, that an indemnified party's failure to give such notice in a timely manner shall only relieve the indemnification obligations of an indemnifying party to the extent such indemnifying party is prejudiced by such failure). In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; provided, however, that if any indemnified party shall have reasonably concluded that there may be one or more legal or equitable defenses available to such indemnified party which are in addition to or conflict with those available to the indemnifying party, or that such claim or litigation involves or could have an effect upon matters beyond the scope of the indemnity agreement provided in this Section 8, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party and such indemnifying party shall reimburse such indemnified party and any Person controlling such indemnified party for that portion of the fees and expenses of any one lead counsel (plus appropriate special and local counsel) retained by the indemnified party which are reasonably related to the matters covered by the indemnity agreement provided in this Section 8. (d) If the indemnification provided for in this Section 8 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage or liability referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such loss, claim, damage or liability as well as any other relevant equitable considerations; provided, however, that the maximum amount of liability in respect of such contribution shall be limited, in the case of each seller of Registrable Shares, to an amount equal to the net proceeds actually received by such seller from the sale of Registrable Shares effected pursuant to such registration. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. No Person guilty of fraud shall be entitled to indemnification or contribution hereunder. - 16 - 20 (e) The indemnification and contribution provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party and will survive the transfer of Registrable Shares. SECTION 9. UNDERWRITING AGREEMENT. (a) Notwithstanding the provisions of Sections 5, 6 and 8, to the extent that the Stockholders selling Registrable Shares in a proposed registration shall enter into an underwriting or similar agreement, which agreement contains provisions covering one or more issues addressed in such Sections of this Agreement, the provisions contained in such Sections of this Agreement addressing such issue or issues shall be of no force or effect with respect to such registration, but this provision shall not apply to the Company if the Company is not a party to the underwriting or similar agreement. (b) If any registration pursuant to Section 2 or Section 4 is requested to be an underwritten offering, the Company shall negotiate in good faith to enter into a reasonable and customary underwriting agreement with the underwriters thereof. The Company shall be entitled to receive indemnities from lead institutions, underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons specifically for inclusion in any Prospectus or Registration Statement and to the extent customary given their role in such distribution. (c) No Stockholder may participate in any registration hereunder that is underwritten unless such Stockholder agrees to (i) sell such Stockholder's Registrable Shares proposed to be included therein on the basis provided in any underwriting arrangements acceptable to the Company in the case of an offering of Primary Shares, or, in the case of an offering pursuant to Section 2 hereof, the Company and the Requesting Stockholders and (ii) as expeditiously as possible, notify the Company of the occurrence of any event concerning such Stockholder as a result of which the Prospectus relating to such registration contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. SECTION 10. SUSPENSION. Anything contained in this Agreement to the contrary notwithstanding, the Company may (not more than once with respect to each registration and not more than once in any twelve-month period), by notice in writing to each holder of Registrable Shares to which a Prospectus relates, require such holder to suspend, for up to 90 days (the "Suspension Period"), the use of any Prospectus included in a Registration Statement filed under Sections 2, 3 or 4 if a Material Transaction exists that would require an amendment to such Registration Statement or supplement to such Prospectus (including any such amendment or supplement made through incorporation by reference to a report filed under Section 13 of the Exchange Act). The period during which such Prospectus must remain effective shall be extended by a period equal to the Suspension Period. The Company may (but shall not be obligated to) withdraw the effectiveness of any Registration Statement subject to this provision. - 17 - 21 SECTION 11. INFORMATION BY HOLDER. Each holder of Registrable Shares to be included in any registration shall furnish to the Company and the managing underwriter such written information regarding such holder and the distribution proposed by such holder as the Company or the managing underwriter may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement. SECTION 12. EXCHANGE ACT COMPLIANCE. From and after the Registration Date or such earlier date as a registration statement filed by the Company pursuant to the Exchange Act relating to any class of the Company's securities shall have become effective, the Company shall comply with all of the reporting requirements of the Exchange Act (whether or not it shall be required to do so) and shall comply with all other public information reporting requirements of the Commission which are conditions to the availability of Rule 144 for the sale of the Common Stock. The Company shall cooperate with each Stockholder in supplying such information as may be necessary for such Stockholder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of Rule 144. SECTION 13. NO CONFLICT OF RIGHTS. The Company represents and warrants to the Stockholders that the registration rights granted to the Stockholders hereby do not conflict with any other registration rights granted by the Company. The Company shall not, after the date hereof, grant any registration rights which conflict with or impair, or have any priority over, the registration rights granted hereby. In any underwritten public offering, the managing underwriter shall be a nationally recognized investment banking firm selected by the Company, and, to the extent applicable, reasonably acceptable to the Requesting Stockholders holding a majority of Registrable Shares requested to be registered. SECTION 14. TERMINATION. This Agreement shall terminate and be of no further force or effect when there shall not be any Restricted Securities; provided, however, that Sections 7 and 8 shall survive the termination of this Agreement. SECTION 15. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit of the Company and the Stockholders and, subject to Section 16, their respective successors and assigns. SECTION 16. ASSIGNMENT. Each Stockholder may assign its rights hereunder to any purchaser from such Stockholder of Restricted Securities; provided, however, that, in the case of an assignment by any Stockholder other than a Note Warrantholder, any such purchaser shall purchase such Restricted Securities from such Stockholder in accordance with the Stockholders' Agreement; - 18 - 22 provided, further, however, that such purchaser shall, as a condition to the effectiveness of such assignment, be required to execute a counterpart to this Agreement agreeing to be treated as a Stockholder hereunder (of the same class (i.e., Investor Stockholder, Trust Holder, Warrantholder or Other Holder) as the transferor Stockholder), as applicable, whereupon such purchaser shall have the benefits of, and shall be subject to the restrictions contained in, this Agreement. Each transferee of a Note Warrantholder is an intended third party beneficiary of this Agreement and shall have the benefits of this Agreement upon such transfer, without any further action on its part. SECTION 17. NOTICES. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument and shall be deemed to have been duly given when delivered in Person, by telecopy, by overnight courier, or by first class registered or certified mail, postage prepaid, addressed to such party at the address set forth below or such other address as may hereafter be designated in writing by the addressee to the sender: (a) if to the Company, to: Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, Utah 84108 Telephone: 801-532-5200 Telecopier: 801-584-5783 Attention: Chief Executive Officer with copies to: Chase Domestic Investments, L.L.C. c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020 Telephone: 212-899-3400 Telecopier: 212-899-3401 Attention: Timothy J. Walsh; and O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza, 41st Floor New York, New York 10112 Telephone: 212-408-2400 Telecopier: 212-728-5950 Attention: Ilan S. Nissan, Esq.; - 19 - 23 (b) if to any Trust Holder, to it at its address set forth on Schedule I attached hereto; (c) if to any Warrantholder, to it at its address set forth on Schedule I attached hereto; (d) if to any Investor Stockholder, to it at its address set forth on Schedule I attached hereto; (e) if to any Note Warrantholder, to the agent under the Note Warrant Agreement: The Bank of New York 101 Barclay Street, Floor 21W New York, NY 10286 Attention: Corporate Trust Department (f) if to the Initial Purchasers, to: Chase Securities Inc. 270 Park Avenue New York, NY 10017 Attention: Legal Department or to such other address as the party to whom notice is to be given may have furnished to each other party in writing in accordance herewith. Any such notice or communication shall be deemed to have been received (a) when delivered, if personally delivered or sent by telecopier, (b) on the first Business Day after dispatch, if sent by nationally recognized, overnight courier guaranteeing next Business Day delivery and (c) on the third Business Day following the date on which the piece of mail containing such communication is posted, if sent by mail. SECTION 18. MODIFICATIONS; AMENDMENTS; WAIVERS. The terms and provisions of this Agreement may not be modified or amended, nor may any provision applicable to the Stockholders be waived, except pursuant to a writing signed by (a) the Company (b) the Requisite Investor Stockholders, and (c) the Requisite Trust Holders; provided, however, that (i) any such amendment, modification, or waiver that would adversely affect the rights hereunder of any Stockholder, in its capacity as a Stockholder, without similarly affecting the rights hereunder of all Stockholders of such class (i.e., Investor Stockholders, Trust Holder, Warrantholder, Note Warrantholder or Other Holder), in their capacities as Stockholders of such class, shall not be effective as to such Stockholder without its prior written consent, (ii) any such amendment, modification, or waiver that would adversely affect the rights hereunder of the Warrantholders as a class, without similarly affecting the rights hereunder of the other classes of Stockholders as a class, shall not be effective as to the Warrantholders without the prior written consent of the Requisite Warrantholders, (iii) any such amendment, modification, or waiver that would adversely affect the rights hereunder of the Note Warrantholders as a class - 20 - 24 shall not be effective as to the Note Warrantholders without the prior written consent of the Requisite Note Warrantholders, and (iv) assuming compliance with Section 16 hereof, Schedule I to this Agreement shall be deemed to be automatically amended from time to time to reflect the addition to this Agreement of any Person identified in clause (b) of the definitions of Investor Stockholder, Trust Holders or Warrantholders, as the case may be, and the Company will, from time to time, distribute to the Stockholders a revised Schedule I to reflect any such changes. SECTION 19. SEVERABILITY. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 20. COUNTERPARTS AND FACSIMILE EXECUTION. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other party, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature to this Agreement that is delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement. SECTION 21. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of New York. SECTION 22. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. SECTION 23. CONSENT TO JURISDICTION. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other - 21 - 25 proceeding arising out of this Agreement or the transactions contemplated hereby. Each of the parties hereto further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth in Section 17 shall be effective service of process for any action, suit or proceeding in the State of New York with respect to any matters to which it has submitted to jurisdiction in this Section 23. Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby and thereby in (a) the Supreme Court of the State of New York, New York County or (b) the United States District Court for the Southern District of New York, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. SECTION 24. ENTIRE AGREEMENT. This Agreement and the other documents, certificates, instruments, writings and agreements referred to herein or delivered pursuant hereto contain the entire understanding of the parties with respect to the subject matter hereof and supersede in their entirety any and all prior agreements and understandings between the parties hereto with respect to subject matter hereof, all of which are hereby terminated in their entirety and of no further force or effect. SECTION 25. HEADINGS. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. ******* - 22 - 26 IN WITNESS WHEREOF, the undersigned have duly executed this Registration Rights Agreement as of the date first written above. HUNTSMAN PACKAGING CORPORATION By: /s/ RONALD G. MOFFITT ------------------------------- Name: Ronald G. Moffitt Title: Executive Vice President, Secretary and General Counsel CHASE DOMESTIC INVESTMENTS, L.L.C. By: Chase Capital Investments, L.P., its sole Member By: Chase Capital Partners, as Investment Manager By: /s/ TIMOTHY J. WALSH ------------------------------- Name: Timothy J. Walsh Title: General Partner FIRST UNION CAPITAL PARTNERS, LLC By: /s/ ROBERT G. CALTON III ------------------------------- Name: Robert G. Calton III Title: Senior Vice President NEW YORK LIFE CAPITAL PARTNERS, L.P. By: NYLCAP Manager LLC, its Investment Manager By: /s/ STEVE BENEVENTO ------------------------------- Name: Steve Benevento Title: Its Authorized Representative 27 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By: /s/ RICHARD A. STRAIT ------------------------------- Name: Richard A. Strait Title: Its Authorized Representative THE CHRISTENA KAREN H. DURHAM TRUST By: /s/ MARK DRESCHLER ------------------------------- Name: Mark Dreschler Title: Trustee DURHAM CAPITAL, LTD. By: /s/ RICHARD P. DURHAM ------------------------------- Name: Richard P. Durham Title: SORENSEN CAPITAL, LLC By: /s/ SCOTT K. SORENSEN ------------------------------- Name: Scott K. Sorensen Title: MOFFITT CAPITAL, LLC By: /s/ RONALD G. MOFFITT ------------------------------- Name: Ronald G. Moffitt Title: 28 RONALD G. MOFFITT IRA (DLJ SECURITIES CORP CUSTODIAN) By: /s/ RONALD G. MOFFITT ------------------------- Name: Ronald G. Moffitt Title: /s/ RICHARD P. DURHAM ---------------------------- Richard P. Durham /s/ JACK E. KNOTT ---------------------------- Jack E. Knott /s/ SCOTT K. SORENSEN ---------------------------- Scott K. Sorensen /s/ RONALD G. MOFFITT ---------------------------- Ronald G. Moffitt CHASE SECURITIES INC. By: /s/ DAVID LYNCH ------------------------------- Name: David Lynch Title: Vice President DEUTSCHE BANK SECURITIES INC. By: /s/ CHARLES DENNISON ------------------------------- Name: Charles Dennison Title: Managing Director 29 Solely for the purpose of receiving notices under Section 17: THE BANK OF NEW YORK By: /s/ MICHELE L. RUSSO --------------------------------------- Name: Michele L. Russo Title: Assistant Vice President 30 SCHEDULE I INVESTOR STOCKHOLDERS Chase Domestic Investments, L.L.C. c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020 Telephone: 212-899-3400 Telecopier: 212-899-3401 Attention: Timothy J. Walsh with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza, 41st Floor New York, New York 10112 Telephone: 212-408-2400 Telecopier: 212-728-5950 Attention: Ilan S. Nissan, Esq. First Union Capital Partners, LLC 301 South College Street One First Union Center, 5th Floor Charlotte, NC 28288-0732 Telephone: 704-715-1481 Telecopier: 704-374-6711 Attention: Robert G. Calton III With a copy to: Kennedy Covington Lobdell & Hickman, L.L.P. Bank of America Corporate Center, Suite 4200 100 North Tryon Street Charlotte, North Carolina 28202-4006 Attention: J. Norfleet Pruden, III Telephone: 704-331-7442 Telecopier: 704-331-7598 New York Life Capital Partners, L.P. 51 Madison Avenue Suite 3009 New York, New York 10010 Attention: Steve Benevento 31 Telephone:. 212-576-7000 Telecopier: 212-576-5591 With a copy to: Office of the General Counsel New York Life Insurance Company 51 Madison Avenue Suite 1104 New York, New York 10010 Attention: Steve Benevento Telephone No. 212-576-7000 Telecopier: 212-576-8340 and a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue, 19th Floor New York, New York 10022 Attention: Edward D. Sopher, Esq. Telephone: 212-872-1026 Telecopier: 212-407-3226 The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, WI 53202 Attention: Dave Barras Telephone: 414-299-1618 Telecopier: 414-299-7124 with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue, 19th Floor New York, New York 10022 Attention: Edward D. Sopher, Esq. Telephone: 212-872-1026 Telecopier: 212-407-3226 32 TRUST HOLDERS The Christena Karen H. Durham Trust c/o Richard P. Durham 500 Huntsman Way Salt Lake City, Utah 84108 Telephone: 801-584-5700 Telecopier: 801-584-5783 Attention: Richard P. Durham with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Telephone: 312-558-5600 Telecopier: 312-558-5700 Attention: John L. MacCarthy WARRANTHOLDERS Chase Domestic Investments, L.L.C. c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020 Telephone: 212-899-3400 Telecopier: 212-899-3401 Attention: Richard D. Waters 33 with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza, 41st Floor New York, New York 10112 Telephone: 212-408-2400 Telecopier: 212-728-5950 Attention: Frederick M. Bachman, Esq. First Union Capital Partners, LLC 301 South College Street One First Union Center, 5th Floor Charlotte, NC 28288-0732 Telephone: 704-715-1481 Telecopier: 704-374-6711 Attention: Robert G. Calton III With a copy to: Kennedy Covington Lobdell & Hickman, L.L.P. Bank of America Corporate Center, Suite 4200 100 North Tryon Street Charlotte, North Carolina 28202-4006 Attention: J. Norfleet Pruden, III Telephone: 704-331-7442 Telecopier: 704-331-7598 New York Life Capital Partners, L.P. 51 Madison Avenue Suite 3009 New York, New York 10010 Attention: Steve Benevento Telephone: 212-576-7000 Telecopier: 212-576-5591 With a copy to: Office of the General Counsel New York Life Insurance Company 51 Madison Avenue Suite 1104 New York, New York 10010 Attention: Steve Benevento Telephone: 212-576-7000 Telecopier: 212-576-8340 34 and a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue, 19th Floor New York, New York 10022 Attention: Edward D. Sopher, Esq. Telephone: 212-872-1026 Telecopier: 212-407-3226 The Northwestern Mutual Life Insurance Company 720 East Wisconsin Avenue Milwaukee, WI 53202 Attention: Dave Barras Telephone: 414-299-1618 Telecopier: 414-299-7124 with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue, 19th Floor New York, New York 10022 Attention: Edward D. Sopher, Esq. Telephone: 212-872-1026 Telecopier: 212-407-3226 OTHER HOLDERS Durham Capital, Ltd. and Richard P. Durham 500 Huntsman Way Salt Lake City, Utah 84108 Telephone: 801-584-5700 Telecopier: 801-584-5783 Attention: Richard P. Durham with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Telephone: 312-558-5600 Telecopier: 312-558-5700 Attention: John L. MacCarthy 35 Jack E. Knott 72 Brinker Road Barrington Hills, Illinois 60010 Telephone: 847-382-0873 with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Telephone: 312-558-5600 Telecopier: 312-558-5700 Attention: John L. MacCarthy Sorensen Capital, LLC and Scott K. Sorensen 3276 E. Walker Oaks Court Salt Lake City, Utah 84121 Telephone: 801-943-4707 Attention: Scott K. Sorensen with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Telephone: 312-558-5600 Telecopier: 312-558-5700 Attention: John L. MacCarthy Moffitt Capital, LLC and Ronald G. Moffitt 6758 S. Vista Grande Drive Salt Lake City, Utah 84121 Telephone: 801-942-2443 Attention: Ronald G. Moffitt with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Telephone: 312-558-5600 Telecopier: 312-558-5700 Attention: John L. MacCarthy 36 Ronald G. Moffitt IRA (DLJ Securities Corp. Custodian) 6758 S. Vista Grande Drive Salt Lake City, Utah 84121 Telephone: 801-942-2443 Attention: Ronald G. Moffitt with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Telephone: 312-558-5600 Telecopier: 312-558-5700 Attention: John L. MacCarthy EX-10.4 11 ex10-4.txt AMENDED REGISTRATION RIGHTS AGREEMENT 1 Exhibit 10.4 AMENDMENT NO. 1 dated as of June 13, 2000 (this "Amendment"), to the REGISTRATION RIGHTS AGREEMENT dated as of May 31, 2000, (the "Original Agreement"), among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), and certain of the stockholders of the Company signatory thereto. By executing and by delivering this Amendment, the undersigned hereby agree as set forth below. Capitalized terms used but not defined herein shall have the respective meanings ascribed to them in the Original Agreement. 1.1 AMENDMENTS. (a) Section 16 of the Original Agreement is hereby amended and restated in its entirety as set forth below: "(a) Each Stockholder may assign its rights hereunder to any purchaser from such Stockholder of Restricted Securities; provided, however, that, in the case of an assignment by any Stockholder other than a Note Warrantholder, any such purchaser shall purchase such Restricted Securities from such Stockholder in accordance with the Stockholders' Agreement; provided, further, however, that such purchaser shall, as a condition to the effectiveness of such assignment, be required to execute a counterpart to this Agreement, substantially in the form of Exhibit A attached hereto, agreeing to be treated as a Stockholder hereunder (of the same class (i.e., Investor Stockholder, Trust Holder, Warrantholder or Other Holder) as the transferor Stockholder), as applicable, whereupon such purchaser shall have the benefits of, and shall be subject to the restrictions contained in, this Agreement. Each transferee of a Note Warrantholder is an intended third party beneficiary of this Agreement and shall have the benefits of this Agreement upon such transfer, without any further action on its part. (b) Subject to the approval of the Board of Directors, the Company may, upon the issuance of Common Stock Equivalents, or the transfer of Common Stock Equivalents, to any Person not already a party to this Agreement, permit such Person to become a party to this Agreement subject to such Person's execution and delivery of a joinder substantially in the form of Exhibit A attached hereto." 1.2 NO OTHER AMENDMENTS OR WAIVERS. Except as modified by this Amendment, the Original Agreement shall remain in full force and effect, enforceable in accordance with its terms. This Amendment is not a consent to any waiver or modification of any other terms or conditions of the Agreement or any of the 2 instruments or documents referred to in the Agreement and shall not prejudice any right or rights which the parties thereto may now or hereafter have under or in connection with the Agreement or any of the instruments or documents referred to therein. 1.3 EFFECTIVENESS. This Amendment shall be effective upon the execution hereof by the requisite Persons party to the Original Agreement in accordance with Section 18 of the Original Agreement. 1.4 COUNTERPARTS. This Amendment may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other party, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature to this Amendment that is delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Amendment. 1.5 GOVERNING LAW. This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether in the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. ******* 2 3 IN WITNESS WHEREOF, the parties have duly executed this Amendment No. 1 to the Registration Rights Agreement as of the date first above written. HUNTSMAN PACKAGING CORPORATION By: /s/ Ronald G. Moffitt ------------------------------------ Name: Ronald G. Moffitt Title: Executive Vice President CHASE DOMESTIC INVESTMENTS, L.L.C. By: Chase Capital Investments, L.P., its sole Member By: Chase Capital Partners, as Investment Manager By: /s/ Timothy Walsh ------------------------------------ Name: Timothy Walsh Title: General Partner FIRST UNION CAPITAL PARTNERS, LLC By: /s/ Robert G. Calton III ------------------------------------ Name: Robert G. Calton III Title: Senior Vice President NEW YORK LIFE CAPITAL PARTNERS, L.P. By: NYLCAP Manager LLC, its Investment Manager By: /s/ Steven Benevento ------------------------------------ Name: Steven Benevento Title: Its Authorized Representative 4 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By: /s/ Richard A. Strait ------------------------------------ Name: Richard A. Strait Title: Its Authorized Representative THE CHRISTENA KAREN H. DURHAM TRUST By: /s/ Mark Dreschler ------------------------------------ Name: Mark Dreschler Title: Trustee cc: Frederick M. Bachman John L. MacCarthy Ilan S. Nissan J. Norfleet Pruden, III Edward D. Sopher Scott K. Sorensen Richard D. Waters 2 5 Exhibit A REGISTRATION RIGHTS AGREEMENT JOINDER The undersigned is executing and delivering this Registration Rights Agreement Joinder pursuant to the Registration Rights Agreement dated as of May 31, 2000 (as the same has been, or may hereafter be, amended, the "Registration Rights Agreement"), among Huntsman Packaging Corporation, a Utah company (the "Company") and certain of the stockholders of the Company signatory thereto. By executing and delivering this Registration Rights Agreement Joinder to the Company, the undersigned hereby agrees to become a party to, to be bound by, and to comply with the provisions of the Registration Rights Agreement in the same manner as if the undersigned were an original signatory to such agreement. The undersigned agrees that the undersigned shall be [a] [an] [Investor Stockholder] [Note Warrantholder] [Other Holder] [Trust Holder] [Warrantholder], as such term is defined in the Registration Rights Agreement.(1) Accordingly, the undersigned has executed and delivered this Registration Rights Agreement Joinder as of the ___ day of June, 2000. _________________________________________ Signature of Stockholder _________________________________________ Print Name of Stockholder _____________________________ (1) TYPE OF STOCKHOLDER SHALL BE THE SAME AS THE TRANSFEROR OF THE TRANSFERRED COMMON STOCK. EX-10.5 12 ex10-5.txt SCURITIES PURCHASE AGREEMENT 1 ================================================================================ EXHIBIT 10.5 SECURITIES PURCHASE AGREEMENT DATED AS OF MAY 31, 2000 AMONG HUNTSMAN PACKAGING CORPORATION AND THE PURCHASERS NAMED HEREIN ================================================================================ 2 TABLE OF CONTENTS Article I DEFINED TERMS; RULES OF CONSTRUCTION...........................................................................1 1.1 Defined Terms..............................................................................................1 1.2 Rules of Construction......................................................................................7 Article II PURCHASE AND SALE OF SHARES; CLOSING..........................................................................8 2.1 Restated Charter...........................................................................................8 2.2 Authorization of Issuance of Purchased Securities..........................................................8 2.3 Sale of Purchased Securities...............................................................................8 2.4 Closing....................................................................................................8 2.5 Closing Deliveries.........................................................................................9 2.6 Use of Proceeds............................................................................................9 2.7 Closing Fee................................................................................................9 Article III REPRESENTATIONS AND WARRANTIES ABOUT THE COMPANY.............................................................9 3.1 Offering Memorandum........................................................................................9 3.2 Private Sale..............................................................................................10 3.3 Organization Etc..........................................................................................10 3.4 Capitalization............................................................................................10 3.5 Authorization, Etc........................................................................................11 3.6 Execution; Enforceability.................................................................................12 3.7 No Conflict; Consents.....................................................................................12 3.8 Financial Reports, Etc....................................................................................13 3.9 Litigation................................................................................................13 3.10 Adverse Actions...........................................................................................14 3.11 No Violation of Charters, Etc.............................................................................14 3.12 Permits...................................................................................................14 3.13 Taxes.....................................................................................................15 3.14 Investment Company; Holding Company.......................................................................15 3.15 Accounting Controls.......................................................................................15 3.16 Insurance.................................................................................................15 3.17 Intellectual Property.....................................................................................15 3.18 Title to Assets Etc.......................................................................................16 3.19 Labor Matters.............................................................................................16 3.20 ERISA Matters.............................................................................................16 3.21 Environmental Matters.....................................................................................16 3.22 Illegal Payments..........................................................................................17 3.23 Solvency..................................................................................................17 3.24 Brokers...................................................................................................18 3.25 Absence of Changes........................................................................................18 Article IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.............................................................18 4.1 Authorization of the Documents............................................................................18 4.2 Investment Representations................................................................................19 Article V CONDITIONS TO CLOSING.........................................................................................19
i 3 5.1 Conditions to Purchasers' Obligations.....................................................................19 5.2 Conditions to the Company's Obligations...................................................................21 Article VI TRANSFER OF SECURITIES.......................................................................................21 6.1 Restriction on Transfer...................................................................................21 6.2 Restrictive Legends.......................................................................................21 6.3 Notice of Transfer........................................................................................22 6.4 Transfer Pursuant to Rule 144.............................................................................23 6.5 Minimum Transfer..........................................................................................24 Article VII COVENANTS OF THE COMPANY....................................................................................24 7.1 Transactions with Affiliates..............................................................................24 7.2 Information Rights........................................................................................26 7.3 Books; Inspection Rights..................................................................................27 7.4 Merger and Consolidation..................................................................................27 7.5 Payments for Consents.....................................................................................28 7.6 Amendment of Restated Charter.............................................................................28 Article VIII MISCELLANEOUS..............................................................................................29 8.1 Expenses, Etc.............................................................................................29 8.2 Further Assurances........................................................................................30 8.3 Specific Performance; Remedies............................................................................30 8.4 Successors and Assigns....................................................................................30 8.5 Entire Agreement..........................................................................................30 8.6 Notices...................................................................................................31 8.7 Amendments, Modifications and Waivers.....................................................................32 8.8 Governing Law.............................................................................................32 8.9 No Third Party Reliance...................................................................................32 8.10 Submission to Jurisdiction................................................................................33 8.11 Severability..............................................................................................33 8.12 Independence of Agreements, Covenants, Representations and Warranties.....................................33 8.13 Survival of Representation, Warranties, Etc...............................................................34 8.14 Counterparts; Facsimile Signatures........................................................................34
ii 4 SCHEDULES AND EXHIBITS SCHEDULES Schedule I Purchasers and Purchase Price Schedule 3.4(a) Ownership of Common Stock EXHIBITS Exhibit A Registration Rights Agreement Exhibit B Restated Charter Exhibit C Stockholders' Agreement Exhibit D Warrant Agreement iii 5 SECURITIES PURCHASE AGREEMENT dated as of May 31, 2000, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), and the Purchasers listed on Schedule I hereto (collectively, the "Purchasers"). WHEREAS, the Company is in the business of manufacturing and distributing value-added films and flexible packaging for food, personal care, medical, agricultural and industrial applications (the "Business"). WHEREAS, the Company desires to raise $100,000,000 in preferred equity financing, and the Purchasers, severally and not jointly, desire to purchase from the Company an aggregate of (i) 100,000 shares of Series A Preferred Stock (as defined herein) and (ii) warrants to purchase 43,242 shares of Common Stock (as defined herein), in each case on the terms and subject to the conditions provided herein; NOW THEREFORE, in consideration of the foregoing and the covenants, agreements, representations and warranties contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto hereby agree as follows: ARTICLE I DEFINED TERMS; RULES OF CONSTRUCTION 1.1 DEFINED TERMS. Capitalized terms used and not otherwise defined in this Agreement have the meanings given to them below or in the other locations of this Agreement specified below (or, if not defined herein, have the meanings ascribed to them in the Restated Charter (as defined below)): "Affiliate" of any specified Person means (i) any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person and (ii) for purposes of Section 7.1 only, any beneficial owner of shares representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to clause (i). For the purposes of this definition, "control" when used with respect to any 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. 6 "Affiliate Transaction" shall have the meaning given to such term in Section 7.1(a). "Agreement" shall have the meaning given to such term in Section 1.2. "Board" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of the Board of Directors. "Business" has the meaning given to it in the Preamble to this Agreement. "Business Day" means any day that is not (a) Pioneer Day in the State of Utah; (b) a Saturday, Sunday, or legal holiday or (c) a day on which banks are not required to be open in New York, New York. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "CDI" means Chase Domestic Investments, L.L.C., a Delaware limited liability company. "Change of Control" means the occurrence of any of the following events: (a) prior to the first public offering of common stock of the Company, the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13-d-3 and 13d-5 under the Exchange Act), directly or indirectly, or a majority in the aggregate of the total voting power of the Voting Stock of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by any Permitted Holder or otherwise (for purposes of this clause (a) and clause (b) below, the Permitted Holders shall be deemed to beneficially own any Voting Stock of an entity (the "specified entity") held by any other entity (the "parent entity") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent entity); (b) (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13-d-5(b)(1) under the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in clause (a) above, except that for purposes of this clause (b) a person (including a Permitted Holder) shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately, only after the passage of time, upon the happening of any event or otherwise), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Company and (ii) the Permitted Holders "beneficially own" (as defined in clause (a) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the 7 right or ability by the voting power, contract or otherwise to elect or designate for election a majority of the Board (for the purposes of this clause (b), such other person shall be deemed to beneficially own any Voting Stock of a specified entity held by a parent entity, if such other person is the beneficial owner (as defined in this clause (b)), directly or indirectly, of more than 50% of the voting power of the Voting Stock of such parent entity and the Permitted Holders "beneficially own" (as defined in clause (b) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of such parent entity); (c) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board (together with any new directors (i) selected in accordance with the Stockholders Agreement so long as such agreement is in effect or otherwise nominated by the Permitted Holders or (ii) whose election by the Board or whose nomination for election by the stockholders of the Company was approved by a vote of at least a majority of the members of the Board then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved by the Board or in accordance with the Stockholders Agreement or otherwise by the Permitted Holders) cease for any reason to constitute a majority of the Board then in office; (d) the adoption of a plan relating to the liquidation or dissolution of the Company; or (e) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving Person or transferee that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving Person or transferee. "Closing" has the meaning given to it in Section 2.4. "Closing Date" has the meaning given to it in Section 2.4. "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "Commission" means the Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act. "Common Stock" means the Company's common stock, no par value. 8 "Company" has the meaning given to it in the caption to this Agreement. "Credit Agreement" shall mean the Credit Agreement dated as of the date hereof among the Company, ASPEN Industrial, S.A. de C.V., the Lenders party thereto, Bankers Trust Company, as Administrative Agent and Collateral Agent, The Chase Manhattan Bank, as Syndication Agent and The Bank of Nova Scotia, as Documentation Agent. "Documents" means the Restated Charter, this Agreement, the Warrant Agreement, the Warrants, the Recapitalization Agreement, the Assignment and Assumption Agreement dated as of the date hereof between CDI and the other Purchasers, the Stockholders' Agreement and the Registration Rights Agreement. "ERISA" has the meaning given to such term in Section 3.20. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Existing Management Stockholders" means each of Richard P. Durham, Jack E. Knott, Scott K. Sorensen and Ronald G. Moffitt. "Final Memorandum" means the final offering memorandum dated May 25, 2000, to be used in connection with the sale of the New Notes. "Fundamental Documents" means the documents by which any Person (other than an individual) establishes its legal existence or which govern its internal affairs. The Fundamental Documents of the Company as of the date hereof are the Restated Charter and the Bylaws of the Company. "GAAP" means generally accepted accounting principles in the United States, as in effect from time to time, consistently applied. "Indebtedness" has the meaning given to such terms in the New Notes Indenture. "Indemnitee" has the meaning given to such term in Section 8.1(b). "Lien" means any mortgage, pledge, security interest, encumbrance, restriction, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Material Adverse Effect" has the meaning given to such term in Section 3.3. "New Notes" means the Company's 13% Senior Subordinated Notes due 2010 issued on the date hereof pursuant to the New Notes Purchase Agreement. 9 "New Notes Indenture" means the Indenture dated as of the date hereof, among the Company, as Issuer, the Guarantors party thereto and The Bank of New York, as Trustee. "New Notes Purchase Agreement" means the Purchase Agreement dated as of May 25, 2000, among the Company and the Initial Purchasers signatory thereto relating to the New Notes and the Note Warrants. "Note Warrants" means the warrants to purchase shares of Common Stock issued in connection with the New Notes Purchase Agreement. "Note Warrant Agreement" means the Note Warrant Agreement dated as of the date hereof between the Company and The Bank of New York, as Warrant Agent. "Permitted Holders" means each of (i) Chase Capital Partners and its Affiliates, (ii) CDI and its Affiliates, (iii) The Christena Karen H. Durham Trust, (iv) the Existing Management Stockholders and their Related Parties and (v) any Person acting in the capacity of an underwriter in connection with a public or private offering of the Company's Capital Stock. "Person" shall be construed as broadly as possible and shall include an individual or natural person, a partnership (including a limited liability partnership), a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental authority. "Preliminary Memorandum" means the preliminary offering memorandum dated May 11, 2000 used in connection with the offering of the New Notes. "Purchased Securities" has the meaning given to such term in Section 2.2. "Purchaser" has the meaning given to it in the caption to this Agreement and any Person succeeding to the rights of a Purchaser pursuant to the terms hereof. "Preferred Shares" means the shares of Series A Preferred Stock being purchased pursuant to this Agreement. "Recapitalization Agreement" means the Recapitalization Agreement dated as of March 31, 2000, between the Company, the selling stockholders listed therein and CDI, as amended and in effect on the date hereof. "Registration Rights Agreement" means the Registration Rights Agreement dated as of the date hereof among the Company, the Purchasers and the other stockholders and other securityholders of the Company party thereto, in substantially the form set forth in Exhibit A. "Related Parties" means with respect to a Person (a) that is a natural person (1) any spouse, parent or lineal descendant (including adopted children) of such Person or (2) the estate of such Person during any period in which such estate holds 10 Capital Stock of the Company for the benefit of any person referred to in clause (a)(1) and (b) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially owning an interest of more than 50% of which consist of such Person and/or such other Persons referred to in the immediately preceding clause (a). "Requisite Purchasers" means, as of any date of determination, Purchasers holding Preferred Shares representing at least sixty percent (60%) of the Preferred Shares then issued and then outstanding. "Restated Charter" means the Third Amended and Restated Articles of Incorporation of the Company, substantially in the form set forth in Exhibit B. "Restricted Securities" means the Purchased Securities, any securities issued with respect to the Purchased Securities by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, to the extent such Securities have not been sold to the public pursuant to (a) registration under the Securities Act or (b) Rule 144 (or similar or successor rule) promulgated under the Securities Act. "Restricted Subsidiary" shall have the meaning given to such term in the New Notes Indenture. "Security" has the meaning given to the term "security" in Section 2(1) of the Securities Act. "Securities Act" means the Securities Act of 1933, as amended, or any successor Federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time "Series A Preferred Stock" means the Company's Series A Cumulative Exchangeable Redeemable Preferred Stock, no par value. "Stockholders' Agreement" means the Stockholders' Agreement dated as of the date hereof among the Company and the stockholders and other securityholders of the Company party thereto, in substantially the form set forth in Exhibit C. "Subsidiary" or "subsidiary" means, with respect to any Person, any other Person of which more than fifty percent (50%) of the shares of stock or other interests entitled to vote in the election of directors or comparable Persons performing similar functions (excluding shares or other interests entitled to vote only upon the failure to pay dividends thereon or other contingencies) are at the time owned or controlled, directly or indirectly through one or more Subsidiaries, by such Person. Unless the context otherwise requires, the term "Subsidiary" means a Subsidiary of the Company. "Successor Company" has the meaning given to such term in Section 7.4. 11 "Transactions" has the meaning given to such term in the Final Memorandum. "Transaction Documents" means the Recapitalization Agreement, the New Notes Indenture, the Registration Rights Agreement (as defined in the New Notes Indenture), the New Notes, the New Notes Purchase Agreement, the Note Warrant Agreement, the Credit Agreement, the instruments and agreements executed and delivered in connection with the Credit Agreement and the other Documents. "Trustee" has the meaning given to it in the Indenture. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Warrant Agreement" means the Warrant Agreement dated as of the date hereof among the Company and the initial holders party thereto, in substantially the form set forth in Exhibit D. "Warrants" means the warrants to purchase shares of Common Stock issued pursuant to the Warrant Agreement. "Warrant Shares" has the meaning given to such term in the Warrant Agreement. 1.2 RULES OF CONSTRUCTION. The term this "Agreement" means this agreement together with all schedules and exhibits hereto, as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms hereof. The use in this Agreement of the term "including" means "including, without limitation." The words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole, including the schedules and exhibits, as the same may from time to time be amended, modified, supplemented or restated, and not to any particular section, subsection, paragraph, subparagraph or clause contained in this Agreement. All references to sections, schedules and exhibits mean the sections of this Agreement and the schedules and exhibits attached to this Agreement, except where otherwise stated. The title of and the section and paragraph headings in this Agreement are for convenience of reference only and shall not govern or affect the interpretation of any of the terms or provisions of this Agreement. The use herein of the masculine, feminine or neuter forms shall also denote the other forms, as in each case the context may require or permit. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement has been chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. Unless expressly provided otherwise, the measure of a period of one month or year for purposes of this Agreement shall be that date of the 12 following month or year corresponding to the starting date, provided that if no corresponding date exists, the measure shall be that date of the following month or year corresponding to the next day following the starting date. For example, one month following February 18 is March 18, and one month following March 31 is May 1. ARTICLE II PURCHASE AND SALE OF SHARES; CLOSING 2.1 RESTATED CHARTER. Prior to the Closing, the Company has filed with the Secretary of State of the State of Utah the Restated Charter. The Restated Charter designates 100,000 shares of Series A Preferred Stock and sets forth the powers, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof. 2.2 AUTHORIZATION OF ISSUANCE OF PURCHASED SECURITIES. The Company has authorized the issuance at the Closing of (i) an aggregate of 100,000 shares of Series A Preferred Stock and (ii) Warrants to purchase an aggregate of 43,242 shares of Common Stock (the "Purchased Securities"). 2.3 SALE OF PURCHASED SECURITIES. (a) At the Closing, subject to the satisfaction or waiver of the conditions set forth in Article V, the Company shall issue and sell to each Purchaser, and each Purchaser shall severally purchase from the Company, the numbers of Purchased Securities set forth opposite its name on Schedule I for the aggregate purchase price set forth opposite its name on such Schedule I. (b) The Purchasers and the Company hereby acknowledge and agree that the Preferred Shares are part of an "investment unit" under principles of Section 1273(c)(2) of the Code, which includes the Warrants. Notwithstanding anything to the contrary contained herein, the Purchasers and the Company hereby further acknowledge and agree that for United States federal income tax purposes the aggregate "issue price" of the Preferred Shares and the Warrants under principles of Section 1273(b) of the Code (and for purposes of comparable state and local income tax laws) shall equal $81,500,000 and $18,500,000, respectively. The Purchasers and the Company agree to use the foregoing issue prices for all income tax purposes with respect to this transaction. 2.4 CLOSING. The closing (the "Closing") hereunder with respect to the issuance and sale of the Purchased Securities being purchased by each Purchaser and the consummation of the related transactions contemplated hereby shall, subject to the satisfaction or waiver of the applicable conditions set forth in Section 5.1, take place at the offices of O'Sullivan Graev & Karabell, LLP at 30 Rockefeller Plaza, New York, New York 10112, on the 13 date of the closing of the transactions contemplated by the Recapitalization Agreement, or at such other time, date or place as agreed to by the parties (the "Closing Date"). 2.5 CLOSING DELIVERIES. At the Closing, the Company shall deliver to each Purchaser (i) one or more stock certificates, registered in such Purchaser's name, representing the Preferred Shares set forth opposite each such Purchaser's name on Schedule I hereto and (ii) one or more warrant certificates, registered in such Purchaser's name, representing the Warrants set forth opposite each such Purchaser's name on Schedule I hereto, against receipt by the Company of a wire transfer of immediately available funds to an account or accounts designated by the Company, of an aggregate amount equal to the purchase price for the Purchased Securities being purchased by such Purchaser at the Closing, net of the Closing Fee payable by the Company to such Purchaser in accordance with Section 2.7 below. 2.6 USE OF PROCEEDS. The proceeds received by the Company from the sale of the Purchased Securities shall be used by the Company solely as set forth under "Sources and Uses of Funds" in the Final Memorandum. 2.7 CLOSING FEE. At the Closing, each Purchaser shall receive a closing fee (the "Closing Fee") equal to 1.5% of the aggregate amount of the purchase price for the Purchased Securities being purchased by such Purchaser at the Closing. The Closing Fee shall be deducted from the aggregate purchase price payable by each Purchaser. ARTICLE III REPRESENTATIONS AND WARRANTIES ABOUT THE COMPANY The Company represents and warrants to, and agrees with, the Purchasers on and as of the date hereof and the Closing Date that: 3.1 OFFERING MEMORANDUM. Each of the Preliminary Offering Memorandum and the Final Memorandum, as of its respective date, did not, and on the Closing Date the Final Memorandum will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty as to information contained in or omitted from the Preliminary Offering Memorandum or the Final Memorandum in reliance upon and in conformity with written information, if any, relating to the Purchasers furnished to the Company by or on behalf of any Purchaser specifically for use therein. The statistical and market-related data included in the Final Memorandum are based on or derived from 14 sources, including management estimates, that the Company believes to be reliable. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Preliminary Offering Memorandum or the Final Memorandum has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith. 3.2 PRIVATE SALE. Assuming (i) that the Purchased Securities are issued, sold and delivered under the circumstances contemplated by this Agreement and (ii) the accuracy of the representations and warranties of the Purchasers contained in Article IV and their compliance with the agreements set forth herein, it is not necessary, in connection with the issuance and sale of the Purchased Securities to the Purchasers to register such Securities under the Securities Act. 3.3 ORGANIZATION ETC. The Company and each of its subsidiaries have been duly incorporated or formed and are validly existing as corporations or limited liability companies in good standing under the laws of their respective jurisdictions of incorporation or formation, are duly qualified to do business and are in good standing as foreign corporations or limited liability companies in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, have a material adverse effect on the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). Huntsman Edison Films Corporation is the only Subsidiary which is a significant subsidiary (as defined in Section 1.02(w) of Regulation S-X under the Securities Act and the Exchange Act). 3.4 CAPITALIZATION. (a) The authorized capital stock of the Company immediately after the Closing shall consist of: (i) 10,000,000 duly authorized shares of Common Stock, of which (i) 548,508 shares shall be duly and validly issued and outstanding, fully paid and nonassessable, with no personal liability attached to the ownership thereof, all of which shall be held of record by the Persons and in the amounts set forth on Schedule 3.4(a), (ii) no shares shall be held by the Company as treasury shares, (iii) 8,902 shares shall be duly and validly reserved for issuance pursuant to outstanding options, (iv) 14,954 shares shall be duly and validly reserved for issuance pursuant to options or as restricted stock that may be granted or sold after the date hereof to employees of the Company pursuant to the Company's 2000 Stock Incentive Plan, (v) 43,242 shares shall be duly and validly reserved 15 for issuance pursuant to the Warrants and (vi) 18,532 shares shall be duly and validly reserved for issuance pursuant to the Note Warrants. (ii) 200,000 duly authorized shares of Preferred Stock, 100,000 of which shall be designated Series A Cumulative Exchangeable Redeemable Preferred Stock and shall be duly and validly issued and outstanding, fully paid and nonassessable, with no personal liability attached to the ownership thereof, all of which shall be held of record by the Purchasers and in the amounts set forth on Schedule I, free and clear of all Liens, other than Liens held by Persons claiming by, through or under the Purchasers, Liens imposed by the Documents and restrictions under federal or state securities laws. (b) All Warrant Shares, if and when issued in accordance with the Warrants, will be duly and validly issued and outstanding, fully paid and nonassessable, with no personal liability attached to the ownership thereof. (c) Other than the Warrants and the Note Warrants and the option granted to Jack Knott to purchase 8,902 shares of Common Stock, there are no outstanding warrants, options, agreements, convertible securities and other commitments pursuant to which the Company is or may become obligated to issue, sell or otherwise transfer any equity Securities of the Company. (d) Except as contemplated by the Stockholders' Agreement, there are no preemptive rights, rights of first refusal or other similar rights to purchase or otherwise acquire shares of capital stock or other equity Securities of the Company pursuant to any Applicable Law, any Fundamental Document of the Company or any agreement to which the Company is a party or may be bound. (e) Except as contemplated by the Documents and the Fundamental Documents of the Company, there is no Lien (including any right of first refusal, right of first offer, proxy, voting trust or voting agreement) with respect to the sale or voting of any equity Securities of the Company (whether outstanding or issuable upon the conversion, exchange or exercise of outstanding Securities). (f) Other than as required by the Restated Charter or the Stockholders' Agreement, there are no obligations to redeem, repurchase or otherwise acquire shares of capital stock or other equity Securities of the Company pursuant to any Applicable Law, any Fundamental Documents of the Company or any agreement to which the Company is a party or may be bound. (g) Except as contemplated by the Registration Rights Agreement, no Person has any right to cause the Company to effect the registration under the Securities Act of any shares of Common Stock or any other equity Securities of the Company. 3.5 AUTHORIZATION, ETC. The Company and each of its subsidiaries has full right, power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a 16 party and to perform their respective obligations hereunder and thereunder; and all requisite action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents to which the Company or any of its subsidiaries is a party and the consummation of the transactions contemplated thereby have been duly and validly taken. 3.6 EXECUTION; ENFORCEABILITY. This Agreement and each of the other Documents has been duly executed and delivered by the Company and constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent that (i) such enforceability may be subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and (B) general equitable principles (whether considered in a proceeding in equity or at law) and (ii) the validity or enforceability of rights to indemnification and contribution under the Registration Rights Agreement may be limited by Federal or state securities laws or regulations or the public policy underlying such laws or regulations. 3.7 NO CONFLICT; CONSENTS. The execution, delivery and performance by the Company and each of its subsidiaries of each of the Transaction Documents to which such entity is a party and the consummation of the transactions contemplated by the Transaction Documents will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or, except for those permitted under the Credit Agreement, result in the creation or imposition of any Lien upon any property or assets of the Company or any of its subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, except for such conflict, breach or violation which would not, singularly or in the aggregate, have a Material Adverse Effect, (ii) result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or (iii) result in any violation of any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets (assuming compliance by the Purchasers with their representations, warranties and agreements set forth in Article IV hereof, except for such conflict, breach or violation which would not, singularly or in the aggregate, have a Material Adverse Effect; and (assuming compliance by the Purchasers with their representations, warranties and agreements set forth in Article IV hereof) no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by the Company and each of its subsidiaries of each of the Transaction Documents to which each is a party and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, 17 authorizations, filings, registrations or qualifications (i) which shall have been obtained or made on or prior to the Closing Date, (ii) in the case of performance or compliance with the Registration Rights Agreement and the Registration Rights Agreement (as defined in the New Notes Indenture), such as may be required to be obtained or made under the Securities Act and the Trust Indenture Act of 1939, as amended (iii) as may be required under state or foreign securities and blue sky laws and the rules and regulations of the National Association of Securities Dealers, Inc. and (iv) as may be required to perfect Liens granted under the Credit Agreement. 3.8 FINANCIAL REPORTS, ETC. To the best knowledge of the Company, each of Arthur Andersen LLP and Deloitte & Touche LLP are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants and its interpretations and rulings thereunder. The historical financial statements (including the related notes) contained in the Final Memorandum have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby and fairly present the financial position of the entities purported to be covered thereby at the respective dates indicated and the results of their operations and their cash flows for the respective periods indicated; and the financial information contained in the Final Memorandum under the headings "Summary--Summary Historical and Pro Forma Financial Data", "Capitalization", "Selected Financial Data", "Unaudited Pro Forma Financial Data", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Management--Executive Compensation" are derived from the accounting records of the Company and its subsidiaries and accurately present in all material respects the information purported to be shown thereby. The pro forma financial information contained in the Final Memorandum has been prepared on a basis consistent with the historical financial statements contained in the Final Memorandum (except for the pro forma adjustments specified therein), includes all material adjustments to the historical financial information required by Rule 11-02 of Regulation S-X under the Securities Act and the Exchange Act), to reflect the transactions described in the Final Memorandum, gives effect to assumptions made on a reasonable basis and fairly presents the historical and proposed transactions contemplated by the Final Memorandum and the Transaction Documents. The other historical financial information and data concerning the Company and its subsidiaries included in the Final Memorandum are accurately presented in all material respects. The projected financial information delivered to the Purchasers on or prior to the date hereof was prepared in good faith based upon assumptions believed to be reasonable at the time. 3.9 LITIGATION. There are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, (A) singularly or in the aggregate, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect or (B) question the validity or enforceability 18 of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and to the best knowledge of the Company and each of its subsidiaries, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. 3.10 ADVERSE ACTIONS. To the best knowledge of the Company and each of its subsidiaries, (A) no action has been taken and no statute, rule, regulation or order has been enacted, adopted or issued by any governmental agency or body which prevents the issuance of the Purchased Securities or suspends the sale of the Purchased Securities in any jurisdiction; and (B) no injunction, restraining order or order of any nature by any federal, state or foreign court of competent jurisdiction has been issued with respect to the Company or any of its subsidiaries which would prevent or suspend the issuance or sale of the Purchased Securities in any jurisdiction; no action, suit or proceeding is pending against or, to the best knowledge of the Company and each of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries before any court or arbitrator or any governmental agency, body or official, domestic or foreign, which could reasonably be expected to interfere with or adversely affect the issuance of the Purchased Securities or in any manner draw into question the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto. 3.11 NO VIOLATION OF CHARTERS, ETC. Neither the Company nor any of its subsidiaries, is (i) in violation of its charter or by-laws (or similar organizational document), (ii) in default, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (iii) in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject, except in the case of clauses (ii) and (iii) for any such default or violation which would not, singularly or in the aggregate, have a Material Adverse Effect. 3.12 PERMITS. The Company and each of its subsidiaries possess all material licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with, the appropriate federal, state or foreign regulatory agencies or bodies which are necessary or desirable for the ownership of their respective properties or the conduct of their respective businesses as described in the Final Memorandum, except where the failure to possess or make the same would not, singularly or in the aggregate, have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received notification of any revocation or modification of any such license, certificate, authorization or permit or has any reason to believe that any such license, certificate, authorization or permit will not be renewed in the ordinary course. 19 3.13 TAXES. Each of Company and each of its subsidiaries has timely filed or caused to be filed all federal, state, local and foreign income and franchise tax returns and reports required to have been filed and has paid or caused to be paid all taxes required to have been paid by it, except (i) any taxes that are being contested in good faith by appropriate proceedings and for which the Company or such subsidiary, as applicable, has set aside on its books adequate reserves or (ii) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. 3.14 INVESTMENT COMPANY; HOLDING COMPANY. Neither the Company nor any of its subsidiaries is (i) an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder or (ii) a "holding company" or a "subsidiary company" of a holding company or an "affiliate" thereof within the meaning of the Public Utility Holding Company Act of 1935, as amended. 3.15 ACCOUNTING CONTROLS. The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 3.16 INSURANCE. The Company and each of its subsidiaries maintains insurance covering their respective properties, operations, personnel and businesses against loss or damage of the kinds customarily insured against by entities engaged in the same or similar businesses as the Company and its subsidiaries, and such insurance is of such type and in such amounts in accordance with customary industry practice. 3.17 INTELLECTUAL PROPERTY. The Company and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses; and the conduct of their respective businesses will not conflict with, and the Company and its subsidiaries have not received any notice of any claim of 20 conflict with, any such rights of others, except for such conflicts which would not, singularly or in the aggregate, have a Material Adverse Effect. 3.18 TITLE TO ASSETS ETC. The Company and each of its subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real and personal property which are material to the business of the Company and its subsidiaries taken as a whole, in each case free and clear of all Liens, claims and defects and imperfections of title except (A) for Liens permitted under the Credit Agreement and (B) such as (i) do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or (ii) could not reasonably be expected to have a Material Adverse Effect. 3.19 LABOR MATTERS. No labor disturbance by or dispute with the employees generally of the Company or any of its subsidiaries exists or, to the best knowledge of the Company and its subsidiaries, is contemplated or threatened. 3.20 ERISA MATTERS. No "prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"), or Section 4975 of the Code) or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan of the Company or any of its subsidiaries which could reasonably be expected to have a Material Adverse Effect; each such employee benefit plan is in compliance in all material respects with applicable law, including ERISA and the Code; the Company and each of its subsidiaries have not incurred and do not expect to incur material liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any pension plan for which the Company or any of its subsidiaries would have any liability; and each such pension plan that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss of such qualification. 3.21 ENVIRONMENTAL MATTERS. There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission or other release of any kind of toxic or other wastes or other hazardous substances by, due to or caused by the Company or any of its subsidiaries (or, to the best knowledge of the Company and its subsidiaries, any other entity (including any predecessor) for whose acts or omissions the Company or any of its subsidiaries is or could reasonably be expected to be liable) upon any of the property now or previously owned or leased by the Company or any of its subsidiaries, or upon any other property, in 21 violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit or which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability that could not reasonably be expected to have, singularly or in the aggregate with all such violations and liabilities, a Material Adverse Effect; and there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company or any of its subsidiaries has knowledge, except for any such disposal, discharge, emission or other release of any kind which could not reasonably be expected to have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse Effect. 3.22 ILLEGAL PAYMENTS. Neither the Company nor, to the best knowledge of the Company and each of its subsidiaries, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. 3.23 SOLVENCY. On and immediately after the Closing Date, the Company (after giving effect to the Transactions described in the Final Memorandum) will be Solvent. As used in this paragraph, the term "Solvent" means, with respect to a particular date, that on such date (i) the present fair market value (or present fair saleable value) of the assets of the Company is not less than the total amount required to pay the probable liabilities of the Company on its total existing debts and liabilities (including contingent liabilities) as they become absolute and matured, (ii) the Company is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and commitments as they mature and become due in the normal course of business, (iii) assuming the consummation of the Transactions described in the Final Memorandum, the Company is not incurring debts or liabilities beyond its ability to pay as such debts and liabilities mature and (iv) the Company is not engaged in any business or transaction, and is not about to engage in any business or transaction, for which its property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which the Company is engaged. In computing the amount of such contingent liabilities at any time, it is intended that such liabilities will be computed at the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. 22 3.24 BROKERS. Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company or the Purchasers for a brokerage commission, finder's fee or like payment in connection with the offering and sale of the Preferred Shares and the Warrants. 3.25 ABSENCE OF CHANGES. Since the date as of which information is given in the Final Memorandum, except as otherwise stated therein, (i) there has been no material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of the Company or any of its subsidiaries, whether or not arising in the ordinary course of business, (ii) none of the Company or any of its subsidiaries has incurred any material liability or obligation, direct or contingent, other than in the ordinary course of business, (iii) none of the Company or any of its subsidiaries has entered into any material transaction other than in the ordinary course of business and (iv) there has not been any material change in the long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS Each Purchaser represents and warrants severally, and not jointly as to any other Purchaser, as follows: 4.1 AUTHORIZATION OF THE DOCUMENTS. Such Purchaser has all requisite power and authority to execute, deliver and perform the Documents to which it is a party and the transactions contemplated thereby, and the execution, delivery and performance by such Purchaser of the Documents to which it is a party have been duly authorized by all requisite action by such Purchaser. This Agreement has been duly executed and delivered by such Purchaser and this Agreement constitutes and, when executed and delivered by such Purchaser (assuming the due authorization, execution and delivery by the other parties thereto), each other Document to which such Purchaser is a party will constitute, a valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws and subject to general principles of equity and (ii) the validity or enforceability of rights to indemnification and contribution under the Registration Rights Agreement may be limited by Federal or state securities laws or regulations or the public policy underlying such laws or regulations. 23 4.2 INVESTMENT REPRESENTATIONS. Solely for establishing that the sale or issuance of the Purchased Securities to such Purchaser is exempt from the registration requirements of the Securities Act and comparable provisions of state blue-sky laws and not in any way to mitigate the responsibility or liability of the Company for any breach of the representations and warranties made by it in this Agreement, on which such Purchaser is relying in full in connection with its decision to invest in the Company: (a) Such Purchaser is acquiring the Purchased Securities for its own account, for investment and not with a view to the distribution thereof in violation of the Securities Act or applicable state securities laws; (b) Such Purchaser (A) understands that (i) the Purchased Securities have not been registered under the Securities Act or applicable state securities laws by reason of their issuance by the Company in a transaction exempt from the registration requirements of the Securities Act and applicable state securities laws and (ii) the Purchased Securities and the Warrant Shares must be held by such Purchaser indefinitely unless a subsequent disposition thereof is registered under the Securities Act and applicable state securities laws or is exempt from such registration and (B) has had the opportunity to ask questions of, and receive answers from, the Company and its management relating to the business and financial condition of the Business; (c) Such Purchaser further understands that the exemption from registration afforded by Rule 144 (the provisions of which are known to such Purchaser) promulgated under the Securities Act depends on the satisfaction of various conditions, and that, if applicable, Rule 144 may afford the basis for sales of Purchased Securities and Warrant Shares in limited amounts; (d) Such Purchaser has not employed any broker or finder in connection with the transactions contemplated by this Agreement; and (e) Such Purchaser is an "accredited investor" (as defined in Rule 501(a) of Regulation D promulgated under the Securities Act). Such Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the risks and merits of this investment. Such Purchaser's representations in this subsection shall in no way limit the enforceability of any representations made by the Company in any of the Documents to which it is a party. ARTICLE V CONDITIONS TO CLOSING 5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS. The obligation of each Purchaser to purchase and pay for the Securities to be purchased hereunder at the Closing is subject to the satisfaction of the following conditions precedent (unless waived by such Purchaser): 24 (a) The Company shall have filed the Restated Charter with and such filing shall have been accepted by the Secretary of State of the State of Utah and the Purchasers shall have received reasonably satisfactory evidence of such filing; (b) The Company shall have duly issued and delivered to each Purchaser one or more stock certificates for the Preferred Shares, and one or more warrant certificates for the Warrants, purchased by such Purchaser; (c) The Company shall have duly executed and delivered to each Purchaser the Registration Rights Agreement and the Stockholders' Agreement; (d) The Company shall have performed its obligations under, and shall have complied with, all the covenants and agreements set forth in this Agreement and the other Documents and all representations and warranties contained in Article III shall be true and correct as of the date hereof and at and as of the Closing Date with the same effect as if such representations and warranties had been made at and as of the Closing Date, and each Purchaser shall have received a certificate to that effect signed by an officer of the Company; (e) Each Purchaser shall have received an opinion from Winston & Strawn and Stoel Rives (each, counsel to the Company), in a form reasonably acceptable to the Purchasers; (f) Each Purchaser shall have received a certificate from the Secretary or an Assistant Secretary of the Company, dated as of the Closing Date, certifying (i) that true and complete copies of the Fundamental Documents of the Company as in effect on the Closing Date are attached thereto, (ii) as to the incumbency and genuineness of the signatures of each Person executing this Agreement and the other Documents on behalf of the Company and (iii) the genuineness of the resolutions (attached thereto) of the board of directors or similar governing body of the Company authorizing the execution, delivery and performance of this Agreement and the other Documents to which the Company is a party and the consummation of the transactions contemplated hereby and thereby; and (g) Each of the conditions to the obligations of CDI under the Recapitalization Agreement shall have been satisfied and each of the conditions to the obligations of the "Initial Purchasers" under the New Notes Purchase Agreement and "the Lenders" under Credit Agreement shall have been satisfied without waiver or amendment (except as disclosed to and reasonably satisfactory to the Purchasers) and the Purchasers shall be satisfied that the closings under such agreements will take place concurrently with the Closing. (h) Each of the Documents shall be in full force and effect and no term or condition thereof shall have been amended, waived or otherwise modified without the prior written consent of each Purchaser. (i) The issuance and sale of the Purchased Securities to the other Purchasers shall have been consummated simultaneously with the Closing. 25 5.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligation of the Company to issue the Purchased Securities at the Closing is subject to the satisfaction of the following conditions precedent (unless waived by the Company): (a) Each Purchaser shall have delivered to the Company by wire transfer, of immediately available funds to an account or accounts designated by the Company, an aggregate amount equal to the purchase price for the Purchased Securities being purchased by such Purchaser, net of the Closing Fee payable by the Company to such Purchaser in accordance with Section 2.7; and (b) The Company shall be satisfied that the closings under the Recapitalization Agreement, the New Notes Purchase Agreement and the Credit Agreement shall take place concurrently with the Closing. (c) Each Purchaser shall have duly executed and delivered the Registration Rights Agreement and the Stockholders' Agreement. ARTICLE VI TRANSFER OF SECURITIES 6.1 RESTRICTION ON TRANSFER. The Restricted Securities shall not be transferable except upon the conditions specified in this Article VI, which conditions are intended to insure compliance with the provisions of the Securities Act in respect of the transfer thereof. 6.2 RESTRICTIVE LEGENDS. (a) Each certificate evidencing shares of Series A Preferred Stock which are Restricted Securities and each certificate for any such securities issued to subsequent transferees of any such certificate shall (unless otherwise permitted by the provisions of Section 6.3 hereof) be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE 26 SECURITIES PURCHASE AGREEMENT DATED AS OF MAY 31, 2000, AMONG THE ISSUER HEREOF AND CERTAIN OTHER SIGNATORIES THERETO. THE TERMS OF SUCH SECURITIES PURCHASE AGREEMENT INCLUDE, AMONG OTHER THINGS, RESTRICTIONS ON TRANSFER. A COPY OF THE SECURITIES PURCHASE AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER HEREOF TO THE HOLDER OF RECORD OF THIS CERTIFICATE UPON WRITTEN REQUEST." (b) Each certificate evidencing Warrants which are Restricted Securities and each certificate for any such securities issued to subsequent transferees of any such certificate shall (unless otherwise permitted by the provisions of Section 6.3 hereof) be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE SECURITIES PURCHASE AGREEMENT AND A STOCKHOLDERS' AGREEMENT, EACH DATED AS OF MAY 31, 2000, AMONG THE ISSUER HEREOF AND CERTAIN OTHER SIGNATORIES THERETO. THE TERMS OF SUCH SECURITIES PURCHASE AGREEMENT AND STOCKHOLDERS' AGREEMENT INCLUDE, AMONG OTHER THINGS, RESTRICTIONS ON TRANSFER. A COPY OF THE SECURITIES PURCHASE AGREEMENT AND STOCKHOLDERS' AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER HEREOF TO THE HOLDER OF RECORD OF THIS CERTIFICATE UPON WRITTEN REQUEST." 6.3 NOTICE OF TRANSFER. (a) The holder of any Restricted Securities, by acceptance thereof agrees, prior to any transfer of any Restricted Securities, to give written notice to the Company of such holder's intention to effect such transfer and to comply in all other respects with the provisions of this Section 6.3. Each such notice shall describe the manner and circumstances of the proposed transfer and shall be accompanied, if reasonably requested by the Company, by the written opinion, addressed to the Company, of counsel for the holder of Restricted Securities, as to whether in the opinion of such counsel (which opinion and counsel shall be reasonably satisfactory to the Company and which counsel 27 may be the in-house counsel of such holder) such proposed transfer involves a transaction requiring registration of such Restricted Securities under the Securities Act; provided, however, that (i) in the case of a holder of Restricted Securities which is a partnership or a limited liability company, no such opinion of counsel shall be necessary for a transfer by such holder of Restricted Securities to a partner or member of such holder of Restricted Securities, or a retired partner or member of such holder who retires after the date hereof, or the estate of any such partner or member or retired partner or member, if in each case the transferee agrees in writing to be subject to the terms of this Article VI to the same extent as if such transferee were originally a signatory to this Agreement, (ii) in the case of a holder of Restricted Securities which is a corporation or a limited liability company, no such opinion of counsel shall be necessary for a transfer by such holder of Restricted Securities to an Affiliate, officer, director, member or manager of such entity and (iii) no such opinion shall be required in connection with a transfer pursuant to Rule 144 (as amended from time to time) promulgated under the Securities Act (or successor rule thereto), provided, that the Company, shall be provided with customary written representations relating to such transaction. (b) If in the opinion of such counsel (if such opinion is required hereunder) the proposed transfer of Restricted Securities may be effected without registration under the Securities Act, the holder of Restricted Securities shall thereupon be entitled to transfer Restricted Securities in accordance with the terms of the notice delivered by it to the Company. (c) Each certificate or other instrument evidencing the securities issued upon the transfer of any Restricted Securities (and each certificate or other instrument evidencing any untransferred balance of such securities) shall bear the legend set forth in Section 6.2 hereof unless (i) in the opinion of such counsel registration of future transfer is not required by the applicable provisions of the Securities Act or (ii) the Company shall have waived the requirement of such legends; provided, however, that such legend shall not be required on any certificate or other instrument evidencing the securities issued upon such transfer in the event such transfer shall be made in compliance with the requirements of Rule 144 (as amended from time to time) promulgated under the Securities Act (or successor rule thereto). 6.4 TRANSFER PURSUANT TO RULE 144. The Company agrees to make publicly available the current information with respect to the Company that is required by Rule 144(c) under the Securities Act and otherwise to take any other action or to execute any certificates necessary to permit a transfer by any holder of Restricted Securities to qualify for the exemption set forth in Rule 144. Without limiting the foregoing, if such information is not publicly available, then, upon a holder's request, the Company will provide such information to such holder or any prospective purchaser designated by such holder. 28 6.5 MINIMUM TRANSFER If the provisions of this Article VI have been complied with, any Purchaser may transfer Preferred Shares subject to a minimum transfer amount of 5,000 shares (subject to adjustment for splits, reverse splits and other like events) until such time as the Purchaser holds less than 5,000 shares, in which case the Purchaser shall not transfer less than all the shares it holds. ARTICLE VII COVENANTS OF THE COMPANY 7.1 TRANSACTIONS WITH AFFILIATES. (a) The Company will not and will not permit any Restricted Subsidiary to, directly or indirectly, enter into or conduct any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless such transaction is on terms: (i) that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate, (ii) that, in the event such Affiliate Transaction involves an aggregate amount in excess of five million dollars ($5,000,000), (A) are set forth in writing, and (B) except as provided in clause (a)(iii) below, have been approved by a majority of the members of the Board having no personal stake in such Affiliate Transaction (if any such members exist), and (iii) that, in the event (A) such Affiliate Transaction involves an amount in excess of ten million dollars ($10,000,000) or (B) if there are no members of the Board having no personal stake in such Affiliate Transaction and such Affiliate Transaction involves an aggregate amount in excess of five million dollars ($5,000,000), have been determined by a nationally recognized appraisal, accounting or investment banking firm to be fair, from a financial standpoint, to the Company and its Restricted Subsidiaries. (b) The provisions of the foregoing paragraph (a) will not prohibit: (i) any payment or distribution permitted to be paid pursuant to Section 3.3(b)(i) of the Restated Charter; (ii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, options to purchase Capital Stock of the Company and equity 29 ownership, restricted stock plans, long-term incentive plans, stock appreciation rights plans, participation plans or similar employee benefits plans approved by the Board, (iii) the grant of options (and the exercise thereof) to purchase Capital Stock of the Company or similar rights to employees and directors of the Company pursuant to plans approved by the Board; (iv) loans or advances to officers, directors or employees in the ordinary course of business, but in any event not to exceed two million dollars ($2,000,000) in the aggregate outstanding at any one time, (v) the payment of reasonable fees to directors of the Company and its Subsidiaries who are not employees of the Company or its Subsidiaries and other reasonable fees, compensation, benefits and indemnities paid or entered into by the Company or its Restricted Subsidiaries in the ordinary course of business to or with the officers, directors or employees of the Company and its Restricted Subsidiaries, (vi) any transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries, (vii) the provision by Persons who may be deemed Affiliates or stockholders of the Company (other than Chase Capital Partners and Persons controlled by Chase Capital Partners) of investment banking, commercial banking, trust, lending or financing, investment, underwriting, placement agent, financial advisory or similar services to the Company or its Subsidiaries performed after the Closing Date, provided that the terms are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate (as determined in good faith by a majority of the members of the Board who do not have a material direct or indirect financial interest in or with respect to the transaction being considered), (viii) sales of Capital Stock to Permitted Holders approved by a majority of the members of the Board who do not have a material direct or indirect financial interest in or with respect to the transaction being considered, or (ix) the existence or performance by the Company or any Restricted Subsidiary under any agreement as in effect as of the Closing Date (including the Recapitalization Agreement and the agreements to be entered into pursuant thereto or any amendment thereto) or replacement agreement therefor or any transaction contemplated thereby (including pursuant to any amendment thereto or replacement agreement therefor) so long as such amendment or replacement is not more disadvantageous to the Purchasers in any material respect than the original agreement as in effect on the Closing Date. 30 7.2 INFORMATION RIGHTS. The Company will furnish to each Purchaser: (a) within 90 days after the end of each fiscal year of the Company, its audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Arthur Andersen LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit other than as to Unrestricted Subsidiaries (as defined in the Credit Agreement)) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Company and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Company, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its financial officers as presenting fairly in all material respects the financial condition and results of operations of the Company and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a financial officer of the Company (i) certifying as to whether an Event of Noncompliance has occurred, or a default or event of default has occurred under the New Notes Indenture or the Credit Agreement and, if an Event of Noncompliance or a default or event of default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto and (ii) stating whether any change in GAAP or in the application thereof has occurred since the date of the Company's audited financial statements referred to in Section 3.8 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate. (d) at least 30 days prior to the commencement of each fiscal year of the Borrower, a consolidated budget for such fiscal year (in the form provided to the Lenders (as defined in the Credit Agreement), including a projected consolidated balance sheet and related statements of projected operations and cash flow as of the end of and for such fiscal year) and, promptly when available, any significant revisions of such budget; (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or 31 any Subsidiary with the Commission or with any national securities exchange, as the case may be; (f) promptly following the commencement thereof, notice and description in reasonable detail of any litigation or proceeding to which the Company or any of its Subsidiaries is a party, except for any litigation or proceeding which could not reasonably be expected to result in a Material Adverse Effect; (g) promptly following the occurrence thereof, notice and a description in reasonable detail of any Material Adverse Effect; (h) as promptly as practicable (but in any event no earlier than required under the Credit Agreement or New Notes Indenture, as the case may be), notice of any Default (as defined in the Credit Agreement) under the Credit Agreement or an Event of Default (as defined in the New Notes Indenture) under the New Notes Indenture; and (i) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Company or any Subsidiary, or compliance with the terms of any Document, as or any Purchaser may reasonably request. 7.3 BOOKS; INSPECTION RIGHTS The Company will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made in all material respects of all dealings and transactions in relation to its business and activities. The Company will, and will cause each of its Subsidiaries to, permit any representatives designated by any Purchaser, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants (and the Company shall be provided the opportunity to participate in any such discussions with such independent accountants), all at such reasonable times and as often as reasonably requested. 7.4 MERGER AND CONSOLIDATION (a) The Company will not consolidate or consummate a share exchange with, or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, unless, on or prior to the consummation of such transaction, all the shares of Series A Preferred Stock are redeemed in accordance with the Restated Charter, or unless: (i) the resulting, surviving or transferee Person (the "Successor Company") will be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia; (ii) (x) the Successor Company (if not the Company) shall expressly assume, by an amendment to this Agreement in form and substance 32 satisfactory to the Requisite Purchasers, all the obligations of the Company hereunder and (y) the Series A Preferred Stock shall be converted or exchanged for and shall become shares of such Successor Company, having in respect of such Successor Company the same powers, preferences and relative participating, optional or other special rights, and the qualifications, limitations or restrictions thereto, that the Series A Preferred Stock had immediately prior to such transaction; (iii) immediately after giving effect to such transaction (and treating any indebtedness which becomes an obligation of the Successor Company or any Restricted Subsidiary as a result of such transaction as having been incurred by the Successor Company or such Restricted Subsidiary at the time of such transaction), no default or event of default shall have occurred and be continuing under the Credit Agreement or the New Notes Indenture and no Event of Noncompliance shall have occurred and be continuing; (iv) immediately after giving effect to such transaction, the Successor Company would be able to incur an additional $1.00 of Indebtedness under Section 4.03(a) of the New Notes Indenture as in effect on the date hereof; and (v) the Company shall have delivered to the holders of the Series A Preferred Stock an Officers' Certificate stating that such consolidation, share exchange, merger, transfer or lease comply with this Section 7.4. (b) The Successor Company shall succeed to, and be substituted for, and may exercise every right and power of, the Company to the extent set forth in this Agreement, but in the case of a lease of all or substantially all its assets, the Company shall not be released from its obligations with respect to the Series A Preferred Stock. Notwithstanding clauses (iii) and (iv) above, (1) any Subsidiary of the Company may consolidate or consummate a share exchange with, merge into or transfer all or part of its properties and assets to the Company and (2) the Company may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction to realize tax or other benefits. 7.5 PAYMENTS FOR CONSENTS. If the Company agrees to make any payment to any Purchaser in exchange for the granting of any waiver or consent under, or the entering into of any amendment to, the Restated Charter or this Agreement or the Warrant Agreement, the Company shall offer to all Purchasers to make payments, ratably based on the number of Preferred Shares or Warrants, as applicable, held, to all Purchasers who agree so such waiver, consent or amendment. 7.6 AMENDMENT OF RESTATED CHARTER. The Company shall not amend Section 3.3(b)(vii)(4)(B) of the Restated Charter without the affirmative written consent or approval of holders of record of the Series A 33 Preferred Stock holding not less than 90% of the then outstanding shares of Series A Preferred Stock. ARTICLE VIII MISCELLANEOUS 8.1 EXPENSES, ETC. (a) The Company shall pay (i) all reasonable out-of-pocket expenses incurred by CDI, including the reasonable fees, charges and disbursements of counsel for CDI, in connection with the preparation the Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) reasonable fees, charges and disbursements of counsel for the Purchasers other than CDI, in connection with the review and negotiation of the Documents, (iii) reasonable fees, charges and disbursements of one counsel for the Purchasers other than CDI, in connection with any amendments, modifications or waivers of the provisions of the Documents (iv) any stamp or similar taxes which may be determined to be payable in connection with the execution, delivery or performance of the Documents or any modification, amendment or alteration of the terms or provisions of the Documents and any issue taxes in respect of the issuance of any Purchased Securities to the Purchasers and (v) all out-of-pocket expenses incurred by the Purchasers including the fees, charges and disbursements of any counsel for the Purchasers, in connection with the enforcement or protection of its rights in connection with the Documents, including its rights under this Section, or in connection with the Purchased Securities, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Securities. (b) The Company shall indemnify the Purchasers and each of their respective Affiliates (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including, without limitation and as incurred, reasonable costs of investigating, preparing or defending any such claim or action, whether or not such Indemnitee is a party thereto), including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution, delivery or performance of any Document or the consummation of the Transactions or any other transactions contemplated hereby, or (ii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or willful misconduct of such Indemnitee or any Affiliate of such Indemnitee (or of any officer, director, employee, advisor or agent of such Indemnitee or any such Indemnitee's Affiliates) or to the extent such damages constitute special, indirect or consequential damages (as opposed to direct or actual damages); and provided further that, for the 34 purposes of the foregoing proviso, the Company and its Subsidiaries shall be deemed not to be Affiliates of any Purchaser. (c) To the extent permitted by applicable law, the Company shall not assert, and it hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any other Document, the Transactions or the use of the proceeds of the Purchased Securities (d) All amounts due under this Section shall be payable promptly after written demand therefor. 8.2 FURTHER ASSURANCES. The Company shall duly execute and deliver, or cause to be duly executed and delivered, at its own cost and expense, such further instruments and documents and to take all such action, in each case as may be necessary or proper in the reasonable judgment of the Purchasers to carry out the provisions and purposes of the Agreement and the other Documents. 8.3 SPECIFIC PERFORMANCE; REMEDIES. Damages in the event of breach of this Agreement or any other Document by the Company would be difficult, if not impossible, to ascertain, and it is therefore agreed that the Purchasers, in addition to and without limiting any other remedy or right it may have (other than the limitations on remedies specified in Section 3.3(b)(viii) of the Restated Charter), will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof and thereof, and the Company hereby waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. Subject to the limitations set forth in Section 3.3(b)(viii) of the Restated Charter, the existence of this right to specific performance will not preclude the Purchasers from pursuing any other rights and remedies at law or in equity which the Purchasers may have. 8.4 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit of the Company and the Purchasers and their respective successors, permitted assigns, heirs and personal representatives. Upon the transfer of any Purchased Securities in accordance with the terms of this Agreement, the transferee shall be bound by, and entitled to the benefits of, this Agreement with respect to such transferred Purchased Securities in the same manner as the transferring Purchaser. 8.5 ENTIRE AGREEMENT. This Agreement and the other writings referred to herein or delivered pursuant hereto which form a part hereof contain the entire agreement among the parties with 35 respect to the subject matter hereof and thereof and supersede all prior and contemporaneous arrangements or understandings with respect thereto. 8.6 NOTICES. All notices, claims, requests, demands or other communications which are required or otherwise delivered hereunder shall be deemed to be sufficient and duly given if contained in a written instrument (i) personally delivered or sent by telecopier, (ii) sent by nationally-recognized overnight courier guaranteeing next Business Day delivery or (iii) sent by first class, registered or certified mail, postage prepaid, return receipt requested, addressed as follows: (a) if to the Company, to: Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, Utah 84108 Attention: Richard P. Durham and Ronald G. Moffitt Telephone No.: (801) 532-5200 Telecopier No.: (801) 584-5783 with copies to: Chase Domestic Investments, L.L.C. c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020-1080 Attention: Timothy J. Walsh Telephone No.: (212) 899-3400 Telecopier No.: (212) 899-3401 and to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Ilan S. Nissan Telephone No.: (212) 408-2400 Telecopier No.: (212) 408-2420 (b) if to any Purchaser, to such Purchaser's address as set forth on Schedule I hereto. Any notice, demand or request so delivered shall constitute valid notice under this Agreement and shall be deemed to have been received (i) on the day of actual delivery in the case of personal delivery, if delivered on a Business Day (otherwise on the next 36 Business Day), (ii) on the next Business Day after the date when sent in the case of delivery by nationally-recognized overnight courier, (iii) on the fifth Business Day after the date of deposit in the U.S. mail in the case of mailing or (iv) upon receipt in the case of a facsimile transmission if received on a Business Day (otherwise on the next Business Day). Any party hereto may from time to time by notice in writing served upon the other as aforesaid designate a different mailing address or a different Person to which all such notices, demands or requests thereafter are to be addressed. 8.7 AMENDMENTS, MODIFICATIONS AND WAIVERS. The terms and provisions of this Agreement may not be modified or amended, nor may any of the provisions hereof be waived, temporarily or permanently, except pursuant to a written instrument executed by the Company and the Requisite Purchasers; provided however that any such amendment, modification or waiver that would adversely affect the rights hereunder of any Purchaser, in its capacity as a Purchaser, without similarly affecting the rights hereunder of all Purchasers, in their capacities as Purchasers, shall not be effective as to such Purchaser without its prior written consent. No waiver by any party shall operate or be construed as a waiver of any subsequent breach by any other party. 8.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS EXCEPT TO THE EXTENT THAT THE NEW YORK CONFLICTS OF LAWS PRINCIPLES WOULD APPLY THE APPLICABLE LAWS OF THE STATE OF THE COMPANY'S ORGANIZATION TO INTERNAL MATTERS RELATING TO ENTITIES SUCH AS THE COMPANY ORGANIZED THEREUNDER). 8.9 NO THIRD PARTY RELIANCE. Anything contained herein to the contrary notwithstanding, the representations and warranties of the Company contained in this Agreement (a) are being given by the Company as an inducement to the Purchasers to enter into this Agreement and the other Documents (and the Company acknowledges that the Purchasers have expressly relied thereon) and (b) are solely for the benefit of the Purchasers and their respective successors and assigns. Accordingly, no third party (including, without limitation, any holder of capital stock of the Company) or anyone acting on behalf of any thereof other than the Purchasers, and each of them and their respective successors and assigns, shall be a third party or other beneficiary of such representations and warranties and no such third party shall have any rights of contribution against the Purchasers or the Company with respect to such representations or warranties or any matter subject to or resulting in indemnification under this Agreement or otherwise. 37 8.10 SUBMISSION TO JURISDICTION. Any legal action or proceeding with respect to this Agreement may be brought in the courts of the State of New York and the United States of America for the Southern District of New York and, by execution and delivery of this Agreement, the Company hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Company hereby irrevocably waives, in connection with any such action or proceeding, any objection, including, without limitation, any objection to the venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions. The Company hereby irrevocably consents to the service of process of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at its address as set forth herein. Nothing herein shall affect the right of the Purchasers to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. 8.11 SEVERABILITY. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the law and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, in the event that any provision of this Agreement would be held in any jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 8.12 INDEPENDENCE OF AGREEMENTS, COVENANTS, REPRESENTATIONS AND WARRANTIES. All agreements and covenants hereunder shall be given independent effect so that if a certain action or condition constitutes a default under a certain agreement or covenant, the fact that such action or condition is permitted by another agreement or covenant shall not affect the occurrence of such default, unless expressly permitted under an exception to such initial covenant. In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of or a breach of a representation and warranty hereunder. 38 8.13 SURVIVAL OF REPRESENTATION, WARRANTIES, ETC. The representations, warranties, covenants and agreements contained in this Agreement or any other instrument delivered pursuant to this Agreement shall survive the Closing hereunder. 8.14 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Facsimile counterpart signatures to this Agreement shall be acceptable and binding. * * * * 39 IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase Agreement as of the date first above written. HUNTSMAN PACKAGING CORPORATION By: /s/ RONALD G. MOFFITT ------------------------------ Name: Ronald G. Moffitt Title: Executive Vice President and General Counsel PURCHASERS CHASE DOMESTIC INVESTMENTS, L.L.C. By: Chase Capital Investments L.P., its Sole Member By: Chase Capital Partners, as Investment Manager By: /s/ RICHARD D. WATERS ------------------------------ Name: Richard D. Waters Title: General Partner NEW YORK LIFE CAPITAL PARTNERS, L.P. By: NYLCAP Manager LLC, its Investment Manager By: /s/ STEVE BENEVENTO ------------------------------ Name: Steve Benevento Title: Its Authorized Representative 40 THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By: /s/ RICHARD A. STRAIT ------------------------------ Name: Richard A. Strait Title: Its Authorized Representative FIRST UNION CAPITAL PARTNERS, LLC By: /s/ ROBERT G. CALTON III ------------------------------ Name: Robert G. Calton III Title: Senior Vice President 41 SCHEDULE I
- ---------------------------------------------------------------------------------------------------------------------------------- NUMBER OF NUMBER OF WARRANT SHARES TOTAL PURCHASE PRICE OF NAME AND ADDRESS PREFERRED SHARES PURCHASED SECURITIES - ---------------------------------------------------------------------------------------------------------------------------------- Chase Domestic Investments, L.L.C. 52,000 22,486 $52,000,000 c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020-1080 Attention: Richard D. Waters Telephone No.: (212) 899-3400 Telecopier No.: (212) 899-3401 with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Frederick M. Bachman Telephone No.: (212) 408-2400 Telecopier No.: (212) 728-5950 - ----------------------------------------------------------------------------------------------------------------------------------
42
- ---------------------------------------------------------------------------------------------------------------------------------- NUMBER OF NUMBER OF WARRANT SHARES TOTAL PURCHASE PRICE OF NAME AND ADDRESS PREFERRED SHARES PURCHASED SECURITIES - ---------------------------------------------------------------------------------------------------------------------------------- New York Life Capital Partners, L.P. 24,000 10,378 $24,000,000 51 Madison Avenue Suite 3009 New York, New York 10010 Attention: Steve Benevento Telephone No.: (212) 576-7000 Telecopier No.: (212) 576-5591 With a copy to: Akin, Gump, Strauss, Hauer & Feld, LLP 590 Madison Avenue 22nd Floor New York, New York 10022 Attention: Edward D. Sopher, Esq. Telephone No.: (212) 872-1026 Telecopier No.: (212) 872-1002 and to: Office of the General Counsel New York Life Insurance Company 51 Madison Avenue Suite 1104 New York, New York 10010 Telephone No.: (212) 576-7000 Telecopier No.: (212) 576-8340 - ----------------------------------------------------------------------------------------------------------------------------------
43
- ---------------------------------------------------------------------------------------------------------------------------------- NUMBER OF NUMBER OF WARRANT SHARES TOTAL PURCHASE PRICE OF NAME AND ADDRESS PREFERRED SHARES PURCHASED SECURITIES - ---------------------------------------------------------------------------------------------------------------------------------- The Northwestern Mutual Life Insurance Company 12,000 5,189 $12,000,000 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: Dave Barras Telephone No.: (414) 299-1618 Telecopier No.: (414) 299-7124 With a copy to: Akin, Gump, Strauss, Hauer & Feld, LLP 590 Madison Avenue 22nd Floor New York, New York 10022 Attention: Edward D. Sopher, Esq. Telephone No.: (212) 872-1026 Telecopier No.: (212) 872-1002 - ----------------------------------------------------------------------------------------------------------------------------------
44
- ---------------------------------------------------------------------------------------------------------------------------------- NUMBER OF NUMBER OF WARRANT SHARES TOTAL PURCHASE PRICE OF NAME AND ADDRESS PREFERRED SHARES PURCHASED SECURITIES - ---------------------------------------------------------------------------------------------------------------------------------- First Union Capital Partners, LLC 12,000 5,189 $12,000,000 301 South College Street One First Union Center, 5th Floor Charlotte, North Carolina 28288-0732 Attention: Robert G. Calton III Telephone No.: (704) 715-1481 Telecopier No.: (704) 374-6711 With a copy to: Kennedy Covington Lobdell & Hickman, L.L.P. Bank of America Corporate Center, Suite 4200 100 North Tryon Street Charlotte, North Carolina 28202-4006 Attention: J. Norfleet Pruden, III Telephone No.: (704) 331-7442 Telecopier No.: (704) 331-7598 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL 100,000 43,242 $100,000,000 - ----------------------------------------------------------------------------------------------------------------------------------
45 SCHEDULE 3.4(a) OWNERSHIP OF COMMON STOCK See attached. The figures opposite the caption "Management Options" include amounts issued as restricted common stock or options. At closing an aggregate of 32,750 shares of restricted common stock are being issued (14,500 shares of which are being issued to Richard P. Durham, 7,750 shares of which are being issued to Jack E. Knott, 6,750 shares of which are being issued to Scott K. Sorensen and 3,750 shares of which are being issued to Ronald G. Moffitt) and 14,954 shares are being reserved for issuance either as restricted common stock or options. The 7,464 shares shown under the column "Warrants/Options Issued at Close" represent the portion of the 32,750 shares of restricted common stock that will vest in January 2001. Such shares were shown separately because they are included in the base for purposes of calculating the 7% amount of shares to be covered by the Warrants issued together with the Series A Preferred Stock. EX-10.6 13 ex10-6.txt WARRANT AGREEMENT 1 ================================================================================ EXHIBIT 10.6 WARRANT AGREEMENT DATED AS OF MAY 31, 2000 AMONG HUNTSMAN PACKAGING CORPORATION AND THE INITIAL HOLDERS LISTED ON SCHEDULE I HERETO ================================================================================ 2 TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS......................................................................................1 1.1 DEFINITIONS..................................................................................1 1.2 ACCOUNTING TERMS AND DETERMINATIONS..........................................................6 1.3 RULES OF CONSTRUCTION........................................................................6 ARTICLE II ISSUANCE OF WARRANTS; RESERVATION OF WARRANT SHARES.............................................6 2.1 ISSUANCE OF WARRANTS TO INITIAL HOLDERS; WARRANT AGREEMENT...................................6 2.2 RESERVATION OF WARRANT SHARES................................................................6 ARTICLE III CERTAIN ADMINISTRATIVE PROVISIONS..............................................................7 3.1 FORM OF WARRANT; REGISTER....................................................................7 3.2 EXCHANGE OF WARRANTS FOR WARRANTS............................................................7 3.3 MECHANICS OF TRANSFER OF WARRANTS............................................................8 3.4 STOCKHOLDERS' AGREEMENT......................................................................9 ARTICLE IV EXERCISE OF WARRANT; EXCHANGE FOR WARRANT SHARES................................................9 4.1 EXERCISE OF WARRANTS; EXPIRATION.............................................................9 4.2 EXCHANGE FOR WARRANT SHARES..................................................................9 4.3 ISSUANCE OF COMMON STOCK....................................................................10 ARTICLE V ADJUSTMENT OF EXERCISE PRICE AND SHARES.........................................................12 5.1 GENERAL.....................................................................................12 5.2 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS..............................................12 5.3 ISSUANCE OF COMMON STOCK....................................................................12 5.4 DISTRIBUTIONS OF ASSETS OR SECURITIES OTHER THAN COMMON STOCK...............................16 5.5 CAPITAL REORGANIZATION, CAPITAL RECLASSIFICATIONS, MERGER, ETC..............................16 5.6 OTHER ACTIONS AFFECTING COMMON STOCK........................................................17 5.7 MISCELLANEOUS...............................................................................17 ARTICLE VI COVENANTS OF THE COMPANY.......................................................................19 6.1 NOTICES OF CERTAIN ACTIONS..................................................................19 6.2 MERGER OR CONSOLIDATION OF THE COMPANY......................................................20 6.3 INFORMATION RIGHTS..........................................................................20 6.4 PAYMENTS IN RESPECT OF DIVIDENDS AND DISTRIBUTIONS..........................................20 ARTICLE VII MISCELLANEOUS.................................................................................21 7.1 NOTICES.....................................................................................21 7.2 NO VOTING RIGHTS; LIMITATION OF LIABILITY...................................................22 7.3 AMENDMENTS AND WAIVERS......................................................................22 7.4 REMEDIES....................................................................................22 7.5 BINDING EFFECT..............................................................................22 7.6 COUNTERPARTS................................................................................23 7.7 GOVERNING LAW...............................................................................23 7.8 BENEFITS OF THIS AGREEMENT..................................................................23 7.9 HEADINGS....................................................................................23
- i - 3 SCHEDULE I - Initial Warrant Holders EXHIBIT A - Form of Warrant - ii - 4 WARRANT AGREEMENT dated as of May 31, 2000, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "COMPANY"), and the initial warrant holders listed on Schedule I hereto (the "INITIAL HOLDERS"). PREAMBLE The Company is entering into a Securities Purchase Agreement dated as of the date hereof with the Initial Holders (the "SECURITIES PURCHASE AGREEMENT") pursuant to which the Company is issuing to the Initial Holders (i) 100,000 shares of Series A Cumulative Exchangeable Redeemable Preferred Stock (the "PREFERRED STOCK") and (ii) Warrants (as defined below) to purchase 43,242 shares of the Company's common stock. This Agreement sets forth terms and conditions applicable to the Warrants. NOW, THEREFORE, the parties to this Agreement hereby agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: "AFFILIATE" means, with respect to any specified Person, any other Person that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with such Person. "APPLICABLE LAW" means all provisions of laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any Governmental Authority applicable to the Person in question or any of its assets or property, and all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party or by which any of its assets or properties are bound. "ASSIGNMENT FORM" means the assignment form attached as Annex C to a Warrant. "BOARD" means the board of directors of the Company. "BUSINESS DAY" means any day that is not (a) Pioneer Day in the State of Utah, (b) a Saturday, Sunday, or legal holiday or (c) any other day on which banks are not required to be open in New York, New York; provided, however, that any determination of a Business Day relating to a securities exchange or other securities market means a Business Day on which such exchange or market is open for trading. 5 "CLOSING DATE" has the meaning given to such term in the Securities Purchase Agreement. "COMMISSION" means the Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act. "COMMON STOCK" means (i) the Common Stock, no par value, of the Company, and (ii) any other class of capital stock of the Company hereafter authorized that is not limited to a fixed sum or percentage of par or stated or liquidation value with respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Company. "COMPANY" has the meaning given to such term in the Preamble. "CONTROL" means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "CONTROL", used as a verb, has a correlative meaning. "CONVERTIBLE SECURITIES" has the meaning given to such term in Section 5.3(b)(i). "DELIVERY DATE" has the meaning given to such term in Section 4.3(a). "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCHANGE FORM" means the exchange form attached as Annex B to a Warrant. "EXCHANGE NUMBER" has the meaning given to such term in Section 4.2. "EXERCISE FORM" means the exercise form attached as Annex A to a Warrant. "EXERCISE PRICE" means $0.01 per Warrant Share, subject to adjustment from time to time in the manner provided in Article V. "EXPIRATION TIME" means 5:00 p.m., Eastern time, on May 31, 2011. "FULLY DILUTED BASIS" means, with respect to the Common Stock at any time of determination, the number of shares of Common Stock that would be issued and outstanding at such time, assuming full conversion, exercise and exchange of all issued and outstanding Convertible Securities and Options that shall be (or may become) exchangeable for, or exercisable or convertible into, Common Stock, including the Warrants, except that the number of shares of Common Stock outstanding on a Fully Diluted Basis shall not include the number of shares of Common Stock issuable upon exercise, conversion or exchange of Options or Convertible Securities that, at the time of determination, are Out of the Money. "GAAP" means generally accepted accounting principles in the United States of America in effect from time to time. 2 6 "GOVERNMENTAL AUTHORITY" means any federal, state, municipal or other government, governmental department, commission, board, bureau, agency or instrumentality, or any court, in each case whether of the United States of America or of any other country, or of any political subdivision thereof. "HOLDER" means with respect to any Warrant, the holder of such Warrant as set forth in the Warrant Register. "MARKET PRICE" means, for any security as of any date of determination, the price per share or other applicable unit determined as follows: (a) if such security is Publicly Traded as of the date of determination, the price shall be determined by computing the average, over a period consisting of the most recent twenty-one (21) Business Days occurring on or prior to the date of determination, of the applicable price set forth below (but excluding any trades or quotations that are not bona fide, arm's length transactions): (i) the average of the closing prices for such security on such Business Day on all domestic national securities exchanges on which such security may be listed if such exchanges are the primary securities markets for such security, or (ii) if there have been no sales on any such exchange on such Business Day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such Business Day if such exchanges are the primary securities markets for such security, or (iii) if on any Business Day such security is not so listed, the closing sales price on such Business Day quoted on the Nasdaq National Market or the Nasdaq Small-Cap Market, as applicable, or if there have been no sales on the Nasdaq National Market or the Nasdaq Small-Cap Market, as the case may be, on such Business Day, the average of the highest bid and lowest asked prices quoted on the Nasdaq National Market or the Nasdaq Small-Cap Market, as the case may be; (iv) if on any Business Day such security is not so listed and not quoted in the Nasdaq National Market or Nasdaq Small-Cap Market, the average of the highest bid and lowest asked prices on such Business Day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization; provided, however, that (1) for the purposes of any determination of the "Market Price" of any share of a security on any day after the "ex" date or any similar date for any dividend or distribution paid or to be paid with respect to such security, any price of such security on a day prior to such "ex" date or similar date shall be reduced by the fair market value of the per share amount of such dividend or distribution as determined in good faith by the Board of Directors of the Company and (2) for the purposes of any determination of the "Market Price" of any security on any day on or after (i) the effective day of any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of outstanding securities or (ii) the "ex" date or any similar date for any dividend or distribution with respect to such securities in shares of that 3 7 security, any price of such security on a day prior to such effective date or "ex" date or similar date shall be appropriately adjusted to reflect such subdivision, combination, dividend or distribution; and (b) if such security is not Publicly Traded as of the date of determination, in the case of the Common Stock, the Market Value Per Share, and, in the case of any other security, the fair market value of one share or other applicable unit of such security, shall be determined in good faith by the Board exercising reasonable business judgment. "MARKET VALUE" means the highest price that would be paid for the entire common equity interest in the Company on a going-concern basis in a single arm's-length transaction between a willing buyer and a willing seller (neither acting under compulsion), using valuation techniques then prevailing in the securities industry and assuming full disclosure of all relevant information and a reasonable period of time for effectuating such sale. For the purposes of determining Market Value, (i) the exercise price of Options to acquire Common Stock that are not Out of the Money shall be deemed to have been received by the Company and (ii) the liquidation preference or indebtedness, as the case may be, represented by Convertible Securities that are not Out of the Money shall be deemed to have been eliminated or cancelled. "MARKET VALUE PER SHARE" means the price per share of Common Stock obtained by dividing (A) the Market Value by (B) the number of shares of Common Stock outstanding (on a Fully Diluted Basis) at the time of determination. "OPTIONS" has the meaning given to such term in Section 5.3(b)(i). "OTHER EQUITY DOCUMENTS" means the Registration Rights Agreement and the Stockholders' Agreement. "OUT OF THE MONEY" means, at any date of determination (a) in the case of an Option, that the aggregate Market Price as of such date of the shares of Common Stock issuable upon the exercise of such Option is less than the aggregate exercise price payable upon such exercise and (b) in the case of a Convertible Security, that the quotient resulting from dividing the Market Price as of such date of such Convertible Security by the number of shares issuable as of such date upon conversion or exchange of such Convertible Security is greater than the Market Price of a share of Common Stock. "PERSON" shall be construed as broadly as possible and shall include an individual or natural person, a partnership (including a limited liability partnership), a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a Governmental Authority. "PREFERRED STOCK" has the meaning given to such term in the Preamble. "PUBLICLY TRADED" means, with respect to any security, that such security is (a) listed on a domestic securities exchange, (b) quoted on the Nasdaq National Market or the Nasdaq Small-Cap Market or (c) traded in the domestic over-the-counter market, which trades are reported by the National Quotation Bureau, Incorporated. 4 8 "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement dated as of the date hereof among the Company, the Initial Holders and the other security holders of the Company party thereto, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the provisions thereof. "REQUISITE HOLDERS" means, as of any date of determination, Holders holding Warrants representing at least sixty percent (60%) of the Warrant Shares that are issuable upon exercise of Warrants then outstanding. "SECURITIES ACT" means the Securities Act of 1933, as amended, or any successor Federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "SECURITIES PURCHASE AGREEMENT" has the meaning given to such term in the Preamble, as the same may amended, restated, supplemented or otherwise modified from time to time in accordance with the provisions thereof. "STOCKHOLDERS' AGREEMENT" means the Stockholders' Agreement dated as of the date hereof among the Company, the Initial Holders and the other security holders of the Company party thereto, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the provisions thereof. "SUBSIDIARY" means, with respect to any Person, any other Person of which more than fifty percent (50%) of the shares of stock or other interests entitled to vote in the election of directors or comparable Persons performing similar functions (excluding shares or other interests entitled to vote only upon the failure to pay dividends thereon or other contingencies) are at the time owned or controlled, directly or indirectly through one or more Subsidiaries, by such Person. Unless the context otherwise requires, the term "Subsidiary" means a Subsidiary of the Company. "TRANSFER" means any sale, transfer, assignment, or other disposition of any interest in, with or without consideration, any security, including any disposition of any security or of any interest therein that would constitute a sale thereof within the meaning of the Securities Act. "WARRANT" has the meaning given to such term in Section 3.1(a). "WARRANT REGISTER" has the meaning given to such term in Section 3.1(b). "WARRANT SHARES" means (a) the shares of Common Stock issued or issuable upon exercise of a Warrant in accordance with Section 4.1 or upon exchange of a Warrant in accordance with Section 4.2, (b) all other securities or other property issued or issuable or delivered or deliverable upon any such exercise or exchange in accordance with this Agreement and (c) any securities of the Company distributed with respect to the securities referred to in the preceding clauses (a) and (b). As used in this Agreement, the phrase "WARRANT SHARES THEN HELD" by any Holder or Holders means Warrant Shares held at the time of determination by such Holder or Holders and Warrant Shares issuable upon exercise of Warrants held at the time of determination by such Holder or Holders. 5 9 1.2 ACCOUNTING TERMS AND DETERMINATIONS. Except as otherwise may be expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Holders hereunder and under the Warrants shall be prepared, in accordance with GAAP. All calculations made for the purposes of determining compliance with the terms of this Agreement and the Warrants shall (except as otherwise may be expressly provided herein) be made by application of GAAP. 1.3 RULES OF CONSTRUCTION. The use in this Agreement of the term "including" means "including, without limitation." The words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole, including the schedules and exhibits, as the same may from time to time be amended, modified, supplemented or restated, and not to any particular section, subsection, paragraph, subparagraph or clause contained in this Agreement. All references to sections, schedules and exhibits mean the sections of this Agreement and the schedules and exhibits attached to this Agreement, except where otherwise stated. The title of and the section and paragraph headings in this Agreement are for convenience of reference only and shall not govern or affect the interpretation of any of the terms or provisions of this Agreement. The use herein of the masculine, feminine or neuter forms shall also denote the other forms, as in each case the context may require. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement has been chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. ARTICLE II ISSUANCE OF WARRANTS; RESERVATION OF WARRANT SHARES 2.1 ISSUANCE OF WARRANTS TO INITIAL HOLDERS; WARRANT AGREEMENT. Concurrently with the execution and delivery of this Agreement, the Company has issued and delivered Warrants, dated as of the date hereof, to the Initial Holders in accordance with the Securities Purchase Agreement. The provisions of this Agreement shall apply to all Warrants, and each Holder that is not a party to this Agreement, by its acceptance of a Warrant, agrees to be bound by the applicable provisions hereof. 2.2 RESERVATION OF WARRANT SHARES. The Company shall at all times have authorized, and reserve and keep available, free from preemptive or similar rights, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon the exercise or exchange of each Warrant, the number of authorized but unissued Warrant Shares issuable upon exercise or exchange of all outstanding Warrants. The Company shall promptly take all actions necessary to ensure that Warrant Shares shall be duly authorized and, when issued upon exercise or exchange of any Warrant in accordance with the terms hereof, shall be validly issued, fully paid and non-assessable, free and clear of all liens, 6 10 security interests, charges and other encumbrances or restrictions (except to the extent of any applicable provisions of this Agreement or any Other Equity Document) and free and clear of all preemptive or similar rights. ARTICLE III CERTAIN ADMINISTRATIVE PROVISIONS 3.1 FORM OF WARRANT; REGISTER. (a) Form. Each Warrant issued hereunder shall be in the form of Exhibit A (each, a "WARRANT") and shall be executed on behalf of the Company by its Chairman, its President or its Chief Executive Officer and by its Chief Financial Officer, its Treasurer or its Assistant Treasurer. Each Warrant shall bear the legend(s) appearing on the first page of such form, except that a Warrant need not bear any such legend from and after such time as all the restrictions to which such legend relates no longer apply. Any Warrant may also bear any other legend applicable thereto. Upon initial issuance, each Warrant shall be dated as of the date of signature thereof by the Company. Irrespective of any adjustments in the Exercise Price or the number or kind of shares or other securities or property issuable upon the exercise of Warrants, any Warrants theretofore or thereafter issued may, as a matter of form, continue to express the same Exercise Price and the same number of shares of Common Stock issuable upon the exercise of such Warrants as were stated in the Warrants initially issued pursuant the Securities Purchase Agreement. The Company, however, may at any time in its sole discretion make any change in the form of Warrant that it may deem appropriate to give effect to such adjustments and that does not affect the substance of the Warrant, and any Warrant thereafter issued, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed. (b) Register. Each Warrant issued, exchanged or transferred hereunder shall be registered in a warrant register (the "WARRANT REGISTER"). The Warrant Register shall set forth the number of each Warrant, the name and address of the Holder thereof and the original number of Warrant Shares purchasable upon the exercise thereof. The Warrant Register will be maintained by the Company and will be available for inspection by any Holder at the principal office of the Company or such other location as the Company may designate to the Holders in the manner set forth in Section 8.1. The Company shall be entitled to treat the Holder of any Warrant as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other Person. 3.2 EXCHANGE OF WARRANTS FOR WARRANTS. (a) Exchange. The Holder may exchange any Warrant or Warrants issued hereunder for another Warrant or Warrants of like kind and tenor representing in the aggregate the right to purchase the same number of Warrant Shares that could be purchased pursuant to the Warrant or Warrants being so exchanged. In order to effect an exchange permitted by this Section 3.2, the Holder shall deliver to the Company such Warrant or Warrants accompanied by a written request signed by the Holder thereof specifying the number and denominations of Warrants to be issued in such exchange and subject to the transfer restrictions contained in the Stockholders' Agreement, the names in which such Warrants are to be issued. As promptly as 7 11 practicable but in any event within five (5) Business Days of receipt of such a request, the Company shall, without charge, issue, register and deliver to the Holder thereof each Warrant to be issued in such exchange. (b) Replacement. Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of the Holder being satisfactory) of the ownership and the loss, theft, destruction or mutilation of any Warrant, and in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company (if the Holder is a financial institution or other institutional investor, its own indemnity agreement being satisfactory) or, in the case of any such mutilation, upon surrender of such Warrant, the Company shall, without charge, issue, register and deliver in lieu of such Warrant a new Warrant of like kind representing the same rights represented by, and dated the date of, such lost, stolen, destroyed or mutilated Warrant. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by any Person. (c) Expenses. The Company shall pay all expenses and taxes (other than any applicable income or similar taxes payable by a Holder of a Warrant) attributable to an exchange or replacement of a Warrant pursuant to this Section 3.2; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance of any Warrant in a name other than that of the Holder of the Warrant being exchanged. 3.3 MECHANICS OF TRANSFER OF WARRANTS. Subject to the further provisions of this Agreement and the Other Equity Documents, each Warrant may be transferred, in whole or in part, to an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act (or any entity in which all of the equity owners are accredited investors of such types) by the Holder thereof by delivering to the Company such Warrant accompanied by a properly completed, duly executed, Assignment Form. As promptly as practicable but in any event within five (5) Business Days of receipt of such Assignment Form, the Company shall, without charge, issue, register and deliver to the Holder thereof a new Warrant or Warrants of like kind and tenor representing in the aggregate the right to purchase the same number of Warrant Shares that could be purchased pursuant to the Warrant being transferred. In all cases of transfer by an attorney, the original power of attorney, duly approved, or a copy thereof, duly certified, shall be deposited and remain with the Company. In case of transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority shall be produced and may be required to be deposited and remain with the Company in its discretion. The Company shall not be liable for complying with a request by a fiduciary or nominee of a fiduciary to register a transfer of any Warrant which is registered in the name of such fiduciary or nominee, unless made with the actual knowledge that such fiduciary or nominee is committing a breach of trust in requesting such registration of transfer, or with knowledge of such facts that the Company's participation therein amounts to bad faith. 8 12 3.4 STOCKHOLDERS' AGREEMENT. Any Person to whom a Warrant is transferred in accordance with this Article III shall, by acceptance of the Warrant, be deemed to be a party to the Stockholders' Agreement and shall be bound by and entitled to the benefits thereunder. ARTICLE IV EXERCISE OF WARRANT; EXCHANGE FOR WARRANT SHARES 4.1 EXERCISE OF WARRANTS; EXPIRATION. (a) On any Business Day on or prior to the Expiration Time, a Holder may exercise a Warrant, in whole or in part, by delivering to the Company such Warrant accompanied by a properly completed Exercise Form and a check or wire transfer in an aggregate amount equal to the product obtained by multiplying (a) the Exercise Price times (b) the number of Warrant Shares being purchased. Any partial exercise of a Warrant shall be for a whole number of Warrant Shares only. (b) A Warrant shall terminate and become void as of the earlier of (i) the Expiration Time or (ii) the date such Warrant is exercised. The Company shall give notice not less than 90, and not more than 120, days prior to the Expiration Time to the Holders of all then outstanding Warrants to the effect that the Warrants will terminate and become void as of the Expiration Time; provided, however, that if the Company fails to give notice as provided in this Section 4.1(b), the Warrants will nevertheless expire and become void at the Expiration Time. 4.2 EXCHANGE FOR WARRANT SHARES. On any Business Day on or prior to the Expiration Time, a Holder may exchange a Warrant, in whole or in part, for Warrant Shares by delivering to the Company such Warrant accompanied by a properly completed Exchange Form. The number of shares of Common Stock to be received by a Holder upon such exchange shall be equal to (a) the number of Warrant Shares allocable to the portion of the Warrant being exchanged (the "EXCHANGE NUMBER"), as specified by such Holder in the Exchange Form less (b) the number of shares equal to the quotient obtained by dividing (i) the product obtained by multiplying (A) the Exercise Price times (B) the Exchange Number by (ii) the Market Price as of the Delivery Date (as defined below). The Exchange Number need not be a whole number, but in the case of any partial exchange of a Warrant under this Section 4.2, the Exchange Number shall be determined so that the number of Warrant Shares to be issued in such exchange shall be a whole number only. The Company acknowledges that the provisions of this Section 4.2 are intended, in part, to ensure that a full or partial exchange of a Warrant pursuant to this Section 4.2 will qualify as a conversion, within the meaning of paragraph (d)(3)(iii) of Rule 144 under the Securities Act. At the request of any Holder, the Company will accept reasonable modifications to the exchange procedures provided for in this Section 4.2 in order to accomplish such intent. 9 13 4.3 ISSUANCE OF COMMON STOCK. (a) Issuance of Common Stock. As promptly as practicable but in any event within seven (7) days (or if the Common Stock is Publicly Traded at such time, within three (3) days or such other time period as is customary in the market for Publicly Traded securities) following the delivery date (the "DELIVERY DATE") of (i) an Exercise Form or Exchange Form in accordance with Section 4.1 or 4.2, (ii) the related Warrant and (iii) any required payment of the Exercise Price, the Company shall, without charge, issue, register and deliver one or more stock certificates representing the aggregate number of shares of Common Stock to which the Holder of such Warrant is entitled and, upon compliance with the applicable provisions of this Warrant Agreement, the Other Equity Documents and the Securities Purchase Agreement, transfer to such Holder appropriate evidence of ownership of other securities or property (including any cash) to which such Holder is entitled, in such denominations, and registered or otherwise placed in, or payable to the order of, such name or names, as may be directed in writing by such Holder. The Company shall deliver such stock certificates, evidence of ownership and any other securities or property (including any cash) to the Person or Persons entitled to receive the same, together with an amount in cash in lieu of any fraction of a share (or fractional interest in any other security), as hereinafter provided. If the Warrant Shares are Publicly Traded, then at the request of such Holder, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically transmit the Warrant Shares to such Holder through the Deposit Withdrawal Agent Commission System of DTC. (b) Partial Exercise or Exchange. If a Holder shall exercise or exchange a Warrant for less than all of the Warrant Shares that could be purchased or received thereunder, the Company shall issue, register and deliver to the Holder, as promptly as practicable but in any event within seven (7) days (or if the Common Stock is Publicly Traded at such time, within three (3) days or such other time period as is customary in the market for Publicly Traded securities) following the Delivery Date, a new Warrant evidencing the right to purchase the remaining Warrant Shares. In the case of an exchange pursuant to Section 4.2, the number of remaining Warrant Shares shall be the original number of Warrant Shares subject to the Warrant so exchanged reduced by the Exchange Number. Each Warrant surrendered pursuant to Section 4.1 or 4.2 shall be canceled. (c) Fractional Shares. The Company shall not be required to issue fractional shares of Common Stock or fractional units of any other security upon the exercise or exchange of a Warrant. If any fraction of a share of Common Stock or fractional unit of any other security would be issuable on the exercise or exchange of any Warrant, the Company may, in lieu of issuing such fractional share or unit, pay to such Holder for any such fraction an amount in cash equal to the product obtained by multiplying (i) such fraction times (ii) the Market Price for the Common Stock or for a unit of such other security, as the case may be, as of the Delivery Date. (d) Expenses. The Company shall pay all expenses and taxes (other than any applicable income or similar taxes payable by a Holder of a Warrant) attributable to the initial issuance of Warrant Shares upon the exercise or exchange of a Warrant; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance of any Warrant or any certificate for, or any other evidence of 10 14 ownership of, Warrant Shares in a name other than that of the Holder of the Warrant being exercised or exchanged. (e) Record Ownership. To the extent permitted by Applicable Law, the Person in whose name any certificate for shares of Common Stock or other evidence of ownership of any other security is issued upon exercise or exchange of a Warrant shall for all purposes be deemed to have become the holder of record of such shares or other security on the Delivery Date, irrespective of the date of delivery of such certificate or other evidence of ownership (subject, in the case of any exercise to which Section 4.3(g) applies, to the consummation of a transaction upon which such exercise is conditioned), notwithstanding that the transfer books of the Company shall then be closed or that such certificates or other evidence of ownership shall not then actually have been delivered to such Person. (f) Approval; Listings. If any securities constituting Warrant Shares or any portion thereof to be issued upon exercise or exchange of a Warrant require registration or approval under any Applicable Law or require listing on any national securities exchange or quotation system before such securities may be so issued, the Company will use commercially reasonable efforts to cause such securities to be registered, or approved, as applicable; provided, however, that this Section 4.3(f) shall not obligate the Company to register such securities under the Securities Act or qualify them under state securities or blue sky laws. The Company shall from time to time promptly take all action that may be necessary so that any such securities, immediately upon their issuance upon exercise or exchange of Warrants, will be listed on all the principal securities exchanges, quotation systems and markets within the United States of America, if any, on which other securities of the Company of the same class or type are then listed or quoted. The Company may suspend the exercise of any Warrant so affected for the period during which such registration, approval or listing is required but not in effect (but the Expiration Time shall be equitably extended so as to prevent the expiration of any Warrant during a suspension period). Notwithstanding anything in this Warrant Agreement to the contrary, in no event shall a Holder be entitled to exercise a Warrant unless (i) a registration statement filed under the Securities Act in respect of the issuance of the Warrant Shares is then effective or (ii) the exercise of such Warrants is exempt from the registration requirements of the Securities Act and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states or other jurisdictions in which such Holders reside, such exemption to be evidenced by an opinion of counsel to the extent such an opinion would be required under Section 6.2 of the Securities Purchase Agreement in respect of a transfer to the Person to whom the Warrant Shares are to be issued. (g) Conditional Exercise or Exchange. Any Exercise Form or Exchange Form delivered under Section 4.1 or 4.2 may condition the exercise or exchange of any Warrant on the consummation of a transaction involving Warrants or Warrant Shares being undertaken by the Company or the Holder of such Warrant, and such exercise or exchange shall not be deemed to have occurred except concurrently with the consummation of such transaction, except that, for purposes of determining whether such exercise or exchange is timely it shall be deemed to have occurred on the Delivery Date. If any exercise of a Warrant is so conditioned, then, subject to delivery of the items required by Section 4.3(a) and compliance with the other terms hereof, the Company shall deliver the certificates and other evidence of ownership of other securities or other property in such manner as such Holder shall direct as required in connection with the 11 15 consummation such transaction upon which the exercise is conditioned. If, at any time prior to the consummation of a conditional exercise or exchange, such Holder shall give notice to the Company that such transaction has been abandoned or such Holder has withdrawn from participation in such transaction, the Company shall return the items delivered pursuant to Section 4.3(a), and such Holder's election to exercise such Warrant shall be deemed rescinded. ARTICLE V ADJUSTMENT OF EXERCISE PRICE AND SHARES. 5.1 GENERAL. The Exercise Price and the number and kind of Warrant Shares issuable upon exercise of each Warrant shall be subject to adjustment from time to time in accordance with this Article V. 5.2 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If, at any time after the Closing Date, the Company shall: (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock; or (ii) subdivide, split or reclassify its outstanding shares of Common Stock into a larger number of shares of Common Stock; or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock; then (A) the number of Warrant Shares issuable upon exercise of each Warrant shall be adjusted so as to equal the number of Warrant Shares that the Holder of such Warrant would have held immediately after the occurrence of such event if the Holder had exercised such Warrant immediately prior to the occurrence of such event (or, in the case of clause (i), the record date therefor) and (B) the Exercise Price shall be adjusted to be equal to (x) the Exercise Price immediately prior to the occurrence of such event multiplied by (y) a fraction (1) the numerator of which is the number of Warrant Shares issuable upon exercise of such Warrant immediately prior to the adjustment in clause (A) and (2) the denominator of which is the number of Warrant Shares issuable upon exercise of such Warrant immediately after the adjustment in clause (A). An adjustment made pursuant to this Section 5.2 shall become effective immediately after the occurrence of such event retroactive to the record date, if any, for such event. 5.3 ISSUANCE OF COMMON STOCK. (a) General. If, at any time after the Closing Date, the Company shall issue or sell (or, in accordance with Section 5.3(b), shall be deemed to have issued or sold) any shares of Common Stock (other than any issuance for which an adjustment is made pursuant to Section 5.2 or 5.5 or no adjustment is required pursuant to Section 5.7(g)) without consideration or for a consideration per share less than the Market Price for the Common Stock determined as of the 12 16 date of such issuance or sale, then, effective immediately upon such issuance or sale, the Exercise Price and the number Warrant Shares issuable upon exercise of each Warrant shall be adjusted as follows: (i) The Exercise Price shall be reduced to an amount equal to the product obtained by multiplying (A) the Exercise Price in effect immediately prior to such issuance or sale times (B) a fraction, (I) the numerator of which shall be the sum of (x) the product of (1) the number of shares of Common Stock outstanding (on a Fully Diluted Basis) immediately prior to such issuance or sale times (2) the Market Price for the Common Stock as of the date of such issuance or sale plus (y) the consideration, if any, received by the Company upon such issuance or sale, and (II) the denominator of which shall be the product of (x) the number of shares of Common Stock outstanding (on a Fully Diluted Basis) immediately after such issuance or sale times (y) such Market Price. (ii) The number of Warrant Shares issuable upon exercise of such Warrant shall be increased to the number of shares determined by multiplying (A) the number of Warrant Shares issuable upon exercise of such Warrant immediately prior to such issuance or sale by (B) a fraction, (1) the numerator of which shall be the Exercise Price in effect immediately prior to the adjustment in clause (i) of this Section 5.3(a), and (2) the denominator of which shall be the Exercise Price in effect immediately after such adjustment. (b) Issuance of Options or Convertible Securities. The issuance or sale of Options or Convertible Securities shall be deemed, in accordance with this Section 5.3(b), to be the issuance of Common Stock. (i) Definitions. For the purposes of this Section 5.3(b), the term "OPTIONS" means any warrants, options or other rights to subscribe for or to purchase (A) Common Stock or (B) Convertible Securities, and the term "CONVERTIBLE SECURITIES" means any capital stock, evidence of indebtedness or other securities or rights convertible into or exchangeable for Common Stock. (ii) Issuance of Options. If the Company in any manner issues or grants any Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options (or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon the exercise of such Options) shall be deemed, for purposes of Section 5.3(a), to be outstanding and to have been issued and sold by the Company. For purposes of Section 5.3(a), the Common Stock issuable upon exercise of Options or upon conversion or exchange of Convertible Securities issuable upon exercise of Options for Convertible Securities shall be deemed to have been issued and sold at a price per share equal to (A) the sum of (x) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of such Options plus (y) the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options plus (z) in the case of such Options for Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon conversion or exchange of such Convertible 13 17 Securities divided by (B) the total maximum number of shares of Common Stock issuable upon exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options. (iii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities, then the maximum number of shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities shall be deemed, for purposes of Section 5.3(a) to be outstanding and to have been issued and sold by the Company. For purposes of Section 5.3(a), the Common Stock issuable upon conversion or exchange of Convertible Securities shall be deemed to have been issued and sold at a price per share equal to (A) the sum of (x) the total amount received or receivable by the Company as consideration for the issuance or sale of such Convertible Securities plus (y) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof divided by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. (iv) Superseding Adjustment. If, at any time after any adjustment of the Exercise Price and the number of Warrant Shares issuable upon exercise of the Warrants shall have been made pursuant to Section 5.3(a) as a result of the issuance of Options or Convertible Securities, or after any new adjustment of the Exercise Price and the number of Warrant Shares shall have been made pursuant to this Section 5.3(b)(iv) (each of the foregoing, a "PREVIOUS ADJUSTMENT"): (A) such Options or the right of conversion or exchange of such Convertible Securities shall expire, or be terminated or surrendered, and all or a portion of such Options or the right of conversion or exchange with respect to all or a portion of such Convertible Securities, as the case may be, shall not have been exercised or treated as having been exercised or otherwise canceled or acquired by the Company in connection with any settlement, including any cash settlement, of such Options or the rights of conversion or exchange of such Convertible Securities; or (B) there has been any change in the number of shares of Common Stock issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (including as a result of a change in the number of Convertible Securities issuable upon the exercise of such Options or the operation of antidilution provisions applicable thereto); or (C) the consideration per share for which shares of Common Stock are issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities, or the maturity of such Convertible Securities, shall be changed; then, with respect to the unexercised portion of any then outstanding Warrants, the previous adjustment shall be rescinded and annulled and the shares of Common Stock which were deemed to have been issued and that gave rise to the 14 18 previous adjustment shall no longer be deemed to have been issued. Thereupon, a recomputation shall be made of the adjustment, if any, of the Exercise Price and the number of Warrant Shares issuable upon exercise of such Warrants as a consequence of such Options or Convertible Securities on the basis of: (1) treating the number of shares of Common Stock, if any, theretofore actually issued or issuable pursuant to the previous exercise of such Options or such right of conversion or exchange (including Options or rights treated as exercised, otherwise cancelled or acquired in connection with any settlement), as having been issued on the date or dates of such issuance as determined for purposes of the previous adjustment and for the total amount of consideration actually received and receivable therefor (determined in the manner described in Section 5.3(b)(ii) or (iii), as the case may be); (2) treating the maximum number of shares of Common Stock (x) issuable upon the exercise (or upon the conversion or exchange of Convertible Securities issuable upon the exercise) of all Options which then remain outstanding and (y) issuable upon the conversion or exchange of all Convertible Securities which then remain outstanding, as having been issued; and (3) making the computations called for in Section 5.3(a) hereof on the basis of the revised terms of such outstanding Options or Convertible Securities, as the case may be, as if they were newly issued at the time of such revision. Any adjustment of the Exercise Price and the number of Warrant Shares issuable upon exercise of the Warrants resulting from such recomputation shall supersede the previous adjustment. (v) No Further Adjustments. Any adjustment of the Exercise Price or the number of Warrant Shares issuable upon the exercise of Warrants to be made pursuant to this Section 5.3 with respect to the issuance of (A) any Options (whether for Common Stock or Convertible Securities), (B) any Convertible Securities issuable upon the exercise of such Options or (C) any shares of Common Stock issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities shall be made effective upon the issuance of such Options. Any adjustment of the Exercise Price or the number of Warrant Shares issuable upon the exercise of Warrants to be made pursuant to this Section 5.3 with respect to the issuance of (x) any Convertible Securities (other than Convertible Securities issuable upon the exercise of Options) or (y) any shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities shall be made effective upon the issuance of such Convertible Securities. No further adjustment of the Exercise Price or the number of Warrant Shares issuable upon the exercise of Warrants shall be made upon the actual issuance of Common Stock or of Convertible Securities upon the exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities. 15 19 5.4 DISTRIBUTIONS OF ASSETS OR SECURITIES OTHER THAN COMMON STOCK. (a) If, at any time after the Closing Date, the Company shall, by dividend or otherwise, distribute to the holders of its Common Stock any shares of its capital stock (other than a distribution of Common Stock referred to in Section 5.2), rights or warrants to purchase any of its securities (other than those referred to in Section 5.3), evidences of its indebtedness, cash or other property (other than cash dividends or cash distributions paid out of current or retained earnings), then the Exercise Price and the number of Warrant Shares issuable upon exercise of each Warrant shall be adjusted as follows: (i) The Exercise Price shall be reduced to an amount equal to the product of (A) the Exercise Price in effect immediately prior to such issuance or sale times (B) a fraction (I) the numerator of which shall be (x) the Market Price for the Common Stock as of the record date for determining stockholders entitled to such distribution less (y) the fair market value of the portion of the capital stock, rights or warrants, evidences of indebtedness, cash or other property distributed or to be distributed with respect to one share of Common Stock, and (II) the denominator of which shall be such Market Price. (ii) The number of Warrant Shares issuable upon exercise of such Warrant shall be increased to the number of shares determined by multiplying (A) the number of Warrant Shares issuable upon exercise of such Warrant immediately prior to such distribution times (B) a fraction (1) the numerator of which shall be the Exercise Price in effect immediately prior to the adjustment in clause (i) of this Section 5.4 and (2) the denominator of which shall be the Exercise Price in effect immediately after such adjustment. (b) Notwithstanding anything to the contrary contained in paragraph (a), upon a dividend payment or other distribution by the Company which would otherwise trigger an adjustment pursuant to paragraph (a), no such adjustment will be required if, upon such dividend payment or other distribution, the Company simultaneously pays to each Holder of a Warrant his, her or its pro rata portion of such dividend payment or other distribution as if such Holder had fully exercised his, her or its Warrant immediately prior to the record date for such distribution or, if no record is taken, the date as of which the record holders of Warrant Shares entitled to such dividend payment or other distribution are to be determined. 5.5 CAPITAL REORGANIZATION, CAPITAL RECLASSIFICATIONS, MERGER, ETC. If, at any time after the Closing Date, (i) there shall be any capital reorganization or any reclassification of the capital stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares to which Section 5.2 applies or any distribution to which Section 5.4 applies) or (ii) the Company shall consolidate with, merge with or into, or sell all or substantially all of its assets or property to, another Person, then in each such case, effective as of the effective date of such event retroactive to the record date, if any, of such event, each Warrant shall be exercisable for the kind and number of shares of stock, other securities, cash or other property to which a holder of the number of Warrant Shares issuable upon exercise of such Warrant would have been entitled to receive and/or to continue to hold 16 20 upon such event. In any such case, if necessary, the provisions of this Agreement (including this Article V) and the Warrants with respect to the rights and interests thereafter of the Holders of the Warrants shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock, other securities, cash or other property thereafter deliverable upon the exercise of the Warrants. 5.6 OTHER ACTIONS AFFECTING COMMON STOCK. (a) Equitable Equivalent. If at any time or from time to time the Company shall take any action affecting its Common Stock, other than any action of a type otherwise described in this Article V, then the number of Warrant Shares issuable upon exercise of each Warrant shall be adjusted to such extent, if any, and in such manner and at such time, as the Board shall, in the good faith, exercise of its reasonable business judgement, determine to be equitable in the circumstances, provided that no such adjustment shall decrease the number of Warrant Shares issuable upon exercise of such Warrant or increase the Exercise Price. (b) No Avoidance. The Company will not, by amendment of its certificate or articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, provided that the Company shall not be deemed to be avoiding or seeking to avoid observance or performance solely because any action otherwise in compliance with this Agreement is structured so as to avoid the need for, or to minimize the extent of, any adjustment under this Article V. The Company shall at all times in good faith assist in the carrying out of all the provisions of this Article V and in the taking of all such action as may be necessary or reasonably appropriate in order to protect the exercise rights of the Holders against impairment. 5.7 MISCELLANEOUS. (a) Calculation of Consideration Received. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, then the consideration received therefor shall be deemed to be the net amount received or to be received by the Company therefor. If any Common Stock, Options or Convertible Securities are issued or sold for consideration other than cash (including in connection with any merger in which the Company issues such securities), then the amount of the consideration other than cash received by the Company shall be the fair market value of such consideration, as of the date of receipt, determined in good faith by the Board exercising reasonable business judgment. (b) Treasury Shares. The number of shares of Common Stock outstanding at any given time does not include shares owned or held by or for the account of the Company or any Subsidiary, and the disposition of any shares so owned or held shall be considered an issuance of Common Stock. (c) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of 17 21 the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. If the Company shall take any such record of the holders of its Common Stock and shall, thereafter and before the taking of the action for which such record was taken, legally abandon its plan to take such action, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (d) Deferral of Issuance. In any case in which this Article V shall require that any adjustment in the number of Warrant Shares issuable upon the exercise of any Warrant or in the Exercise Price be made effective as of immediately after a record date for a specified event, the Company may elect to defer, until the occurrence of such event, the issuing to the Holder of any Warrant exercised after such record date of the shares of Common Stock and shares or other units of other securities of the Company, if any, issuable upon such exercise over and above the number of shares or other units that would have been issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment. In such case, the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares or other units upon the occurrence of the event requiring such adjustment. (e) Notice; Adjustment Rules. Whenever the Exercise Price or the number of Warrant Shares shall be adjusted as provided in this Article V, the Company shall provide to each Holder a statement, signed by the Chairman, the President or the Chief Financial Officer of the Company, describing in reasonable detail the facts requiring such adjustment and setting forth a calculation of the Exercise Price and the number of Warrant Shares applicable to each Warrant after giving effect to such adjustment. All calculations under this Article V shall be made to the nearest one-hundredth of a cent ($.0001) or to the nearest one-hundredth of a share, as the case may be. Adjustments pursuant to this Article V shall apply to successive events or transactions of the types covered thereby. Notwithstanding any other provision of this Article V, no adjustment shall be made to the number of Warrant Shares or to the Exercise Price if such adjustment represents less than 1% of the number of Warrant Shares previously required to be so delivered, but any lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall amount to 1% or more of the number of Warrant Shares to be so delivered. (f) Certain Adjustments. The Company may make such reductions in the Exercise Price or increase in the number of Warrant Shares to be received by any Holder upon the exercise or exchange of a Warrant, in addition to those adjustments required by this Article V, as it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Common Stock, or any issuance wholly for cash of any shares of Common Stock, or any issuance wholly for cash of shares of Common Stock or Convertible Securities, or any stock dividend, or any issuance of Options hereinafter made by the Company to the holders of its Common Stock shall not be taxable to such holders. (g) Excluded Issuances. Notwithstanding any other provision of this Article V, no adjustment shall be made pursuant to this Article V in respect of (i) the issuance of Common Stock in any underwritten public offering that is registered with the Commission, (ii) the issuance of Common Stock or Options to purchase Common Stock issued to employees, 18 22 officers, directors or consultants of the Company or any Subsidiary, or the issuance of Common Stock upon the exercise of any such Options, provided, however, that the aggregate amount of all such Common Stock or Common Stock which may be acquired upon the exercise of such Options shall not exceed an aggregate of 14,954 shares of Common Stock (as such number is adjusted for stock splits, stock dividends, reverse stock splits or combinations affecting the Common Stock), (iii) the issuance from time to time of shares of Common Stock upon the exercise of any of the Warrants or Note Warrants (as defined in the Securities Purchase Agreement), (iv) the issuance of Common Stock pursuant to any adjustment provided for in Sections 5.2, 5.4 and 5.5, (v) the issuance of Common Stock or Options as purchase price payable to sellers (other than any Affiliates of the Company) in any merger, share exchange, consolidation, liquidation or other business combination required to be approved and actually approved by the requisite vote (being not less than a majority based on voting power) of the shareholders of the Company, (vi) 8,902 shares of Common Stock issuable upon exercise of the option granted to Jack Knott and (vii) securities issued in connection with the adoption of a shareholder rights plan by the Company. (h) Par Value. The Company shall not increase the par value of any shares of Common Stock or other securities issuable upon the exercise of the Warrants to an amount that exceeds the Exercise Price. Before taking any action that would cause an adjustment pursuant to this Article V that would reduce the Exercise Price below the par value per share of the Common Stock, the Company shall be required to take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. ARTICLE VI COVENANTS OF THE COMPANY 6.1 NOTICES OF CERTAIN ACTIONS. In the event that the Company: (i) shall authorize issuance to all holders of Common Stock of rights or warrants to subscribe for or purchase capital stock of the Company or of any other subscription rights or warrants; or (ii) shall authorize a dividend or other distribution to all holders of Common Stock of evidences of its indebtedness, cash or other property or assets; or (iii) becomes a party to any consolidation or merger for which approval of any shareholders of the Company will be required, or to a conveyance or transfer of the properties and assets of the Company substantially as an entirety, or of any capital reorganization or reclassification or change of the Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination); or (iv) commences a voluntary or involuntary dissolution, liquidation or winding up; 19 23 then the Company shall provide a written notice to each Holder stating (1) the date as of which the holders of record of Common Stock to be entitled to receive any such rights, warrants or distribution are to be determined, (2) the material terms of any such consolidation or merger and the expected effective date thereof, or (3) the material terms of any such conveyance, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of record of Common Stock will be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, conveyance, transfer, dissolution, liquidation or winding up. Such notice shall be given as promptly as practicable and not later than ten (10) Business Days prior to the effective date (or the applicable record date, if earlier) of such event. The failure to give the notice required by this Section 6.1 or any defect therein shall not affect the legality or validity of any distribution, right, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. 6.2 MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into, or sell, transfer or lease all or substantially all of its property to, any other entity unless the successor or purchasing entity, as the case may be (if not the Company), is organized under the laws of the United States of America or any state or political subdivision thereof and shall expressly agree to provide to each Holder the securities, cash or property required by Section 5.5 hereof upon the exercise or exchange of Warrants and expressly assumes, by supplemental agreement reasonably satisfactory in form and substance to the Requisite Holders, the due and punctual performance and observance of each and every covenant and condition of this Agreement to be performed and observed by the Company; provided, however, that the initial obligation of such successor with respect to the exercise or exchange of Warrants shall be only as set forth in Section 5.5. 6.3 INFORMATION RIGHTS. So long as any Holder or holder of Warrant Shares shall hold no less than five percent (5%) of the aggregate of the then issued and outstanding Warrants and Warrant Shares, the Company shall provide to such Holders and/or holders all information required to be provided under Section 7.2 of the Securities Purchase Agreement as in effect on the date hereof (whether or not the same shall remain in effect). 6.4 PAYMENTS IN RESPECT OF DIVIDENDS AND DISTRIBUTIONS. If, at any time prior to the Expiration Time, the Company pays any dividend or makes any distribution (whether in cash, property or securities of the Company) on its Common Stock which does not result in an adjustment under Article V, then the Company shall simultaneously pay to the Holder of each Warrant, the cash, property or securities that would have been paid or delivered to such Holder on the Warrant Shares receivable upon the exercise in full of such Warrant had such Warrant been fully exercised immediately prior to the record date for such dividend or distribution or, if no record is taken, the date as of which the record holders of Warrant Shares entitled to such dividend or distribution are to be determined. 20 24 ARTICLE VII MISCELLANEOUS 7.1 NOTICES. All notices, claims, requests, demands or other communications which are required or otherwise delivered hereunder shall be deemed to be sufficient and duly given if contained in a written instrument (i) personally delivered or sent by telecopier, (b) sent by nationally-recognized overnight courier guaranteeing next Business Day delivery or (c) sent by first class, registered or certified mail, postage prepaid, return receipt requested, addressed as follows: (a) if to the Company, to: Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, Utah 84108 Attention: Richard P. Durham and Ronald G. Moffitt Telephone No.: (801) 532-5200 Telecopier No.: (801) 584-5783 with copies to: Chase Domestic Investments, L.L.C. c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020-1080 Attention: Timothy J. Walsh Telephone No.: (212) 899-3400 Telecopier No.: (212) 899-3401 and to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Ilan S. Nissan Telephone No.: (212) 408-2400 Telecopier No.: (212) 408-2420 (b) if to any Holder, to such Holder's address as set forth on Schedule I hereto. Any notice, demand or request so delivered shall constitute valid notice under this Agreement and shall be deemed to have been received (i) on the day of actual delivery in the case of personal delivery, if delivered on a Business Day (otherwise on the next Business Day), (ii) on the next Business Day after the date when sent in the case of delivery by nationally-recognized 21 25 overnight courier, (iii) on the fifth Business Day after the date of deposit in the U.S. mail in the case of mailing or (iv) upon receipt in the case of a facsimile transmission if received on a Business Day (otherwise on the next Business Day). Any party hereto may from time to time by notice in writing served upon the other as aforesaid designate a different mailing address or a different Person to which all such notices, demands or requests thereafter are to be addressed. 7.2 NO VOTING RIGHTS; LIMITATION OF LIABILITY. No Warrant shall entitle the holder thereof to any voting rights or, except as otherwise provided herein, any other rights as a stockholder of the Company, as such. No provision hereof, in the absence of affirmative action by the Holder to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder shall give rise to any liability of such Holder for the Exercise Price of Warrant Shares acquirable by exercise hereof or as a stockholder of the Company. 7.3 AMENDMENTS AND WAIVERS. (a) Written Document. Any provision of this Agreement may be amended or waived, but only pursuant to a written agreement signed by the Company and the Requisite Holders, provided that no such amendment or modification shall without the written consent of each Holder affected thereby (i) shorten the Expiration Date of any Warrant, (ii) increase the Exercise Price of any Warrant, (iii) change any of the provisions of this Section 7.3(a) or the definition of "Requisite Holders" or any other provision hereof specifying the number or percentage of Holders required to waive, amend, or modify any rights hereunder or required to make any determination or grant any consent hereunder or otherwise to act with respect to this Agreement or any Warrants or (iv) materially increase the obligations of any Holder. (b) No Waiver. No failure on the part of any Holder to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement or the Warrants shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement or the Warrant preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 7.4 REMEDIES. Each Holder shall have all rights and remedies reserved for such Holder pursuant to this Agreement, all rights and remedies which such Holder has been granted at any time under any other agreement or instrument and all of the rights and remedies such Holder may have at law or in equity. The remedies provided herein are cumulative and not exclusive. Any Person having any rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or equity. 7.5 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Company, each Holder and its successors and permitted assigns. 22 26 7.6 COUNTERPARTS. This Agreement may be executed in two or more counterparts each of which shall constitute an original but all of which when taken together shall constitute but one agreement. 7.7 GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS EXCEPT TO THE EXTENT THAT THE NEW YORK CONFLICTS OF LAWS PRINCIPLES WOULD APPLY THE APPLICABLE LAWS OF THE STATE OF THE COMPANY'S ORGANIZATION TO INTERNAL MATTERS RELATING TO ENTITIES SUCH AS THE COMPANY ORGANIZED THEREUNDER). 7.8 BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any Person other than the Company and each Holder of a Warrant or a Warrant Share any legal or equitable right, remedy or claim hereunder. 7.9 HEADINGS. Section headings in this Agreement have been inserted for convenience of reference only and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. * * * * 23 27 IN WITNESS WHEREOF, each party hereto has caused this Agreement to be duly executed and delivered by its authorized signatory, all as of the date and year first above written. HUNTSMAN PACKAGING CORPORATION By: /s/ RONALD G. MOFFITT ------------------------------- Name: Ronald G. Moffitt Title: Executive Vice President and General Counsel CHASE DOMESTIC INVESTMENTS, L.L.C. By: Chase Capital Investments, L.P., its sole Member By: Chase Capital Partners, as Investment Manager By: /s/ RICHARD D. WATERS ------------------------------- Name: Richard D. Waters Title: General Partner NEW YORK LIFE CAPITAL PARTNERS, L.P. By: NYLCAP Manager LLC, its Investment Manager By: /s/ STEVE BENEVENTO ------------------------------- Name: Steve Benevento Title: Its Authorized Representative THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY By: /s/ RICHARD A. STRAIT ------------------------------- Name: Richard A. Strait Title: Its Authorized Representative 28 FIRST UNION CAPITAL PARTNERS, LLC By: /s/ ROBERT G. CALTON III ------------------------------- Name: Robert G. Calton III Title: Senior Vice President 29 SCHEDULE I INITIAL HOLDERS
- --------------------------------------------------------------------------------------------------------------------------- INVESTOR NUMBER OF WARRANT SHARES - --------------------------------------------------------------------------------------------------------------------------- 22,486 Chase Domestic Investments, L.L.C. c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020-1080 Attention: Richard D. Waters Telephone No.: (212) 899-3400 Telecopier No.: (212) 899-3401 with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Frederick M. Bachman Telephone No.: (212) 408-2400 Telecopier No.: (212) 728-5950 - --------------------------------------------------------------------------------------------------------------------------- New York Life Capital Partners, L.P. 10,378 51 Madison Avenue Suite 3009 New York, New York 10010 Attention: Steve Benevento Telephone No.: (212) 576-7000 Telecopier No.: (212) 576-5591 With a copy to: Akin, Gump, Strauss, Hauer & Feld, LLP 590 Madison Avenue 22nd Floor New York, New York 10022 Attention: Edward D. Sopher, Esq. Telephone No.: (212) 872-1026 Telecopier No.: (212) 872-1002 and to: Office of the General Counsel New York Life Insurance Company - ---------------------------------------------------------------------------------------------------------------------------
30
- --------------------------------------------------------------------------------------------------------------------------- INVESTOR NUMBER OF WARRANT SHARES - --------------------------------------------------------------------------------------------------------------------------- 51 Madison Avenue Suite 1104 New York, New York 10010 Telephone No.: (212) 576-7000 Telecopier No.: (212) 576-8340 - --------------------------------------------------------------------------------------------------------------------------- The Northwestern Mutual Life Insurance Company 5,189 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: Dave Barras Telephone No.: (414) 299-1618 Telecopier No.: (414) 299-7124 With a copy to: Akin, Gump, Strauss, Hauer & Feld, LLP 590 Madison Avenue 22nd Floor New York, New York 10022 Attention: Edward D. Sopher, Esq. Telephone No.: (212) 872-1026 Telecopier No.: (212) 872-1002 - --------------------------------------------------------------------------------------------------------------------------- First Union Capital Partners, LLC 5,189 301 South College Street One First Union Center, 5th Floor Charlotte, North Carolina 28288-0732 Attention: Robert G. Calton III Telephone No.: (704) 715-1481 Telecopier No.: (704) 374-6711 With a copy to: Kennedy Covington Lobdell & Hickman, L.L.P. Bank of America Corporate Center, Suite 4200 100 North Tryon Street Charlotte, North Carolina 28202-4006 Attention: J. Norfleet Pruden, III Telephone No.: (704) 331-7442 Telecopier No.: (704) 331-7598 - ---------------------------------------------------------------------------------------------------------------------------
31 EXHIBIT A THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A WARRANT AGREEMENT AND A STOCKHOLDERS' AGREEMENT, EACH DATED AS OF MAY 31, 2000, AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS. THE TERMS OF SUCH WARRANT AGREEMENT AND STOCKHOLDERS' AGREEMENT INCLUDE, AMONG OTHER THINGS, RESTRICTIONS ON TRANSFERS. A COPY OF THE WARRANT AGREEMENT AND THE STOCKHOLDERS' AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST. HUNTSMAN PACKAGING CORPORATION NO. W WARRANT TO PURCHASE ____ SHARES OF COMMON STOCK May 31, 2000 COMMON STOCK PURCHASE WARRANT THIS CERTIFIES that, for value received, [INSERT NAME OF HOLDER] (the "HOLDER"), or assigns, is entitled to purchase from HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "COMPANY"), ___ shares of the COMMON STOCK, no par value (the "COMMON STOCK"), of the Company, at the price (the "EXERCISE PRICE") of $.01 per share, at any time or from time to time during the period commencing on the date hereof and ending at 5:00 P.M. Eastern time, on May 31, 2011 (the "EXPIRATION TIME"). This Warrant has been issued pursuant to the Warrant Agreement (as amended or supplemented from time to time, the "WARRANT AGREEMENT") dated as of May 31, 2000, between the Company and the Initial Holders named therein, and is subject to the terms and conditions, and the Holder is entitled to the benefits, thereof, including without limitation provisions (i) for adjusting the number of Warrant Shares issuable upon the exercise hereof and the Exercise Price to be paid upon such exercise and (ii) providing certain other rights and obligations. A copy of the Warrant Agreement is on file and may be inspected at the principal executive office of the Company. The Holder of this certificate, by acceptance of this certificate, A-1 32 agrees to be bound by the provisions of the Warrant Agreement. Capitalized terms used but not defined herein shall have the meanings given to them in the Warrant Agreement. SECTION 1. EXERCISE OF WARRANT. On any Business Day prior to the Expiration Time, the Holder may exercise this Warrant, in whole or in part, by delivering to the Company this Warrant accompanied by a properly completed Exercise Form in the form of Annex A and a check in an aggregate amount equal to the product obtained by multiplying (a) the Exercise Price by (b) the number of Warrant Shares being purchased. Any partial exercise of a Warrant shall be for a whole number of Warrant Shares only. SECTION 2. EXERCISE PRICE. The Exercise Price is subject to adjustment from time to time as provided in the Warrant Agreement. SECTION 3. EXCHANGE OF WARRANT. On any Business Day prior to the Expiration Date, the Holder may exchange this Warrant, in whole or in part, for Warrant Shares by delivering to the Company this Warrant accompanied by a properly completed Exchange Form in the form of Annex B. The number of shares of Common Stock to be received by the Holder upon such exchange shall be determined as provided in Section 4.2 of the Warrant Agreement. SECTION 4. TRANSFER. Subject to the limitations set forth or referred to in the Warrant Agreement, this Warrant may be transferred by the Holder by delivery to the Company of this Warrant accompanied by a properly completed Assignment Form in the form of Annex C. SECTION 5. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company will issue a new Warrant of like denomination and tenor upon compliance with the provisions set forth in the Warrant Agreement. SECTION 6. NO STOCKHOLDER RIGHTS. This Warrant shall not entitle the holder hereof to any voting rights or, except as otherwise provided in the Warrant Agreement, other rights of a stockholder of the Company, as such. SECTION 7. SUCCESSORS. All of the provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of their respective successors and assigns. SECTION 8. HEADINGS. Section headings in this Warrant have been inserted for convenience of reference only and shall not affect the construction of, or be taken into consideration in interpreting, this Warrant. SECTION 9. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS EXCEPT TO THE EXTENT THAT THE NEW YORK CONFLICTS OF LAWS PRINCIPLES WOULD APPLY THE APPLICABLE LAWS OF THE STATE OF THE COMPANY'S ORGANIZATION TO INTERNAL MATTERS RELATING TO ENTITIES SUCH AS THE COMPANY ORGANIZED THEREUNDER). A-2 33 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officers and this Warrant to be dated as of the date first set forth above. HUNTSMAN PACKAGING CORPORATION By: ------------------------------------- Name: Title: [Chairman, President or Chief Executive Officer] ATTEST: By: ----------------------- Name: Title: [Chief Financial Officer, Treasurer or Assistant Treasurer] 34 ANNEX A EXERCISE FORM [TO BE SIGNED UPON EXERCISE OF WARRANT] TO HUNTSMAN PACKAGING CORPORATION The undersigned, being the Holder of the within Warrant, hereby elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder _________ shares of, the Common Stock of HUNTSMAN PACKAGING CORPORATION (the "Company") and requests that the certificates for such shares be issued in the name of, and be delivered to, _______________________, whose address is __________________________________ ____________________________. The undersigned warrants to the Company that the undersigned (a) is not acquiring the Warrant Shares with a view to transferring such Warrant Shares in violation of the Securities Act of 1933, as amended (the "Securities Act"), (b) acknowledges that the issuance of the Warrant Shares has not been registered under the Securities Act and that the Warrant Shares may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption therefrom is available and (c) is an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act (or an entity in which all of the equity owners are accredited investors of such types). The foregoing exercise is (check one): ______ irrevocable ______ conditioned upon the consummation of the transaction described briefly below: ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- Dated: --------------------------------- (Signature) --------------------------------- (Address) 35 ANNEX B EXCHANGE FORM [TO BE SIGNED UPON EXCHANGE OF WARRANT] TO HUNTSMAN PACKAGING CORPORATION The undersigned, being the Holder of the within Warrant, hereby irrevocably elects to exchange, pursuant to Section 4.2 of the Warrant Agreement referred to in such Warrant, the portion of such Warrant representing the right to purchase _________ shares of Common Stock of HUNTSMAN PACKAGING CORPORATION (the "Company"). The undersigned hereby requests that the certificates for the number of shares of Common Stock issuable in such exchange pursuant to such Section 4.2 be issued in the name of, and be delivered to, _____________, whose address is ________________________________________. The undersigned warrants to the Company that the undersigned (a) is not exchanging the Warrant Shares with a view to transfer such Warrant Shares in violation of the Securities Act of 1933, as amended (the "Securities Act"), (b) acknowledges that the issuance of the Warrant Shares has not been registered under the Securities Act and that the Warrant Shares may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption therefrom is available and (c) is an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act (or an entity in which all of the equity owners are accredited investors of such types). The foregoing exchange is (check one): ______ irrevocable ______ conditioned upon the consummation of the transaction described briefly below: ------------------------------------------------------------- ------------------------------------------------------------- Dated: ------------------------------ (Signature) ------------------------------ (Address) 36 ANNEX C ASSIGNMENT FORM [TO BE SIGNED ONLY UPON TRANSFER OF WARRANT] For value received, the undersigned hereby sells, assigns and transfers unto _________________________, all of the rights represented by the within Warrant to purchase shares of Common Stock of HUNTSMAN PACKAGING CORPORATION (the "COMPANY"), to which such Warrant relates, and appoints ________________________ Attorney to transfer such Warrant on the books of the Company, with full power of substitution in the premises. DATED: ------------------------------ (Signature) ------------------------------ (Address) EX-10.7 14 ex10-7.txt CREDIT AGREEMENT 1 EXHIBIT 10.7 EXECUTION COPY - -------------------------------------------------------------------------------- CREDIT AGREEMENT dated as of September 30, 1997 As Amended and Restated as of May 31, 2000 among HUNTSMAN PACKAGING CORPORATION, as Borrower ASPEN INDUSTRIAL, S.A. DE C.V., as Mexico Borrower The Lenders Party Hereto, Bankers Trust Company, as Administrative Agent and Collateral Agent THE CHASE MANHATTAN BANK, as Syndication Agent and The Bank of Nova Scotia, as Documentation Agent --------------------------- CHASE SECURITIES INC., as Arranger - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions ----------- SECTION 1.01.......................................................Defined Terms 2 SECTION 1.02..............................Classification of Loans and Borrowings 35 SECTION 1.03.....................................................Terms Generally 35 SECTION 1.04......Accounting Terms; GAAP; Treatment of Unrestricted Subsidiaries 35 ARTICLE II The Credits ----------- SECTION 2.01....................Commitments; Loans Outstanding on Effective Date 36 SECTION 2.02................................................Loans and Borrowings 36 SECTION 2.03.............................................Requests for Borrowings 38 SECTION 2.04.....................................................Swingline Loans 38 SECTION 2.05...................................................Letters of Credit 40 SECTION 2.06...............................................Funding of Borrowings 46 SECTION 2.07..................................................Interest Elections 47 SECTION 2.08............................Termination and Reduction of Commitments 49 SECTION 2.09................................Repayment of Loans; Evidence of Debt 50 SECTION 2.10..........................................Amortization of Term Loans 51 SECTION 2.11.................................................Prepayment of Loans 53 SECTION 2.12................................................................Fees 57 SECTION 2.13............................................................Interest 59 SECTION 2.14..........................................Alternate Rate of Interest 60 SECTION 2.15.....................................................Increased Costs 60 SECTION 2.16..............................................Break Funding Payments 62 SECTION 2.17...............................................................Taxes 62 SECTION 2.18..........Payments Generally; Pro Rata Treatment; Sharing of Setoffs 64 SECTION 2.19......................Mitigation Obligations; Replacement of Lenders 67 SECTION 2.20................................Extension of Revolving Maturity Date 68
i 3
ARTICLE III Representations and Warranties ------------------------------ SECTION 3.01................................................Organization; Powers 68 SECTION 3.02.......................................Authorization; Enforceability 69 SECTION 3.03................................Governmental Approvals; No Conflicts 69 SECTION 3.04.....................Financial Condition; No Material Adverse Change 70 SECTION 3.05..........................................................Properties 70 SECTION 3.06................................Litigation and Environmental Matters 71 SECTION 3.07.................................Compliance with Laws and Agreements 72 SECTION 3.08...............................Investment and Holding Company Status 72 SECTION 3.09...............................................................Taxes 72 SECTION 3.10...............................................................ERISA 72 SECTION 3.11..........................................................Disclosure 72 SECTION 3.12........................................................Subsidiaries 73 SECTION 3.13...........................................................Insurance 73 SECTION 3.14.......................................................Labor Matters 73 SECTION 3.15............................................................Solvency 73 SECTION 3.16..................................................Security Documents 74 SECTION 3.17.........................................Federal Reserve Regulations 75 ARTICLE IV Conditions ---------- SECTION 4.01......................................................Effective Date 75 SECTION 4.02...................................................Each Credit Event 80 ARTICLE V Affirmative Covenants --------------------- SECTION 5.01..........................Financial Statements and Other Information 81 SECTION 5.02..........................................Notices of Material Events 83 SECTION 5.03....................................Information Regarding Collateral 83 SECTION 5.04......................................Existence; Conduct of Business 84 SECTION 5.05..............................................Payment of Obligations 84 SECTION 5.06...........................................Maintenance of Properties 85 SECTION 5.07...........................................................Insurance 85 SECTION 5.08...........................................Casualty and Condemnation 86 SECTION 5.09......................Books and Records; Inspection and Audit Rights 86 SECTION 5.10................................................Compliance with Laws 87
ii 4 SECTION 5.11...............................Use of Proceeds and Letters of Credit 87 SECTION 5.12.............................................Additional Subsidiaries 87 SECTION 5.13..................................................Further Assurances 88 SECTION 5.14...............................................Interest Rate Hedging 89 ARTICLE VI Negative Covenants ------------------ SECTION 6.01........................................................Indebtedness 89 SECTION 6.02...........................................Certain Equity Securities 91 SECTION 6.03...............................................................Liens 91 SECTION 6.04.................................................Fundamental Changes 93 SECTION 6.05...........Investments, Loans, Advances, Guarantees and Acquisitions 94 SECTION 6.06.........................................................Asset Sales 97 SECTION 6.07....................................Sale and Lease-Back Transactions 98 SECTION 6.08..................................................Hedging Agreements 98 SECTION 6.09......Restricted Payments; Certain Payments Payments of Indebtedness 99 SECTION 6.10........................................Transactions with Affiliates 100 SECTION 6.11..............................................Restrictive Agreements 100 SECTION 6.12.....................................Amendment of Material Documents 101 SECTION 6.13................................................Capital Expenditures 102 SECTION 6.14......................................................Leverage Ratio 103 SECTION 6.15.............................................Interest Coverage Ratio 103 SECTION 6.16..............................................Designated Senior Debt 103 ARTICLE VII Events of Default............................104 ----------------- ARTICLE VIII The Administrative Agent.........................107 ------------------------ ARTICLE IX Miscellaneous -------------
iii 5 SECTION 9.01.............................................................Notices 110 SECTION 9.02.................................................Waivers; Amendments 111 SECTION 9.03..................................Expenses; Indemnity; Damage Waiver 112 SECTION 9.04..............................................Successors and Assigns 115 SECTION 9.05............................................................Survival 118 SECTION 9.06............................Counterparts; Integration; Effectiveness 119 SECTION 9.07........................................................Severability 119 SECTION 9.08.....................................................Right of Setoff 119 SECTION 9.09..........Governing Law; Jurisdiction; Consent to Service of Process 119 SECTION 9.10................................................WAIVER OF JURY TRIAL 120 SECTION 9.11............................................................Headings 121 SECTION 9.12.....................................................Confidentiality 121 SECTION 9.13............................................Conversion of Currencies 122 SECTION 9.14............................................Interest Rate Limitation 123 SECTION 9.15..........................................Release of Mexico Borrower 123 SECTION 9.16..............Effectiveness of the Amendment and Restatement; Original Credit Agreement............................. 123 SCHEDULES: Schedule 1.01(a) -- Mortgaged Properties Schedule 1.01(b) -- Existing Letters of Credit Schedule 1.01(c) -- Special Charges Schedule 2.01 -- Commitments Schedule 3.05 -- Owned or Leased Property Schedule 3.12 -- Subsidiaries Schedule 3.13 -- Insurance Schedule 3.16(a) -- Actions to Pledge Stock of Foreign Subsidiaries Schedule 3.16(d) -- Mortgage Filing Offices Schedule 5.07 -- Insurance Levels Schedule 6.01 -- Existing Indebtedness Schedule 6.03 -- Existing Liens Schedule 6.05 -- Existing Investments Schedule 6.10 -- Affiliate Transactions Schedule 6.11 -- Existing Restrictions EXHIBITS: Exhibit A -- Form of Assignment and Acceptance Exhibit B-1 -- Forms of Opinion of Borrower's Counsel
iv 6 Exhibit B-2 -- Form of Opinion of Foreign Counsel Exhibit B-3 -- Form of Opinion of Borrower's Utah Counsel Exhibit B-4 -- Form of Opinion of Local Counsel Exhibit C -- Form of Guarantee Agreement Exhibit D -- Form of Indemnity, Subrogation and Contribution Agreement Exhibit E -- Form of Pledge Agreement Exhibit F -- Form of Security Agreement
v 7 CREDIT AGREEMENT dated as of September 30, 1997, as amended and restated as of May 31, 2000 among HUNTSMAN PACKAGING CORPORATION, a Utah corporation, ASPEN INDUSTRIAL, S.A. DE C.V., a Mexico corporation, the LENDERS party hereto, Bankers Trust Company, as Administrative Agent and Collateral Agent, THE CHASE MANHATTAN BANK, as Syndication Agent and The Bank of Nova Scotia, as Documentation Agent. The Borrower (such term and each other capitalized term used but not defined in this preamble having the meaning assigned to such term in Article I), has entered into a Recapitalization Agreement dated as of March 31, 2000 (the "Recapitalization Agreement") with Chase Domestic Investments, L.L.C. ("Investment L.L.C."), an affiliate of Chase Capital Partners (the "Sponsor"), and the other parties thereto, pursuant to which (a) Investment L.L.C., together with certain co-investors, will contribute, directly or indirectly, an aggregate amount of not less than $165,600,000 in cash (the "Equity Contribution") to the Borrower in exchange for the issuance to Investment L.L.C. of (i) the number of shares of common stock of the Borrower specified in the Recapitalization Agreement and (ii) the Investor Preferred Stock, (b) Investment L.L.C. will acquire directly from The Christena Karen H. Durham Trust (the "Trust") and the members of management that are effecting the Management Equity Rollover (as defined below) the number of shares of common stock of the Borrower specified in the Recapitalization Agreement in exchange for $99,700,000 (the "Investor Share Purchase"), (c) the Borrower will redeem all of the shares of Borrower's common stock not purchased pursuant to the Investor Share Purchase in exchange for a redemption payment of approximately $314,000,000, subject to adjustment, other than the common stock of the Borrower subject to the Trust Equity Rollover (as defined below) and the Management Equity Rollover (the "Equity Redemption"), (d) the Trust will continue its ownership of the number of shares of common stock of the Borrower specified in the Recapitalization Agreement (the "Trust Equity Rollover") and (e) certain members of management will continue ownership of the number of shares of common stock of the 8 Borrower specified in the Recapitalization Agreement (the "Management Equity Rollover"). In connection therewith, the Borrower desires to amend and restate the terms and provisions of the Credit Agreement dated as of September 30, 1997, as amended and restated as of May 14, 1998 (the "Original Credit Agreement"), among the Borrower, the existing lenders thereunder and The Chase Manhattan Bank, as the administrative agent thereunder, in the form hereof in order, among other things, to permit the Recapitalization Transactions and the other Transactions and to provide for the Loans. The Lenders are willing to amend and restate the Original Credit Agreement and are willing to extend credit to the Borrower and the Mexico Borrower, in each case upon the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent" means Bankers Trust Company, in its capacity as administrative agent for the Lenders hereunder. 9 "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. For purposes of Section 2.18(c), The Chase Manhattan Corporation shall not be deemed an Affiliate of the Borrower. "Alternate Base Rate" means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day, and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Applicable Percentage" means, with respect to any Revolving Lender, the percentage of the total Revolving Commitments represented by such Lender's Revolving Commitment. If the Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Revolving Commitments most recently in effect, giving effect to any assignments. 10 "Applicable Rate" means, for any day (a) with respect to a Tranche B Term Loan, the applicable Tranche B Rate and (b) with respect to any ABR Loan or Eurodollar Loan that is a Revolving Loan, a Mexico Term Loan or a Tranche A Term Loan, or with respect to the commitment fees payable hereunder related to the Revolving Commitments, as the case may be, the applicable rate per annum set forth below under the caption "ABR Spread", "Eurodollar Spread" or "Commitment Fee Rate", as the case may be, based upon the Leverage Ratio as of the most recent determination date; provided that until the delivery to the Administrative Agent, pursuant to Section 5.01(b), of the Borrower's consolidated financial statements for the Borrower's fiscal year ending December 31, 2000, the "Applicable Rate" shall be the applicable rate per annum set forth below in Category 1:
- --------------------------------------------------------------------------------------------------------------------------------- Leverage Ratio ABR Spread Eurodollar Spread Commitment Fee Rate - --------------------------------------------------------------------------------------------------------------------------------- Category 1 ---------- Greater than 4.25 to 1.00 1.50% 2.50% 0.500% - --------------------------------------------------------------------------------------------------------------------------------- Category 2 ---------- Less than or equal to 4.25 to 1.00 but greater than 3.25 to 1.00 1.25% 2.25% 0.500% - --------------------------------------------------------------------------------------------------------------------------------- Category 3 ---------- Less than or equal to 3.25 to 1.00 but greater than 2.25 to 1.00 1.00% 2.00% 0.500% - --------------------------------------------------------------------------------------------------------------------------------- Category 4 ---------- Less than or equal to 2.25 to 1.00 0.75% 1.75% 0.375% - ---------------------------------------------------------------------------------------------------------------------------------
For purposes of the foregoing, (a) the Leverage Ratio shall be determined as of the end of each fiscal quarter of the Borrower's fiscal year based upon the Borrower's consolidated financial statements delivered pursuant to Section 5.01(a) or (b) and (b) each change in the Applicable Rate resulting from a change in the Leverage Ratio shall be effective during the period commencing on and including the third day after the date of delivery to the Administrative Agent of such consolidated financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change; provided that the Leverage Ratio shall be deemed to be in Category 1 (i) at any time that an Event of Default has occurred and is continuing or (ii) if the Borrower fails to deliver the consolidated financial statements required to be delivered by it pursuant to Section 5.01(a) 11 or (b), during the period from the expiration of the time for delivery thereof until such consolidated financial statements are delivered. "Arranger" means Chase Securities Inc. as arranger for the Loans. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent and the Borrower. "Bank Hedge Agreement" means any Hedge Agreement required under Section 5.14 or otherwise permitted by this Agreement that is entered into by and between a Loan Party and any Hedge Bank. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means Huntsman Packaging Corporation, a Utah corporation. "Borrower Amount" means, at any date, the sum of: (a) the aggregate amount of Excess Cash Flow for all fiscal years of the Borrower completed prior to such date for which financial statements have been delivered pursuant to Section 5.01 (commencing with the fiscal year ending December 31, 2000), less the sum of (i) all prepayments of Term Borrowings required to be made pursuant to Section 2.11(c) and (ii) all reductions of Revolving Commitments required to be made pursuant to Section 2.08(c) in respect of such Excess Cash Flow; plus (b) the aggregate Net Proceeds received by the Borrower after the Effective Date and prior to such date in respect of Prepayment Events described in clause (c) of the definition of "Prepayment Event", less the sum of (i) all prepayments of Term Borrowings required to be made pursuant to Section 2.11(b) in respect of such Net Proceeds, (ii) all reductions of 12 Revolving Commitments required to be made pursuant to Section 2.08(c) in respect of such Net Proceeds and (iii) any portion of such Net Proceeds reserved for a Permitted Acquisition or for Capital Expenditures as provided in clause (ii) of Section 2.11(e); minus (c) the sum of all utilizations of the Borrower Amount pursuant to any provisions of this Agreement permitting utilization of the Borrower Amount. Any provisions of this Agreement that permit an action to be taken by utilizing the Borrower Amount shall be construed to permit such action only to the extent that the Borrower Amount is a positive amount at that time. "Borrowing" means (a) Loans of the same Class and Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, or (b) a Swingline Loan. "Borrowing Request" means a request by the Borrower or the Mexico Borrower for a Borrowing in accordance with Section 2.03. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks generally are not open for dealings in dollar deposits in the London interbank market. For purposes of this Agreement "Pioneer Day" as recognized in the State of Utah shall not be a Business Day. "Capital Expenditures" means, for any period, without duplication, (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and its Restricted Subsidiaries that are (or would be) set forth in a consolidated statement of cash flows of the Borrower and its Restricted Subsidiaries for such period prepared in accordance with GAAP and (b) Capital Lease Obligations incurred by the Borrower and its Restricted Subsidiaries during such period. 13 "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Cash Interest Expense" means, for any period, Consolidated Interest Expense for such period excluding any portion thereof in respect of interest not required to be paid in cash during such period or within one year thereafter. "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq. "Change in Control" means, at any time, (a) prior to an IPO, the failure by the Control Group to collectively own and control at least a sufficient amount of the outstanding voting capital stock of the Borrower, or otherwise have the right, to elect, or cause the election of, at least a majority of the Board of Directors of the Borrower; (b) after an IPO, the acquisition of beneficial ownership, directly or indirectly, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the Effective Date) other than the Control Group, of shares representing more than 35% (or 40%, if such Person or group is the Trust) of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower; (c) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by members of the Control Group or the board of directors of the Borrower nor (ii) appointed by directors so nominated; (d) prior to the date that all Mexico Term Loans have been fully repaid, the Mexico Borrower ceases to be a Wholly Owned Subsidiary; or (e) there shall occur a "Change of Control" as defined under the New Senior Subordinated Documents or the Investor Preferred Stock. If, at any time, any of the members of the Board of Directors of the Borrower shall have more than 14 one vote per Person, then any determination of a majority of the Board of Directors shall be based on a majority of the voting power of the members thereof rather than a majority of the members or seats. "Change in Law" means (a) the adoption of any law, rule or regulation after the Effective Date, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the Effective Date or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender's or the Issuing Bank's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the Effective Date. "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Mexico Term Loans, Tranche A Term Loans, Tranche B Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, Mexico Term Commitment, Tranche A Term Commitment or Tranche B Term Commitment. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Collateral" means any and all "Collateral", as defined in any applicable Security Document. "Collateral Agent" means Bankers Trust Company, in its capacity as collateral agent for the Secured Parties under the Security Documents. "Commitment" means a Revolving Commitment, Mexico Term Commitment, Tranche A Term Commitment, Tranche B Term Commitment, or any combination thereof (as the context requires). "Consolidated EBITDA" means, for any period, Consolidated Net Income for such period, plus, without duplication and to the extent deducted from revenues in determining Consolidated Net Income, the sum of (a) the 15 aggregate amount of Consolidated Interest Expense for such period, (b) the aggregate amount of letter of credit fees paid during such period, (c) the aggregate amount of income tax expense for such period, (d) all amounts attributable to depreciation, amortization and other non-cash charges or losses for such period, (e) all extraordinary charges and losses during such period and any Excluded Charges and Consulting Charges during such period, (f) non-cash expenses resulting from the grant of stock options or other equity-related incentives to any director, officer or employee of the Borrower or any Restricted Subsidiary pursuant to a written plan or agreement, (g) all amounts attributable to compensation expense related to long term incentive plan payments, other bonuses (including stay bonuses) and severance payments incurred in connection with the Transactions and (h) all non-recurring transaction and financing expenses resulting from the Transactions and Permitted Acquisitions, and minus, without duplication and to the extent added to revenues in determining Consolidated Net Income for such period, all extraordinary gains during such period, all as determined on a consolidated basis with respect to the Borrower and the Restricted Subsidiaries in accordance with GAAP. If the Borrower or any Restricted Subsidiary has made any Permitted Acquisition or any sale, transfer, lease or other disposition of assets outside of the ordinary course of business permitted by Section 6.06 during the relevant period for determining Consolidated EBITDA, Consolidated EBITDA for the relevant period shall be calculated after giving pro forma effect thereto, as if such Permitted Acquisition or sale, transfer, lease or other disposition of assets (and any related incurrence, repayment or assumption of Indebtedness, with any new Indebtedness being deemed to be amortized over the relevant period in accordance with its terms, and assuming that any Revolving Loans borrowed in connection with such acquisition are repaid with excess cash balances when available) had occurred on the first day of the relevant period for determining Consolidated EBITDA. Any such pro forma calculations may include operating and other expense reductions and other synergistic benefits for such period resulting from any Permitted Acquisition that is being given pro forma effect to the extent that such operating and other expense reductions and other synergistic benefits would be permitted pursuant to Article XI of Regulation S-X under the Securities Act of 1933. 16 "Consolidated Interest Expense" means, for any period, the interest expense, both expensed and capitalized (including the interest component in respect of Capital Lease Obligations), accrued by the Borrower and the Restricted Subsidiaries during such period (net of payments made or received under interest rate protection agreements and net of interest income), determined on a consolidated basis in accordance with GAAP; provided that "Consolidated Interest Expense" shall not include non-cash interest expense in respect of the New Senior Subordinated Notes arising because (i) such Notes and the Warrants were issued at a discount to their face value and (ii) a portion of the issue price of such Notes and the Warrants is being allocated to the Warrants. "Consolidated Net Income" means, for any period, net income or loss of the Borrower and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, provided that there shall be excluded (a) the income of any unconsolidated Subsidiary and any Person in which any other Person (other than the Borrower or any of the Restricted Subsidiaries or any director holding qualifying shares in compliance with applicable law or any other third party holding a de minimus number of shares in order to comply with other similar requirements) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of its Restricted Subsidiaries by such Person during such period, and (b) the income (or loss) of any Person accrued prior to the date it becomes (or, for pro forma purposes, is deemed to have become) a Restricted Subsidiary or is merged into or consolidated with the Borrower or any of its Restricted Subsidiaries or the date that Person's assets are acquired by the Borrower or any of its Restricted Subsidiaries. "Consulting Charges" means the non-recurring charges incurred or to be incurred specified on Schedule 1.01(c), pursuant to the Agreement between the Borrower and A.T. Kearney, Inc. dated as of February 22, 2000. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through 17 the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Control Group" means collectively the Sponsor and all Persons Controlled by the Sponsor. "Debt Tender Offer" means the Tender Offer and Consent Solicitation dated April 12, 2000, made by the Borrower (a) for the purchase of all of the Existing Notes and (b) to obtain consents to amend the Existing Notes Indenture, in accordance with the terms thereof. "Default" means any event or condition that constitutes an Event of Default or that upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Documentation Agent" means The Bank of Nova Scotia, in its capacity as documentation agent for the Lenders hereunder. "dollars" or "$" refers to lawful money of the United States of America. "Effective Date" means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02). "Environmental Laws" means all laws (including common law), rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, handling, treatment, storage, disposal, Release or threatened Release of any Hazardous Material or to health and safety matters. "Environmental Liability" means any liability, obligation, claim, action, suit, judgment or order, contingent or otherwise (including, but not limited to, any liability for damages, natural resource damage, costs of environmental remediation, administrative oversight costs, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based 18 upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Equity Contribution" has the meaning set forth in the preamble to this Agreement. "Equity Redemption" has the meaning set forth in the preamble to this Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or 19 any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. "Event of Default" has the meaning assigned to such term in Article VII. "Excess Cash Flow" means, for any period, the sum (without duplication) of: (a) Consolidated Net Income for such period, adjusted to exclude any gains or losses attributable to Prepayment Events or dispositions that would constitute Prepayment Events but for clauses (a)(i) through (a) (iii) and clause (b) of the definition of the term "Prepayment Event"; plus (b) depreciation, amortization and other non-cash charges or losses deducted in determining such Consolidated Net Income for such period; plus (c) the sum of (i) the amount, if any, by which Net Working Capital decreased during such period plus (ii) the amount, if any, by which the consolidated deferred revenues of the Borrower and its consolidated Restricted Subsidiaries (not recorded as a current liability) increased during such period plus (iii) the aggregate principal amount of Capital Lease Obligations and other Indebtedness incurred during such period to finance Capital Expenditures and the investments referred to in clause (e) below, to the extent that mandatory principal payments in respect of such Indebtedness would not be excluded from clause (f) below when made; minus (d) the sum of (i) any non-cash gains included in determining such Consolidated Net Income for such 20 period plus (ii) the amount, if any, by which Net Working Capital increased during such period plus (iii) the amount, if any, by which the consolidated deferred revenues of the Borrower and its consolidated Restricted Subsidiaries (not recorded as a current liability) decreased during such period; minus (e) the sum of (i) Capital Expenditures for such period, (ii) cash consideration paid in respect of Permitted Acquisitions during such period, including cash generated by the issuance of Indebtedness, and (iii) investments made in cash, including cash generated by the issuance of Indebtedness, pursuant to clause (h) of Section 6.05 during such period; provided that amounts shall not be deducted pursuant to this clause (e) in determining Excess Cash Flow to the extent that such Capital Expenditures, Permitted Acquisitions or investments are made (A) by utilizing the Borrower Amount, (B) by utilizing Net Proceeds of an event that otherwise would be a "Prepayment Event" as provided in the proviso to the definition of "Prepayment Event" or (C) in reliance upon sub-clause (ii) of Section 2.11(e); minus (f) the aggregate principal amount of Indebtedness repaid or prepaid by the Borrower and its consolidated Restricted Subsidiaries during such period, excluding (i) Indebtedness in respect of Revolving Loans and Letters of Credit, (ii) Term Loans prepaid pursuant to Section 2.11(a), (b) or (c), (iii) repayments or prepayments of Indebtedness financed by incurring other Indebtedness, to the extent that mandatory principal payments in respect of such other Indebtedness would, pursuant to this clause (f), be deducted in determining Excess Cash Flow when made, (iv) Indebtedness referred to in clauses (iii), (iv) and (ix) of Section 6.01 and (v) Indebtedness referred to in clauses (v), (vi) and (viii) of Section 6.01, to the extent but only to the extent that such Indebtedness was incurred by utilizing the Borrower Amount. "Excluded Charges" means (a) the non-recurring charges incurred or to be incurred in respect of the restructurings, plant closings or similar actions that have 21 occurred or are expected to be taken in connection with the Borrower's facilities specified in Schedule 1.01(c), and (b) any other such non-recurring charges incurred in respect of any restructurings, plant closings or similar actions during the eighteen month period commencing on the Effective Date, provided that the cash portion of charges referred to in this clause (b) shall be limited to $8,000,000. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower or Mexico Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower or Mexico Borrower is located, and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.19(b)), any withholding tax that is imposed on amounts payable hereunder, other than any withholding tax imposed by a Mexican taxing authority payable with respect to the Mexico Term Loans, to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 2.17(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower or Mexico Borrower with respect to such withholding tax pursuant to Section 2.17(a) and (d) in the case of a Mexico Lender (other than an assignee pursuant to a request by the Borrower or the Mexico Borrower under Section 2.19(b)), any Taxes that are imposed on amounts payable hereunder to such Mexico Lender at the time such Mexico Lender becomes a party to this Agreement (or designates a new lending office, or before such Mexico Lender receives its first interest payment under this Agreement) to the extent that such Taxes are imposed because such Mexico Lender (i) does not qualify for the 22 benefits (including interest and limitation on benefits provisions) of an effective income tax treaty for the avoidance of double tax between its country of residence and Mexico, (ii) is not duly registered as a foreign financial institution with the Mexico Ministry of Finance and Public Credit, (iii) will not be duly registered as a foreign financial institution with the Mexican Ministry of Finance and Public Credit prior to the first interest payment date, which in no event shall be sooner than 90 days after the Effective Date or, in the case of an assignee, prior to the date 90 days following the date of the related assignment and (iv) in the case of a Mexico Lender that is organized under the laws of a United States jurisdiction, or whose applicable lending office is located in the United States, such Lender is not a bank or insurance company within the meaning of Article 11(2)(a)(i) of the income tax treaty between the United States and Mexico. "Existing Letters of Credit" means the letters of credit issued under the Original Credit Agreement and outstanding as of the Effective Date, which are listed on Schedule 1.01(b). "Existing Notes" means the Borrower's 9c% Senior Subordinated Notes due 2007 issued under the Existing Notes Indenture. "Existing Notes Indenture" means the Indenture dated as of September 30, 1997, among the Borrower, the guarantors named therein and The Bank of New York, as trustee. "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. 23 "Financial Officer" means the chief financial officer, principal accounting officer, treasurer, assistant treasurer or controller of the Borrower. "Foreign Assets" means the assets of or shares or other ownership interests in the Foreign Subsidiaries. "Foreign Lender" means (a) with respect to the Borrower, any Lender that is organized under the laws of a jurisdiction other than the United States of America, each State thereof and the District of Columbia, and (b) with respect to the Mexico Borrower, any Lender that is organized under the laws of a jurisdiction other than Mexico. "Foreign Subsidiary" means any Subsidiary that is organized under the laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia. "GAAP" means, subject to Section 1.04, generally accepted accounting principles in the United States of America. "Governmental Authority" means the government of the United States of America, Mexico, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the 24 owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. "Guarantee Agreement" means the amended and restated Guarantee Agreement, substantially in the form of Exhibit C, made by the Borrower and the Subsidiary Loan Parties in favor of the Administrative Agent for the benefit of the Secured Parties. "Hazardous Materials" means all explosive, radioactive, hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes, and all other substances or wastes of any nature regulated pursuant to any Environmental Law, including any material listed as a hazardous substance under Section 101(14) of CERCLA. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "Hedge Bank" means any Lender (or any Affiliate thereof) in its capacity as a party to a Bank Hedge Agreement. "Immaterial Subsidiaries" mean, at any date, Restricted Subsidiaries affected by one or more events described in clause (h), (i), (j) or (k) of Article VII that (a) have (in the aggregate) consolidated assets representing less than 5% of the consolidated assets of the Borrower and its Restricted Subsidiaries as of such date, determined in accordance with GAAP, and (b) had (in the aggregate) consolidated revenues and consolidated net income, in each case for the period of four consecutive 25 fiscal quarters of the Borrower most recently ended as of such date for which financial statements have been delivered pursuant to Section 5.01, representing less than 5% of the revenues and consolidated net income, respectively, of the Borrower and its Restricted Subsidiaries for such period, determined in accordance with GAAP; provided that all Restricted Subsidiaries affected by events described in such clauses of Article VII shall be consolidated for purposes of determining compliance with clauses (a) and (b) above. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding accounts payable incurred in the ordinary course of business that are not overdue by more than 90 days, unless the payment thereof is being contested in good faith) (it being understood that "deferred purchase price" in connection with any purchase of property or assets shall include only that portion of the purchase price which shall be deferred beyond the date on which the purchase is actually consummated), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (i) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable 26 therefor. Notwithstanding the foregoing, "Indebtedness" shall not include (i) deferred taxes or (ii) unsecured indebtedness of the Borrower or any Subsidiary to finance insurance premiums in a principal amount not in excess of the casualty and other insurance premiums to be paid by the Borrower or any Restricted Subsidiary for a three-year period beginning on the date of any incurrence of such indebtedness. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Indemnity, Subrogation and Contribution Agreement" means the amended and restated Indemnity, Subrogation and Contribution Agreement, substantially in the form of Exhibit D, among the Borrower, the Subsidiary Loan Parties and the Administrative Agent. "Interest Election Request" means a request by the Borrower or the Mexico Borrower to convert or continue a Revolving Borrowing or Term Borrowing in accordance with Section 2.07. "Interest Payment Date" means (a) with respect to any ABR Loan (including any Swingline Loan), the last day of each March, June, September and December and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period. "Interest Period" means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period 27 that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Investment L.L.C." has the meaning set forth in the preamble to this Agreement. "Investor Preferred Stock" means the Series A Cumulative Exchangeable Redeemable Preferred Stock of the Borrower issued on the Effective Date having the terms specified in the Borrower's Third Amended and Restated Articles of Incorporation as in effect on the Effective Date. "Investor Share Purchase" has the meaning set forth in the preamble to this Agreement. "IPO" means the issuance by the Borrower of shares of its common stock to the public pursuant to a bona fide underwritten public offering. "Issuing Bank" means Bankers Trust Company, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i) and such other financial institutions as may become Issuing Banks as provided in Section 2.05(i). The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, subject to the consent of the Borrower which shall not be unreasonably withheld, in which case the term "Issuing Bank" shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. In the event that there is more than one Issuing Bank at any time, references herein and in the other Loan Documents to the Issuing Bank shall be deemed to refer to the Issuing Bank in respect of the applicable Letter of Credit or to all Issuing Banks, as the context requires. Notwithstanding the foregoing, each institution listed in 28 Schedule 1.01(b) shall be deemed to be an Issuing Bank with respect to the Existing Letters of Credit issued by it. "Joint Venture" means, as to a Person, any corporation, partnership or other legal entity or arrangement in which such Person has any direct or indirect equity interest and that is not a subsidiary of such Person. "LC Availability Period" means the period from and including the Effective Date to but excluding the earlier of (a) the date that is five Business Days prior to the Revolving Maturity Date and (b) the date of termination of the Revolving Commitments. "LC Disbursement" means a payment made by the Issuing Bank pursuant to a Letter of Credit. "LC Exposure" means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time. "Lender Affiliate" means, (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Lenders" means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. Unless the context 29 otherwise requires, the term "Lenders" includes the Swingline Lender. "Letter of Credit" means any letter of credit issued pursuant to this Agreement. Each Existing Letter of Credit shall be deemed to constitute a Letter of Credit issued hereunder on the Effective Date for all purposes of the Loan Documents. "Leverage Ratio" means, on any date, the ratio of (a) Total Debt as of such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of the Borrower ended on such date, all determined on a consolidated basis in accordance with GAAP. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 10:00 a.m., New York City time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the 30 foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loan Documents" means this Agreement, the Guarantee Agreement, the Indemnity, Subrogation and Contribution Agreement, the Security Documents and each Bank Hedging Agreement. "Loan Parties" means the Borrower, the Mexico Borrower and the Subsidiary Loan Parties; provided that the Mexico Borrower shall not be a "Loan Party" for purposes of Articles V and VI. "Loan Transactions" means the execution, delivery and performance by each Loan Party of the Loan Documents to which it is to be a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder. "Loans" means the loans made by the Lenders to the Borrower or the Mexico Borrower pursuant to this Agreement. "Management Equity Rollover" has the meaning set forth in the preamble to this Agreement. "Margin Stock" shall have the meaning assigned to such term in Regulation U. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, results of operations or condition, financial or otherwise, of the Borrower and the Restricted Subsidiaries, taken as a whole, (b) the ability of the Loan Parties to perform any material obligations under any Loan Document or (c) the rights of or benefits available to the Lenders under any Loan Document. "Material Indebtedness" means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and its Restricted Subsidiaries in an aggregate principal amount exceeding $10,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or 31 any Restricted Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Restricted Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "Mexico Borrower" means Aspen Industrial, S.A. de C.V., a Mexico corporation. "Mexico Lender" means a Lender with a Mexico Term Commitment or an outstanding Mexico Term Loan. "Mexico Term Commitment" means, with respect to each Mexico Lender, the commitment, if any, of such Mexico Lender to make Mexico Term Loans on the Effective Date, expressed as an amount representing the maximum aggregate principal amount of Mexico Term Loans to be made by such Mexico Lender hereunder, as such Commitment may be (a) reduced from time to time pursuant to Section 2.08 or (b) reduced or increased from time to time pursuant to assignments by or to such Mexico Lender pursuant to Section 9.04. The initial amount of each Mexico Lender's Mexico Term Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Mexico Lender shall have assumed its Mexico Term Commitment, as applicable. The initial aggregate amount of the Mexico Lenders' Mexico Term Commitments as of the Effective Date is $40,000,000. "Mexico Term Loan" has the meaning set forth in Section 2.01. "Mexico Term Loan Maturity Date" means May 31, 2006. "Moody's" means Moody's Investors Service, Inc. "Mortgage" means a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document, including any amendment thereto, granting a Lien on any Mortgaged Property to secure the Obligations. Each Mortgage shall be reasonably satisfactory in form and substance to the Collateral Agent. 32 "Mortgaged Property" means, initially, each parcel of real property and the improvements thereto owned by a Loan Party and identified on Schedule 1.01(a), and includes each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.12 or 5.13. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Proceeds" means, with respect to any event (a) the cash proceeds received by the Borrower and the Restricted Subsidiaries in respect of such event including (i) any cash received in respect of any non-cash proceeds (excluding interest payments), but only as and when received, (ii) in the case of a casualty, insurance proceeds, and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, net of (b) the sum of (i) all reasonable fees and out-of-pocket expenses paid by the Borrower and the Restricted Subsidiaries to third parties (other than to the Borrower or a Subsidiary) in connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or other insured damage or condemnation or similar proceeding), the amount of all payments required to be made by the Borrower and the Restricted Subsidiaries as a result of such event to repay Indebtedness (other than Loans) secured by such asset or otherwise subject to mandatory prepayment as a result of such event (including in order to obtain any consent required therefor), (iii) the amount of all taxes paid (or reasonably estimated to be payable) by the Borrower and the Restricted Subsidiaries, and the amount of any reserves established by the Borrower and the Restricted Subsidiaries to fund contingent liabilities reasonably estimated to be payable, and that are directly attributable to such event (as determined reasonably and in good faith by the chief financial officer of the Borrower) and (iv) all distributions and other payments required to be made to minority interest holders in Subsidiaries or Joint Ventures as a result of such event (provided that such distribution or payment is proportionate to such minority interest holders' share of net income (or dividends and distribution made in respect of the capital stock or other equity interests) of such 33 Subsidiary or Joint Venture as provided in the certificate of incorporation or other governing documents of such Subsidiary or Joint Venture). In the case of Net Proceeds denominated in a currency other than dollars, the amount of such Net Proceeds shall be the dollar equivalent thereof based upon the exchange rates prevailing at the time. "Net Working Capital" means, at any date, (a) the consolidated current assets of the Borrower and its consolidated Restricted Subsidiaries as of such date (excluding cash and Permitted Investments) minus (b) the consolidated current liabilities of the Borrower and its consolidated Restricted Subsidiaries as of such date (excluding current liabilities in respect of Indebtedness). Net Working Capital at any date may be a positive or negative number. Net Working Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative. "New Senior Subordinated Note Documents" means the New Senior Subordinated Notes, the indenture under which the New Senior Subordinated Notes are issued, all other documents evidencing, guaranteeing or otherwise governing the terms of the New Senior Subordinated Notes, the Warrants and the warrant agreement under which the Warrants were issued. "New Senior Subordinated Notes" means (i) the 13% Senior Subordinated Notes due 2010 in an aggregate principal amount of $220,000,000 issued by the Borrower pursuant to the New Senior Subordinated Note Documents (the "Initial Notes") and (ii) 13% senior subordinated notes with substantially identical terms to the Initial Notes which are issued in exchange for the Initial Notes following the issuance of the Initial Notes as contemplated by the New Senior Subordinated Note Documents. "Obligations" has the meaning assigned to such term in the Security Agreement. "Original Credit Agreement" has the meaning set forth in the preamble to this Agreement. "Other Taxes" means any and all current or future stamp or documentary taxes or any other excise or property 34 taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Perfection Certificate" means a certificate in the form of Annex 1 to the Security Agreement or any other form approved by the Collateral Agent. "Permitted Acquisition" means any acquisition by the Borrower or a Restricted Subsidiary of the Borrower of all or substantially all the assets of, or all the shares of capital stock of or other equity interests in, a Person or a division, line of business or other business unit of a Person if, immediately after giving effect thereto, (a) no Default has occurred and is continuing or would result therefrom, (b) all transactions related thereto are consummated in all material respects in accordance with applicable laws, (c) each Subsidiary formed for the purpose of or resulting from such acquisition shall be a Restricted Subsidiary and all the capital stock of each such Subsidiary shall be owned directly by the Borrower or a Restricted Subsidiary of the Borrower and all actions required to be taken with respect to such acquired or newly formed Subsidiary under Sections 5.12 and 5.13 have been taken, (d) the Borrower and its Restricted Subsidiaries are in compliance, on a pro forma basis after giving effect to such acquisition, with the covenants contained in Sections 6.13, 6.14 and 6.15 recomputed as at the last day of the most recently ended fiscal quarter of the Borrower for which financial statements are available, as if such acquisition (and any related incurrence or repayment of Indebtedness, with any new Indebtedness being deemed to be amortized over the applicable testing period in accordance with its terms, and assuming that any Revolving Loans borrowed in connection with such acquisition are repaid with excess cash balances when available) had occurred on the first day of each relevant period for testing such compliance and (e) the Borrower has delivered to the Administrative Agent an officers' certificate to the effect set forth in clauses (a), (b), (c) and (d) above, together 35 with all relevant financial information for the Person or assets to be acquired. "Permitted Encumbrances" means: (a) Liens imposed by law for Taxes that are not yet due or are being contested in compliance with Section 5.05; (b) carriers', warehousemen's, mechanics', materialmen's, processors', landlords', repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 60 days or are being contested in compliance with Section 5.05; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII; (f) Liens of a collection bank arising in the ordinary course of business under Section 4-208 of the Uniform Commercial Code in effect in the relevant jurisdiction; (g) Liens disclosed on title policies delivered to the Administrative Agent prior to the Effective Date in respect of any Mortgaged Property and easements, zoning restrictions, rights-of-way and similar restrictions and encumbrances (including minor title and survey defects) on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected 36 property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary; and (h) Liens in respect of real property that become Mortgaged Property after the Effective Date pursuant to Section 5.13 to the extent such Lien is permitted by the applicable Mortgage and reasonably acceptable to the Administrative Agent; provided that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. "Permitted Investments" means (i) a marketable obligation, maturing within two years after issuance thereof, issued or guaranteed by the United States of America or an instrumentality or agency thereof, (ii) a certificate of deposit or banker's acceptance, maturing within one year after issuance thereof, issued by any Lender, or a national or state bank or trust company or a European, Canadian or Japanese bank in each case having capital, surplus and undivided profits of at least $100,000,000 and whose long-term unsecured debt has a rating of "A" or better by S&P or A2 or better by Moody's or the equivalent rating by any other nationally recognized rating agency (provided that the aggregate face amount of all investments in certificates of deposit or banker's acceptances issued by the principal offices of or branches of such European or Japanese banks located outside the United States shall not at any time exceed 33-1/3% of all investments described in this definition), (iii) open market commercial paper, maturing within 270 days after issuance thereof, which has a rating of A1 or better by S&P or P1 or better by Moody's, or the equivalent rating by any other nationally recognized rating agency, (iv) repurchase agreements and reverse repurchase agreements with a term not in excess of one year with any financial institution which has been elected a primary government securities dealer by the Federal Reserve Board or whose securities are rated AA-or better by S&P or Aa3 or better by Moody's or the equivalent rating by any other nationally recognized rating agency relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or instrumentality thereof and backed by the full faith and credit of the United States of America, (v) "money market" preferred stock maturing within 37 six months after issuance thereof or municipal bonds issued by a corporation organized under the laws of any state of the United States, which has a rating of "A" or better by S&P or Moody's or the equivalent rating by any other nationally recognized rating agency, (vi) tax exempt floating rate option tender bonds backed by letters of credit issued by a national or state bank whose long-term unsecured debt has a rating of AA or better by S&P or Aa2 or better by Moody's or the equivalent rating by any other nationally recognized rating agency, (vii) "money market" funds that invest in the investments specified in clauses (i) through (vi) above and (viii) demand deposit accounts with commercial banks. "Permitted Mexico Indebtedness" means Indebtedness of the Mexico Borrower for borrowed money that (a) is denominated in Mexico pesos, (b) is supported by a Letter of Credit and (c) is in an aggregate principal amount not exceeding $40,000,000 (based on exchange rates prevailing at the time such Indebtedness is incurred). "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pledge Agreement" means the amended and restated Pledge Agreement, substantially in the form of Exhibit E, among the Borrower, the Subsidiaries party thereto and the Collateral Agent for the benefit of the Secured Parties. "Prepayment Event" means: (a) any sale, transfer or other disposition (including pursuant to a sale and leaseback transaction) of any property or asset of the Borrower or any Restricted Subsidiary, other than (i) 38 dispositions described in clauses (a), (b), (c), (d), (e) and (h) of Section 6.06, (ii) dispositions to which clause (b) of this definition applies, and (iii) other dispositions resulting in aggregate Net Proceeds not exceeding $10,000,000 during any fiscal year of the Borrower; or (b) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of the Borrower or any Restricted Subsidiary, other than such events resulting in aggregate Net Proceeds not exceeding $10,000,000 during any fiscal year of the Borrower; or (c) the issuance by the Borrower or any Restricted Subsidiary of any equity securities, or the receipt by the Borrower or any Restricted Subsidiary of any capital contribution, other than (i) any such issuance of equity securities to, or receipt of any such capital contribution from, the Borrower or a Restricted Subsidiary and (ii) the issuance by the Borrower of equity securities to officers, directors and employees of the Borrower and its Restricted Subsidiaries, in the case of this clause (ii), resulting in aggregate Net Proceeds not exceeding $10,000,000 during any fiscal year of the Borrower; or (d) the incurrence (i) by the Borrower or any Restricted Subsidiary of any Indebtedness, other than Indebtedness permitted by Section 6.01, or (ii) of any Permitted Mexico Indebtedness; provided that, with respect to any event described in clause (a) or (b) above, if the Borrower shall deliver a certificate of a Financial Officer to the Administrative Agent at the time of such event (i) setting forth the Borrower's or a Restricted Subsidiary's intent to use the Net Proceeds of such event to repair the assets that are the subject of such event, or to use the Net Proceeds to make acquisitions of assets or capital stock permitted by this Agreement to be used in a line of business permitted under Section 6.04(b), in each case within 365 days (or, in the case of a disposition of Foreign Assets, 545 days) of receipt of such Net Proceeds and (ii) certifying that no 39 Default has occurred and is continuing, then such event shall not constitute a Prepayment Event except to the extent the Net Proceeds therefrom are not so used at the end of such 365-day or 545-day period, as applicable, at which time such event shall be deemed a Prepayment Event with Net Proceeds equal to the Net Proceeds so remaining unused; provided further that the provisions of the foregoing exception allowing Net Proceeds to be used to finance Permitted Acquisitions in Canada shall be subject to the requirement that all Subsidiaries resulting from any such Permitted Acquisitions must be treated as Subsidiary Loan Parties for purposes of this Agreement. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Bankers Trust Company as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Qualified Preferred Stock" means, with respect to any Person, any preferred capital stock or preferred equity interest that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event does not (a) (i) mature or becomes mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (ii) become convertible or exchangeable at the option of the holder thereof for Indebtedness or preferred stock that is not Qualified Preferred Stock; or (iii) become redeemable at the option of the holder thereof (other than as a result of a change of control event), in whole or in part, in each case on or prior to the first anniversary of the Tranche B Term Loan Maturity Date and (b) provide holders thereunder with rights upon the occurrence of a "change of control" event or have other terms relating to "change of control" events that are less favorable to the Lenders than the applicable terms set forth in the Investor Preferred Stock. Notwithstanding anything to the contrary, the Investor Preferred Stock shall be deemed to be Qualified Preferred Stock. "Recapitalization Agreement" has the meaning set forth in the preamble to this Agreement. 40 "Recapitalization Documents" means the Recapitaliza-tion Agreement and the other agreements and documents entered into pursuant thereto or in connection therewith. "Recapitalization Transactions" means the transactions contemplated by the Recapitalization Agreement, including the Equity Contribution, the Investor Share Purchase, the Equity Redemption, the Trust Equity Rollover and the Management Equity Rollover. "Register" has the meaning set forth in Section 9.04. "Regulation U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Release" means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment. "Remaining Notes" means any Existing Notes that are not purchased and canceled pursuant to the Debt Tender Offer. "Required Lenders" means, at any time, Lenders having Revolving Exposures, Term Loans and unused Commitments representing more than 50% of the sum of the total Revolving Exposures, outstanding Term Loans and unused Commitments at such time. "Restatement Information Memorandum" means the Confidential Information Memorandum dated April 2000 relating to the Borrower and the Transactions. 41 "Restricted Payment" means any dividend or other distribution (whether in cash, securities or other property) with respect to any shares of any class of capital stock of the Borrower or any Restricted Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancelation or termination of any such shares of capital stock of the Borrower or any Restricted Subsidiary or any option, warrant or other right to acquire any such shares of capital stock of the Borrower or any Restricted Subsidiary. "Restricted Subsidiary" means any Subsidiary (including the Mexico Borrower) that is not an Unrestricted Subsidiary. "Revolving Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Revolving Maturity Date and the date of termination of the Revolving Commitments. "Revolving Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Revolving Commitment is set forth on Schedule 2.01 (as of the Effective Date), or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable. The initial aggregate amount of the Lenders' Revolving Commitments is $100,000,000. "Revolving Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Loans and its LC Exposure and Swingline Exposure at such time. 42 "Revolving Lender" means a Lender with a Revolving Commitment or, if the Revolving Commitments have terminated or expired, a Lender with Revolving Exposure. "Revolving Loan" has the meaning set forth in Section 2.01. "Revolving Maturity Date" means May 31, 2006. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. "SEC" means the Securities and Exchange Commission. "Secured Parties" shall have the meaning assigned to such term in the Security Agreement. "Security Agreement" means the amended and restated Security Agreement, substantially in the form of Exhibit F, among the Borrower, the Subsidiary Loan Parties and the Collateral Agent for the benefit of the Secured Parties. "Security Documents" means the Security Agreement, the Pledge Agreement, the Mortgages and each other security agreement or other instrument or document executed and delivered pursuant to Section 5.12 or 5.13 to secure any of the Obligations. "Senior Subordinated Notes" means the New Senior Subordinated Notes and any Remaining Notes. "Sponsor" has the meaning set forth in the preamble to this Agreement. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in 43 Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Stockholders Agreement" means the Stockholders Agreement dated as of May 31, 2000, among Huntsman Packaging Corporation, a Utah corporation, and the stockholders party thereto, which agreement was entered into as part of the Transactions. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held. "Subsidiary" means any subsidiary of the Borrower. "Subsidiary Loan Party" means any Restricted Subsidiary; provided that a Foreign Subsidiary shall not be a Subsidiary Loan Party if the Borrower would suffer adverse tax consequences if such Foreign Subsidiary were to be a Subsidiary Loan Party. "Swingline Exposure" means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any 44 Revolving Lender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time. "Swingline Lender" means Bankers Trust Company, in its capacity as lender of Swingline Loans hereunder. "Swingline Loan" has the meaning set forth in Section 2.04. "Syndication Agent" means The Chase Manhattan Bank, in its capacity as syndication agent for the Lenders. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Term Commitment" means a Mexico Term Commitment, a Tranche A Term Commitment or a Tranche B Term Commitment, or any combination thereof (as the context requires). "Term Loan Lender" means a Lender with a Term Commitment or an outstanding Term Loan. "Term Loans" means Mexico Term Loans, Tranche A Term Loans or Tranche B Term Loans, or any combination thereof (as the context requires). "Total Debt" means, as of any date of determination, without duplication, the aggregate principal amount (or in the case of Indebtedness (including the New Senior Subordinated Notes) issued at a discount to its par value and/or issued together with a warrant or other equity security to which a portion of the issue price is allocated, the accreted value) of Indebtedness of the Borrower and the Restricted Subsidiaries outstanding as of such date, determined on a consolidated basis in accordance with GAAP (other than the Indebtedness of the type referred to in clause (h) of the definition of the term "Indebtedness", except to the extent of any unreimbursed drawings thereunder). "Tranche A Lender" means a Lender with a Tranche A Term Commitment or an outstanding Tranche A Term Loan. "Tranche A Term Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to 45 make Tranche A Term Loans on the Effective Date, expressed as an amount representing the maximum aggregate principal amount of Tranche A Term Loans to be made by such Lender hereunder, as such Commitment may be (a) reduced from time to time pursuant to Section 2.08 or (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Tranche A Term Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Tranche A Term Commitment, as applicable. The initial aggregate amount of the Lenders' Tranche A Term Commitments as of the Effective Date is $160,000,000. "Tranche A Term Loan" has the meaning set forth in Section 2.01. "Tranche A Term Loan Maturity Date" means May 31, 2006. "Tranche B Lender" means a Lender with a Tranche B Term Commitment or an outstanding Tranche B Term Loan. "Tranche B Rate" means (a) 3.00% per annum, in the case of a Eurodollar Loan, and (b) 2.00% per annum, in the case of an ABR Loan. "Tranche B Term Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make a Tranche B Term Loan hereunder on the Effective Date, expressed as an amount representing the maximum principal amount of the Tranche B Term Loan to be made by such Lender hereunder, as such Commitment may be (a) reduced pursuant to Section 2.08 or (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Tranche B Term Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Tranche B Term Commitment, as applicable. The initial aggregate amount of the Lenders' Tranche B Term Commitments as of the Effective Date is $280,000,000. "Tranche B Term Loan" has the meaning set forth in Section 2.01. 46 "Tranche B Term Loan Maturity Date" means May 31, 2008. "Transactions" means the Recapitalization Transactions, the Loan Transactions, the Debt Tender Offer and the issuance of the New Senior Subordinated Notes and the Warrants. "Transaction Costs" means the fees and expenses incurred by, or required to be reimbursed or paid by, the Borrower and its Subsidiaries in connection with the Recapitalization Transactions. "Trust" has the meaning set forth in the preamble to this Agreement. "Trust Equity Rollover" has the meaning set forth in the preamble to this Agreement. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "Unrestricted Subsidiary" means (a) Subsidiaries that constitute Unrestricted Subsidiaries under the Original Credit Agreement as of the Effective Date that are identified as such on Schedule 3.12, (b) any Subsidiary organized after the Effective Date, for the purpose of acquiring the stock or assets of another Person or for start-up ventures or activities and designated as an Unrestricted Subsidiary by the Borrower by notice to the Administrative Agent at or prior to the time of its organization and (c) any Subsidiary of any Unrestricted Subsidiary. By notice to the Administrative Agent, the Borrower may declare an Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (i) no Default has occurred and is continuing or would result from such declaration and (ii) the representations and warranties of the Borrower herein qualified as to materiality would be true and correct and those not so qualified shall be true and correct in all material respects, in each case on and as of the date of such declaration (after giving effect to 47 such declaration), except to the extent such representations and warranties expressly relate to an earlier date in which case such representations and warranties shall be true and correct as of such earlier date. The Borrower may not declare a Restricted Subsidiary to be an Unrestricted Subsidiary. "Warrants" means the warrants of the Borrower to acquire common stock of the Borrower issued as units with the New Senior Subordinated Notes. "Wholly Owned Subsidiary" means a Subsidiary of which securities (except for directors' qualifying shares or other de minimus shares) or other ownership interests representing 100% of the equity are at the time owned, directly or indirectly, by the Borrower. "Withdrawal Liability" means liability of the Borrower or any ERISA Affiliate to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time 48 to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.04. Accounting Terms; GAAP; Treatment of Unrestricted Subsidiaries. (a) Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. (b) Except as otherwise expressly provided herein, all accounting and financial calculations and determinations hereunder shall be made without consolidating the accounts of Unrestricted Subsidiaries with those of the Borrower or any Restricted Subsidiary, notwithstanding that such treatment is inconsistent with GAAP. 49 ARTICLE II The Credits SECTION 2.01. Commitments; Loans Outstanding on Effective Date. Subject to the terms and conditions set forth herein, each Lender agrees (i) to make a loan in dollars (a "Mexico Term Loan") to the Mexico Borrower on the Effective Date in the principal amount of its Mexico Term Commitment, (ii) to make a loan in dollars (a "Tranche A Term Loan") to the Borrower on the Effective Date in the principal amount of its Tranche A Commitment, (iii) to make a loan in dollars (a "Tranche B Term Loan") to the Borrower on the Effective Date in the principal amount of its Tranche B Term Commitment and (iv) to make loans in dollars ("Revolving Loans") to the Borrower from time to time during the Revolving Availability Period in an aggregate principal amount that will not result in such Lender's Revolving Exposure exceeding such Lender's Revolving Commitment (after giving effect to the application of any proceeds being applied contemporaneously with the advance of such Revolving Loans). Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. The full amount of the Term Commitments must be drawn in a single Borrowing on the Effective Date. Amounts repaid or prepaid in respect of Term Loans may not be reborrowed. SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.14, each Revolving Borrowing and Term Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower or Mexico Borrower, as applicable, may request in accordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by 50 causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower or Mexico Borrower, as applicable, to repay such Loan in accordance with the terms of this Agreement and shall not result in any increased costs under Section 2.15 or any obligation by the Borrower or Mexico Borrower, as applicable, to make any payment under Section 2.17 in excess of the amounts, if any, that such Lender would be entitled to claim under Section 2.15 or 2.17, as applicable, without giving effect to such change in lending office. (c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Commitments or that is equal to the amount required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e). Each Swingline Loan shall be in an amount that is an integral multiple of $10,000 and not less than $50,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 8 Eurodollar Borrowings outstanding. (d) Notwithstanding any other provision of this Agreement, neither the Borrower nor the Mexico Borrower shall be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Maturity Date, Mexico Term Loan Maturity Date, Tranche A Term Loan Maturity Date or Tranche B Term Loan Maturity Date, as applicable. 51 SECTION 2.03. Requests for Borrowings. To request a Revolving Borrowing or Term Borrowing, the Borrower or Mexico Borrower, as applicable, shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 1:00 p.m., New York City time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower or Mexico Borrower, as applicable. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) whether the requested Borrowing is to be a Revolving Borrowing, a Mexico Term Borrowing, a Tranche A Term Borrowing or a Tranche B Term Borrowing; (ii) the aggregate amount of such Borrowing; (iii) the date of such Borrowing, which shall be a Business Day; (iv) subject to Section 2.02, whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (v) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (vi) the location and number of the account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Revolving Borrowing, then the Borrower 52 or Mexico Borrower, as applicable shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Swingline Loans. (a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make loans ("Swingline Loans") to the Borrower from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $5,000,000 or (ii) the sum of the total Revolving Exposures exceeding the total Revolving Commitments; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans. (b) To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than 12:00 (noon), New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e), by remittance to the Issuing Bank) by 2:00 p.m., New York City time, on the requested date of such Swingline Loan. (c) The Swingline Lender may by written notice given to the Administrative Agent not later than 10:00 a.m., New York City time, on any Business Day require the Revolving Lenders to acquire participations on such 53 Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Revolving Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Revolving Lender shall comply with its obligation under this paragraph by making a wire transfer to the Administrative Agent for the benefit of the Swingline Lender of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Revolving Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to 54 this paragraph shall not relieve the Borrower of any default in the payment thereof. SECTION 2.05. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters of Credit for its own account or the account of any Subsidiary Loan Party (provided that the Borrower shall be a co-applicant with respect to each Letter of Credit issued for the account of or in favor of such Subsidiary Loan Party), in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the LC Availability Period. All Letters of Credit shall be denominated in U.S. dollars. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank's standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of 55 Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $30,000,000 (plus an additional amount, not to exceed $40,000,000, to support Permitted Mexico Indebtedness) and (ii) the total Revolving Exposures shall not exceed the total Revolving Commitments. (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Revolving Maturity Date. (d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender's Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender's Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. 56 (e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, New York City time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that, if the Borrower does not otherwise elect by notice to the Administrative Agent to make such payment, the Borrower shall be deemed to have requested in accordance with Section 2.03 (but without regard to the minimum borrowing amounts specified in Section 2.02) that such LC Disbursement be financed with an ABR Revolving Borrowing in an amount equal to such LC Disbursement, the Administrative Agent shall notify the Revolving Lenders thereof, the Revolving Lenders shall (subject to the conditions to borrowing herein) advance their respective ABR Revolving Loans (which shall be applied to reimburse such LC Disbursement) and, to the extent such ABR Revolving Loans are so advanced and applied, the Borrower's obligation to make such payment shall be deemed discharged as of the date due and replaced by the resulting ABR Revolving Loans. If and to the extent that the Borrower's obligation to make such payment is not fully discharged and replaced by ABR Revolving Loans as aforesaid (whether as a result of the failure to satisfy any condition to borrowing or otherwise) and if the Borrower otherwise fails to make such payment when due, the Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender's Applicable Percentage thereof. Promptly following receipt of such notice, each Revolving Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 57 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Revolving Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement. (f) Obligations Absolute. The Borrower's obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower's obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other 58 communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that nothing in this Section 2.05 shall be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or wilful misconduct on the part of the Issuing Bank, the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement. (h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC 59 Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Loans; provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment. (i) Replacement of the Issuing Bank; Additional Issuing Banks. The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. One or more Lenders may be appointed as additional Issuing Banks by written agreement among the Borrower, the Administrative Agent (whose consent will not be unreasonably withheld) and the Lender that is to be so appointed. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank or any such additional Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12(b). From and after the effective date of any such replacement or addition, as applicable, (i) the successor or additional Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or such addition or to any previous Issuing Bank, or to such successor or such addition and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. If at any time there is more than one Issuing Bank hereunder, the 60 Borrower may, in its discretion, select which Issuing Bank is to issue any particular Letter of Credit. (j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to 105% of the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i) of Article VII. Each such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower's risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the 61 Borrower within three Business Days after all Events of Default have been cured or waived. SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans available to the Borrower or, in the case of Mexico Term Loans, the Mexico Borrower, by promptly crediting the amounts so received, in like funds, to an account of the Borrower or, in the case of Mexico Term Loans, the Mexico Borrower maintained with the Administrative Agent in New York City and designated by the Borrower or, in the case of Mexico Term Loans, the Mexico Borrower, in the applicable Borrowing Request; provided that ABR Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the Issuing Bank. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower or, in the case of Mexico Term Loans, the Mexico Borrower, a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower or, in the case of Mexico Term Loans, the Mexico Borrower, severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower or, in the case of Mexico Term Loans, the Mexico Borrower, to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance 62 with banking industry rules on interbank compensation or (ii) in the case of the Borrower or, in the case of Mexico Term Loans, the Mexico Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.07. Interest Elections. (a) Each Revolving Borrowing and Term Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower or, in the case of a Mexico Term Loan, the Mexico Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower or, in the case of a Mexico Term Loan, the Mexico Borrower, may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued. (b) To make an election pursuant to this Section, the Borrower or, in the case of a Mexico Term Loan, the Mexico Borrower, shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower or, in the case of a Mexico Term Loan, the Mexico Borrower, were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower or, in the case of a Mexico Term Loan, the Mexico Borrower. 63 (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02 and paragraph (f) of this Section: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If the Borrower or the Mexico Borrower, as applicable, fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of 64 the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. (f) A Borrowing of any Class may not be converted to or continued as a Eurodollar Borrowing if after giving effect thereto (i) the Interest Period therefor would commence before and end after a date on which any principal of the Loans of such Class is scheduled to be repaid and (ii) the sum of the aggregate principal amount of outstanding Eurodollar Borrowings of such Class with Interest Periods ending on or prior to such scheduled repayment date plus the aggregate principal amount of outstanding ABR Borrowings of such Class would be less than the aggregate principal amount of Loans of such Class required to be repaid on such scheduled repayment date. SECTION 2.08. Termination and Reduction of Commit- ments. (a) Unless previously terminated, (i) the Mexico Term Commitments, Tranche A Term Commitments and Tranche B Term Commitments shall terminate at 5:00 p.m., New York City time, on the Effective Date and (ii) the Revolving Commitments shall terminate on the Revolving Maturity Date. (b) The Borrower may at any time terminate, or from time to time reduce, the Revolving Commitments; provided that (i) each reduction of the Revolving Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.11, the sum of the Revolving Exposures would exceed the total Revolving Commitments. (c) If any prepayment of a Term Borrowing would be required pursuant to Section 2.11(b) or (c) at a time when there are not any Term Borrowings outstanding, then the Revolving Commitments shall be reduced at such time in an amount equal to the prepayment that would be required if Term Borrowings were outstanding at such time. 65 (d) The Borrower shall notify the Administrative Agent of any election or requirement to terminate or reduce the Revolving Commitments under paragraph (b) or (c) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election or requirement and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Commitments delivered by the Borrower under paragraph (b) of this Section may state that such notice is conditioned upon the effectiveness of other borrowings or the completion of the sale or issuance of stock of the Borrower or the sale of assets of the Borrower, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class. SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan of such Lender on the Revolving Maturity Date, (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Tranche A Term Loan and Tranche B Term Loan of such Lender as provided in Section 2.10 and (iii) to the Administrative Agent for the account of the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Maturity Date and the first date after such Swingline Loan is made that is the last day of March, June, September or December and is at least two Business Days after such Swingline Loan is made. The Mexico Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Mexico Term Loan of such Lender as provided in Section 2.10. 66 (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower or the Mexico Borrower, as applicable, to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower or the Mexico Borrower, as applicable, to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower or the Mexico Borrower, as applicable, to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Borrower or the Mexico Borrower, as applicable, shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a customary form approved by the Administrative Agent and the Borrower. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). 67 SECTION 2.10. Amortization of Term Loans. (a) Subject to adjustment pursuant to paragraph (e) of this Section, the Borrower shall repay Tranche A Term Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date:
Date Amount ---- ------ September 30, 2001 $1,800,000 December 31, 2001 2,400,000 March 31, 2002 3,600,000 June 30, 2002 4,200,000 September 30, 2002 4,000,000 December 31, 2002 4,000,000 March 31, 2003 6,000,000 June 30, 2003 6,000,000 September 30, 2003 6,000,000 December 31, 2003 6,000,000 March 31, 2004 10,000,000 June 30, 2004 10,000,000 September 30, 2004 11,000,000 December 31, 2004 11,000,000 March 31, 2005 11,000,000 June 30, 2005 11,000,000 September 30, 2005 13,000,000 December 31, 2005 13,000,000 March 31, 2006 13,000,000 Tranche A Term Loan Maturity Date 13,000,000 ---------- $160,000,000
(b) Subject to adjustment pursuant to paragraph (e) of this Section, the Mexico Borrower shall repay Mexico Term Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date:
Date Amount ---- ------ September 30, 2001 $ 450,000 December 31, 2001 600,000 March 31, 2002 900,000 June 30, 2002 1,050,000 September 30, 2002 1,000,000 December 31, 2002 1,000,000 March 31, 2003 1,500,000 June 30, 2003 1,500,000
68 September 30, 2003 1,500,000 December 31, 2003 1,500,000 March 31, 2004 2,500,000 June 30, 2004 2,500,000 September 30, 2004 2,750,000 December 31, 2004 2,750,000 March 31, 2005 2,750,000 June 30, 2005 2,750,000 September 30, 2005 3,250,000 December 31, 2005 3,250,000 March 31, 2006 3,250,000 Mexico Term Loan Maturity Date 3,250,000 --------- $40,000,000
(c) Subject to adjustment pursuant to paragraph (e) of this Section, the Borrower shall repay Tranche B Term Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date:
Date Amount ---- ------ June 30, 2001 $2,800,000 June 30, 2002 2,800,000 June 30, 2003 2,800,000 June 30, 2004 2,800,000 June 30, 2005 2,800,000 June 30, 2006 2,800,000 June 30, 2007 54,320,000 September 30, 2007 52,220,000 December 31, 2007 52,220,000 March 31, 2008 52,220,000 Tranche B Term Loan Maturity Date 52,220,000 ------------ $280,000,000
(d) To the extent not previously paid, all Mexico Term Loans, Tranche A Term Loans and Tranche B Term Loans shall be due and payable on the Mexico Term Loan Maturity Date, Tranche A Term Loan Maturity Date or Tranche B Term Loan Maturity Date, respectively. (e) If the initial aggregate amount of the Lenders' Mexico Term Commitments, Tranche A Term Commitments or Tranche B Term Commitments exceeds the aggregate principal amount of Mexico Term Loans, Tranche A Term Loans or Tranche B Term Loans, respectively, made on 69 the Effective Date, then the scheduled repayments of Mexico Term Borrowings, Tranche A Term Borrowings or Tranche B Term Borrowings, as applicable, to be made pursuant to this Section shall be reduced by an aggregate amount equal to such excess in the chronological order in which such repayments are scheduled to become due. Any prepayment of a Mexico Term Borrowing, Tranche A Term Borrowing or Tranche B Term Borrowing shall be applied to reduce the subsequent scheduled repayments of Borrowings of such Class to be made pursuant to this Section ratably; provided, that any prepayment of Term Borrowings of any Class made pursuant to Section 2.11(a) shall be applied, first, to reduce the next four scheduled repayments of Term Borrowings (or the next scheduled repayment of Tranche B Term Borrowings to the extent such prepayment occurs prior to June 30, 2007) of such Class to be made pursuant to this Section (other than those that have been reduced to zero by operation of this paragraph) unless and until such next four scheduled repayments (or the next scheduled repayment in the case of Tranche B Term Borrowings to the extent such prepayment occurs prior to June 30, 2007) have been eliminated as a result of reductions hereunder and, second, to reduce the remaining scheduled repayments of Term Borrowings of such Class to be made pursuant to this Section ratably. (f) Prior to any repayment of any Term Borrowings of any Class hereunder, the Borrower shall select the Borrowing or Borrowings of such Class to be repaid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 11:00 a.m., New York City time, three Business Days before the scheduled date of such repayment; provided that each repayment of Term Borrowings of any Class shall be applied to repay any outstanding ABR Term Borrowings of such Class before any other Borrowings of such Class. Each repayment or prepayment of a Borrowing shall be applied ratably to the Loans included in the repaid Borrowing. Repayments of Term Borrowings shall be accompanied by accrued interest on the amount repaid. SECTION 2.11. Prepayment of Loans. (a) The Borrower (or, in the case of a Mexico Term Borrowing, the Mexico Borrower) shall have the right at any time and from 70 time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section. (b) Subject to the provisions of Sections 2.11(e) and 5.08, in the event and on each occasion that any Net Proceeds are received by or on behalf of the Borrower or any Subsidiary in respect of any Prepayment Event, the Borrower and the Mexico Borrower, as applicable, shall, within three Business Days after such Net Proceeds are received, prepay Term Borrowings in an aggregate amount equal to the entire amount of such Net Proceeds. (c) Following the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2000, the Borrower and the Mexico Borrower collectively shall prepay Term Borrowings in an aggregate amount equal to the amount, if any, by which (i) 50% of Excess Cash Flow for such fiscal year exceeds (ii) the aggregate amount of all prepayments actually made pursuant to Section 2.11(a) since the date a prepayment was made pursuant to this paragraph in respect of the immediately preceding fiscal year of the Borrower (or would have been required to be made pursuant to this paragraph if so required with respect to such immediately preceding fiscal year); provided, however, that for the purposes of Section 2.11(c) the amount required to be prepaid for purposes of the fiscal year ending December 31, 2000 shall be determined based on the period from the Effective Date through December 31, 2000. Each prepayment pursuant to this paragraph shall be made on or before the date that is three Business Days after the date on which financial statements are delivered pursuant to Section 5.01 with respect to the fiscal year for which Excess Cash Flow is being calculated (and in any event within 90 days after the end of such fiscal year). (d) If at any time the sum of the total Revolving Exposures exceeds the total Revolving Commitments, the Borrower shall immediately prepay Revolving Borrowings and Swingline Loans to the extent necessary to eliminate such excess. If any such excess remains after all Revolving Borrowings and Swingline Loans are prepaid, the Borrower shall deposit cash collateral pursuant to Section 2.05(j) in an amount equal to such remaining excess. 71 (e) Notwithstanding the provisions of Section 2.11(b): (i) in the case of a Prepayment Event described in clause (a) of the definition of "Prepayment Event" consisting of a disposition by a Foreign Subsidiary, the Borrower and the Mexico Borrower may, in lieu of prepaying Term Borrowings, permit such Foreign Subsidiary to retain the Net Proceeds of such disposition, in which case no prepayment shall be required in respect of such Net Proceeds; provided that (A) the Borrower notifies the Administrative Agent that it is exercising such option, specifying the Prepayment Event and the amount of the prepayment, at or prior to the time that the prepayment is required, (B) the Borrower is in compliance with Sections 6.13, 6.14 and 6.15 before and after giving effect to such Prepayment Event, (C) the aggregate Net Proceeds which are not required to be prepaid pursuant to this clause (i) shall not exceed $40,000,000 (on a cumulative basis) during the remaining term of this Agreement subsequent to the Effective Date and (D) the Net Proceeds relating to such Prepayment Event are not required to be used to repay or prepay any other Indebtedness of the Borrower or any Subsidiary (after the passage of time or otherwise); (ii) in the case of a Prepayment Event described in clause (c) of the definition of "Prepayment Event", the Borrower may, at its option, notify the Administrative Agent that the Borrower intends to utilize all or a specified portion of the Net Proceeds of such Prepayment Event to finance a Permitted Acquisition or Capital Expenditures to be consummated within 270 days after such Prepayment Event, in which case the Borrower and the Mexico Borrower shall not be required to prepay Term Borrowings pursuant to Section 2.11(b) to the extent of the Net Proceeds so specified; provided that (A) the Borrower delivers such notice, specifying the Prepayment Event and describing the anticipated Permitted Acquisition or Capital Expenditures in reasonable detail, at or prior to the time of such Prepayment Event, (B) no Default has occurred and is continuing at the time of such Prepayment Event and (C) to the extent such Net 72 Proceeds are not applied to finance such Permitted Acquisition or Capital Expenditures within the 270-day period after such Prepayment Event, the Borrower and the Mexico Borrower shall prepay Term Borrowings (at the earlier of (1) expiration of such period, (2) the date of abandonment of such Permitted Acquisition or Capital Expenditures or (3) the date of consummation of such Permitted Acquisition) in an amount equal to such Net Proceeds that are not so applied; and (iii) in the case of a Prepayment Event described in clause (c) of the definition of "Prepayment Event", if, as of the end of the most recent fiscal quarter for which financial statements have been delivered to the Administrative Agent pursuant to clause (a) or (b) of Section 5.01 prior to such Prepayment Event, the Leverage Ratio was less than 2.00 to 1.00, then no prepayment pursuant to Section 2.11(b) shall be required in respect of such Prepayment Event. (f) Prior to any optional or mandatory prepayment of Borrowings hereunder, the Borrower or the Mexico Borrower, as the case may be, shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (g) of this Section; provided that each prepayment of Borrowings of any Class shall be applied to prepay ABR Borrowings of such Class before any other Borrowings of such Class. In the event of any optional or mandatory prepayment of Term Borrowings made at a time when Term Borrowings of more than one Class remain outstanding, the Borrower and the Mexico Borrower shall select Term Borrowings to be prepaid so that the aggregate amount of such prepayment is allocated among the Mexico Term Borrowings, Tranche A Term Borrowings and Tranche B Term Borrowings pro rata based on the aggregate principal amount of outstanding Borrowings of each such Class (a "Pro Rata Allocation"); provided that if such prepayment is a mandatory prepayment pursuant to paragraph (b) or (c) of this Section, any Tranche B Lender may elect, to the extent Term Borrowings of any other Class or Classes remain outstanding on the prepayment date, by notice to the Administrative Agent by telephone (confirmed by telecopy) at least one Business Day prior to the prepayment date, to decline all or any portion of any prepayment of its Tranche B Term Loans pursuant to this Section, in which case the 73 aggregate amount of the prepayment that would have been applied to prepay Tranche B Term Borrowings but was so declined shall be applied to prepay Term Borrowings of each other Class then outstanding pro rata based on the aggregate principal amount of outstanding Borrowings of each such Class; and provided further that if such prepayment is (i) a voluntary prepayment pursuant to paragraph (a) of this Section, the Borrower and the Mexico Borrower may, in their sole discretion, (x) select Term Borrowings to be prepaid so that the amount of such prepayment allocated to the Tranche B Term Borrowings is less than the amount that would be allocated to the Tranche B Term Borrowings under a Pro Rata Allocation and/or (y) elect, by prior written notice given to the Administrative Agent and the Tranche B Term Lenders, to afford the Tranche B Term Lenders the right to decline to accept such prepayment, in which case the Tranche B Term Lenders will be entitled to decline all or any portion of such prepayment to the same extent, and subject to the same procedures that are applicable to mandatory prepayments or (ii) by the Mexico Borrower, the Mexico Borrower may, in its sole discretion, select Mexico Term Borrowings to be prepaid so that the amount of such prepayment allocated to the other Term Borrowings is less than the amount that would be allocated to the other Term Borrowings under a Pro Rata Allocation. (g) The Borrower (or, in the case of prepayment of a Mexico Term Borrowing, the Mexico Borrower) shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 noon, New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment; provided that, if a notice of optional 74 prepayment is given in connection with a conditional notice of termination of the Revolving Commitments as contemplated by Section 2.08, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.08. Promptly following receipt of any such notice (other than a notice relating solely to Swingline Loans), the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount such that the remaining amount of such Borrowing not so prepaid would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13. SECTION 2.12. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender a commitment fee, which shall accrue at the Applicable Rate on the average daily unused amount of the Revolving Commitment of such Lender during the period from and including the Effective Date to but excluding the date on which such Revolving Commitment terminates. Accrued commitment fees with respect to each Revolving Commitment shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which such Revolving Commitment terminates, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing commitment fees with respect to Revolving Commitments, a Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans and LC Exposure of such Lender (and the Swingline Exposure of such Lender shall be disregarded for such purpose). (b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Rate as interest on Eurodollar 75 Revolving Loans on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender's Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate or rates per annum separately agreed upon between the Borrower and the Issuing Bank on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Revolving Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank's standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Revolving Commitments terminate and any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders 76 entitled thereto. Fees paid shall not be refundable under any circumstances. SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate. (b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower or the Mexico Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Revolving Loans as provided in paragraph (a) of this Section. (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Revolving Commitments; provided that (A) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (B) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Revolving Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (C) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times 77 when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing. SECTION 2.15. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such 78 reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or (ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered. (b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Bank, as the case may be, following receipt by the Borrower of the certificate referred to in clause (c) below, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company for any such reduction suffered. 79 (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section (and setting forth the underlying calculations) shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the Issuing Bank's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Revolving Loan or Eurodollar Term Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(g) and is revoked in accordance therewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower (or, in the case of a Mexico Term Loan, the Mexico Borrower) pursuant to Section 2.19, then, in any such event, the Borrower (or, in the case of a Mexico Term Loan, the Mexico Borrower) shall compensate each Lender for the 80 loss, cost and expense attributable to such event. Such loss, cost or expense to any Lender shall be deemed to include an amount reasonably determined by such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section (and setting forth the underlying calculations) shall be delivered to the Borrower or the Mexico Borrower, as applicable, and shall be conclusive absent manifest error. The Borrower or the Mexico Borrower, as applicable, shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.17. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower or the Mexico Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower or the Mexico Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or the Mexico Borrower, as applicable, shall make such deductions and (iii) the Borrower or the Mexico Borrower, as applicable, shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. 81 (b) In addition, the Borrower and the Mexico Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower, or, in the case of Indemnified Taxes or Other Taxes attributable to obligations of the Mexico Borrower, the Mexico Borrower, shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower or the Mexico Borrower, as applicable, hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability (and setting forth the underlying calculations) delivered to the Borrower or the Mexico Borrower, as applicable, by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower or the Mexico Borrower to a Governmental Authority, the Borrower or the Mexico Borrower, as applicable, shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender and any Issuing Bank that is not a "United States person" within the meaning of Section 7701(a)(30) of the Code (together with the Foreign Lenders, the "Non-U.S. Lenders") shall, if such Non-U.S. Lender is entitled to an exemption from or reduction of withholding Tax under the laws of the jurisdiction in which the Borrower is located, or any treaty to which such 82 jurisdiction is a party, with respect to payments under this Agreement, deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate. Notwithstanding any other provision of this Section 2.17, a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 2.17(e) that such Non-U.S. Lender is not legally able to deliver. (f) If the Administrative Agent or a Lender (or transferee) determines, in its reasonable discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or the Mexico Borrower, as applicable, or with respect to which the Borrower or the Mexico Borrower, as applicable, has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to the Borrower or the Mexico Borrower, as applicable (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower or the Mexico Borrower, as applicable, under this Section 2.17 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender (or transferee) and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, however, that the Borrower or the Mexico Borrower, as applicable, upon the request of the Administrative Agent or such Lender (or transferee), agrees to repay the amount paid over to the Borrower or the Mexico Borrower, as applicable (plus any penalties, interest or other charges imposed by the relevant Governmental Authority), to the Administrative Agent or such Lender (or transferee) in the event the Administrative Agent or such Lender (or transferee) is required to repay such refund to such Governmental Authority. Nothing contained in this Section 2.17(f) shall require the Administrative Agent or any Lender to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to the Borrower, the Mexico Borrower or any other Person. 83 SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Setoffs. (a) Each of the Borrower and the Mexico Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without setoff or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at One Bankers Trust Plaza, New York, New York 10006, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties. 84 (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans, Term Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower or the Mexico Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The provisions of this paragraph (c) shall apply to any payment or distribution received by any Lender in respect of any principal of or interest on its Mexico Term Loans pursuant to an exercise of remedies or otherwise during a period in which an Event of Default shall have occurred and be continuing (including any distribution received in any bankruptcy or similar proceeding) resulting in such Lender receiving a disproportionately greater recovery to the extent necessary so that the benefit of all such payments or distributions shall be shared as set forth in the immediately preceding sentence. Each of the Borrower and the Mexico Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable 85 law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower or the Mexico Borrower, as applicable, rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower or the Mexico Borrower, as applicable, in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower or the Mexico Borrower, as applicable, prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower or the Mexico Borrower, as applicable, will not make such payment, the Administrative Agent may assume that the Borrower or the Mexico Borrower, as applicable, has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower or the Mexico Borrower, as applicable, has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.18(d) or 9.03(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.15, or if the Borrower or the 86 Mexico Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.15, or if the Borrower or the Mexico Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Commitment is being assigned, the Issuing Bank and Swingline Lender), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower or the Mexico Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such 87 compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. SECTION 2.20. Extension of Revolving Maturity Date. (a) The Borrower may, by notice to the Administrative Agent and the Revolving Lenders given not less than 30 and not more than 60 days prior to the Revolving Maturity Date, request that the Revolving Lenders extend the Revolving Maturity Date for an additional one year period. Each Revolving Lender shall, by notice to the Borrower and the Administrative Agent given not later than the 10th Business Day after the date of receipt of the Borrower's notice, advise the Borrower whether or not such Lender agrees to such extension (and any Lender that does not so advise the Borrower on or before such day shall be deemed to have advised the Borrower that it will not agree to such extension). The approval of any such extension shall be at the sole discretion of each Revolving Lender. (b) If (and only if) all Revolving Lenders shall have agreed to extend the Revolving Maturity Date as provided in paragraph (a) above, then the Revolving Maturity Date shall be extended to May 31, 2007. ARTICLE III Representations and Warranties The Borrower represents and warrants to the Lenders that: SECTION 3.01. Organization; Powers. Each of the Borrower and its Restricted Subsidiaries is duly organized, validly existing and, where applicable, in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. 88 SECTION 3.02. Authorization; Enforceability. The Transactions entered into and to be entered into by each Loan Party are within such Loan Party's corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement has been duly executed and delivered by the Borrower and the Mexico Borrower and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of the Borrower, the Mexico Borrower or such Loan Party (as the case may be), enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect or, if not obtained or made, would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect and except filings necessary to perfect Liens created under the Loan Documents, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Restricted Subsidiaries or any order of any Governmental Authority, except, with respect to any violation of applicable law or regulation or any order of any Governmental Authority, to the extent any such violation would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect, (c) will not violate or result in a default under any material indenture, agreement or other instrument binding upon the Borrower or any of its Restricted Subsidiaries or its assets, except to the extent any such violation, default or right would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Restricted Subsidiaries, and (d) will not result in the creation or 89 imposition of any Lien on any asset of the Borrower or any of its Restricted Subsidiaries, except Liens created under the Loan Documents. SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders' equity and cash flows as of and for the fiscal year ended December 31, 1999, reported on by Arthur Andersen LLP, independent public accountants. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries, as of such dates and for such periods in accordance with GAAP. (b) The Borrower has heretofore made available to the Lenders its pro forma consolidated balance sheet as of March 31, 2000, prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) has been prepared in good faith based on the same assumptions used to prepare the applicable pro forma financial statements, which were simultaneously made available to the Lenders (which assumptions are believed by the Borrower to be reasonable), (ii) is based on the best information available to the Borrower after due inquiry, (iii) accurately reflects all material adjustments necessary to give effect to the Transactions and (iv) presents fairly, in all material respects, the pro forma financial position of the Borrower and its consolidated Subsidiaries as of March 31, 2000, as if the Transactions had occurred on such date; provided, however, that such pro forma balance sheet did not reflect that (w) the New Senior Subordinated Notes would be issued together with the Warrants, (x) such securities would be issued at an aggregate discount of approximately $5,900,000, (y) approximately $8,000,000 of the issue price of such securities would be allocated to the Warrants and (z) approximately $5,900,000 of Revolving Loans would be borrowed on the Effective Date in connection with the consummation of the Transactions. (c) Since December 31, 1999, there has been no material adverse change in the business, assets, results of 90 operations or condition, financial or otherwise of the Borrower and its Restricted Subsidiaries, taken as a whole. SECTION 3.05. Properties. (a) Each of the Borrower and its Restricted Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business (including its Mortgaged Properties), except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes and other Permitted Encumbrances. (b) Each of the Borrower and its Restricted Subsidiaries owns, or is licensed or otherwise permitted to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to the business of the Borrower and its Restricted Subsidiaries, taken as a whole, and the use thereof by the Borrower and its Restricted Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. (c) Schedule 3.05 sets forth the address of each real property that is owned or leased by the Borrower or any of its Subsidiaries as of the Effective Date. (d) As of the Effective Date, neither the Borrower nor any of its Subsidiaries has received notice of, or has knowledge of, any pending or contemplated condemnation proceeding affecting any Mortgaged Property or any sale or disposition thereof in lieu of condemnation. Neither any Mortgaged Property nor any interest therein is subject to any right of first refusal, option or other contractual right to purchase such Mortgaged Property or interest therein held by any Person, other than the Borrower or any Restricted Subsidiary. SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if 91 adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, (ii) that involve or arise out of the Recapitalization and which could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, or (iii) that involve any of the Loan Documents or the Transactions. (b) Except with respect to any matters that, individually or in the aggregate, would not be reasonably likely to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 3.08. Investment and Holding Company Status. Neither the Borrower nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that 92 the failure to do so could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $12,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $12,000,000 the fair market value of the assets of all such underfunded Plans. SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which the Borrower or any of its Subsidiaries is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. The Restatement Information Memorandum and the other reports, financial statements, certificates and other written information furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by other information so furnished), when made or delivered, did not contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. 93 SECTION 3.12. Subsidiaries. Schedule 3.12 sets forth the name of, and the ownership interest of the Borrower in, each Subsidiary of the Borrower and identifies each Subsidiary that is a Subsidiary Loan Party or an Unrestricted Subsidiary, in each case as of the Effective Date. SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all insurance maintained by or on behalf of the Borrower and its Subsidiaries as of the Effective Date. As of the Effective Date, all premiums that are due and payable in respect of such insurance have been paid. SECTION 3.14. Labor Matters. As of the Effective Date, there are no strikes, lockouts or slowdowns against the Borrower or any Subsidiary pending or, to the knowledge of the Borrower, threatened that could reasonably be expected to result in a Material Adverse Effect. All material payments due from the Borrower or any Restricted Subsidiary, or for which any claim may be made against the Borrower or any Restricted Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of the Borrower or such Restricted Subsidiary. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower or any Subsidiary is bound. SECTION 3.15. Solvency. Immediately after the consummation of the Transactions to occur on the Effective Date and immediately following the making of each Loan made on the Effective Date and after giving effect to the application of the proceeds of such Loans, (a) the fair value of the assets of each Loan Party, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of each Loan Party will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) each Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and 94 liabilities become absolute and matured; and (d) each Loan Party will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Effective Date. SECTION 3.16. Security Documents. (a) The Pledge Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Pledge Agreement) and, when such Collateral is delivered to the Collateral Agent, the Pledge Agreement shall constitute a fully perfected first priority Lien on, and security interest in, all right, title and interest of the pledgor thereunder in such Collateral, in each case prior and superior in right to any other Person; provided that the actions specified in Schedule 3.16(a) are required to be taken in connection with the pledge of capital stock of Foreign Subsidiaries. (b) The Security Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Security Agreement) and, when financing statements in appropriate form are filed in the offices specified on Schedule 6 to the Perfection Certificate, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral (other than the Intellectual Property (as defined in the Security Agreement)), in each case prior and superior in right to any other Person, other than with respect to Liens expressly permitted by Section 6.03. (c) When the Security Agreement (or a summary thereof) is filed in the United States Patent and Trademark Office and the United States Copyright Office, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Intellectual Property (as defined in the Security Agreement) in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document in the United States Patent and Trademark Office or the United 95 States Copyright Office, as applicable, in each case prior and superior in right to any other Person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a lien on registered trademarks, trademark applications and copyrights acquired by the Loan Parties after the Effective Date), other than with respect to Liens permitted by Section 6.03. (d) The Mortgages are effective to create, subject to the exceptions listed in each title insurance policy covering such Mortgage, in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the Loan Parties' right, title and interest in and to the Mortgaged Properties thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 3.16(d), the Mortgages shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to the rights of Persons pursuant to Liens expressly permitted by Section 6.03. SECTION 3.17. Federal Reserve Regulations. (a) Neither the Borrower nor any of the Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock. (b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of the provisions of the Regulations of the Board, including Regulation U or X. ARTICLE IV Conditions 96 SECTION 4.01. Effective Date. The amendments to the Original Credit Agreement effected hereby and the obligations of the Lenders to make the Loans shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): (a) The Administrative Agent (or its counsel) shall have received from the Borrower, the Mexico Borrower and each Lender, either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent and the Syndication Agent shall have received a favorable written opinion (addressed to the Administrative Agent, the Syndication Agent and the Lenders and dated the Effective Date) of each of (i) O'Sullivan Graev & Karabell, LLP, counsel for the Borrower, substantially addressing the matters set forth in Exhibit B-1, (ii) Kuri Brena, Sancrez Ugarte, Corcuera y Aznar, counsel for the Mexico Borrower, substantially in the form of Exhibit B-2, (iii) Stoel Rives LLP, Utah counsel for the Borrower, substantially in the form of Exhibit B-3 and (iv) to the extent requested by the Administrative Agent, local counsel in each jurisdiction where a Mortgaged Property is located, substantially in a form agreed to by the Administrative Agent, and, in the case of each such opinion required by this paragraph, covering such other matters relating to the Loan Parties, the Loan Documents or the Transactions as the Administrative Agent shall reasonably request. The Borrower and the Mexico Borrower hereby request such counsel to deliver such opinions. (c) The Administrative Agent and the Syndication Agent shall have received such documents and certificates as the Administrative Agent, the Syndication Agent or their counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating 97 to the Loan Parties, the Loan Documents or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (d) The Administrative Agent and the Syndication Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02. (e) The Administrative Agent and the Syndication Agent, as applicable shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document. (f) The Collateral Agent shall have received counterparts of the Pledge Agreement signed on behalf of the Borrower and each Subsidiary Loan Party, together with stock certificates representing all the outstanding shares of capital stock of each Subsidiary owned by or on behalf of any Loan Party as of the Effective Date after giving effect to the Transactions (except that such delivery of stock certificates representing shares of common stock of a Foreign Subsidiary that is not a Subsidiary Loan Party may be limited to 65% of the outstanding shares of common stock of such Foreign Subsidiary), promissory notes evidencing all intercompany Indebtedness owed to any Loan Party by the Borrower or any Subsidiary as of the Effective Date after giving effect to the Transactions and stock powers and instruments of transfer, endorsed in blank, with respect to such stock certificates and promissory notes. The Collateral Agent shall have received evidence that all actions specified in Schedule 3.16(a) shall have been taken. (g) The Collateral Agent shall have received counterparts of the Security Agreement signed on behalf of the Borrower and each Subsidiary Loan Party, together with the following: 98 (i) all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Administrative Agent to be filed, registered or recorded to create or perfect the Liens intended to be created under the Security Agreement; and (ii) a completed Perfection Certificate dated the Effective Date and signed by an executive officer or Financial Officer of the Borrower, together with all attachments contemplated thereby, including the results of a search of the Uniform Commercial Code (or equivalent) filings made with respect to the Loan Parties in the jurisdictions contemplated by the Perfection Certificate (other than jurisdictions in which a search was undertaken in the name of such Loan Party in connection with the execution of the Original Credit Agreement) and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Administrative Agent that the Liens indicated by such financing statements (or similar documents) are permitted by Section 6.03 or have been released. (iii) counterparts of a Mortgage with respect to each Mortgaged Property signed on behalf of the record owner of such Mortgaged Property, (iv) a policy or policies of title insurance issued by a nationally recognized title insurance company, insuring the Lien of each such Mortgage as a valid first Lien on the Mortgaged Property described therein, free of any other Liens except as permitted by Section 6.03, in form and substance reasonably acceptable to the Collateral Agent, together with such endorsements, coinsurance and reinsurance as the Collateral Agent or the Required Lenders may reasonably request, (v) copies of all existing surveys and such other information and documents with respect to 99 the Mortgaged Properties as shall be necessary for the aforesaid title insurance policies to be issued without a survey exception and (vi) such other customary documentation with respect to the Mortgaged Properties as the Administrative Agent may reasonably require; provided that with respect to any Mortgaged Property as to which a Mortgage was recorded prior to the Effective Date, the requirements of this paragraph shall be limited to such supplements, amendments and bring-downs as the Collateral Agent shall request. (h) The Administrative Agent shall have received (i) counterparts of the Guarantee Agreement signed on behalf of the Borrower and each Subsidiary Loan Party and (ii) counterparts of the Indemnity, Subrogation and Contribution Agreement signed on behalf of the Borrower and each Subsidiary Loan Party. (i) The Administrative Agent and the Syndication Agent shall have received evidence satisfactory to it that the insurance required by Section 5.07 is in effect. (j) The Recapitalization Transactions shall be consummated in accordance with applicable law, the Recapitalization Agreement (without adverse amendment or waiver thereof not approved by the Lenders) and such other agreements reasonably satisfactory to the Lenders. In connection with the Recapitalization Transactions, Investment L.L.C. and certain co-investors shall have purchased (i) common stock of the Borrower for a purchase price of not less than $165,300,000 ($65,600,000 as part of the Equity Contribution and $99,700,000 through the Investor Share Purchase) and (ii) the Investor Preferred Stock and the warrants to be issued in connection therewith for a purchase price of not less than $100,000,000 and such proceeds shall have been used in their entirety by the Borrower to effect the Transactions. (k) The Lenders shall be satisfied with the proposed capital structure and ownership of the 100 Borrower and its Subsidiaries after consummation of the Transactions (it being understood that the capital structure and ownership to the extent described in the Restatement Information Memorandum are satisfactory). (l) The Borrower shall have purchased all Existing Notes tendered (and not withdrawn) pursuant to the Debt Tender Offer and if less than all the outstanding Existing Notes shall have been so purchased, the Existing Notes Indenture shall have been amended as provided in the Debt Tender Offer (without adverse amendment or waiver thereof not approved by the Lenders), all in accordance with applicable law. (m) All principal, interest, fees and other amounts outstanding under the Original Credit Agreement shall have been repaid in full. (n) After giving effect to the Transactions, the Borrower and its Subsidiaries shall not have any outstanding Indebtedness or preferred stock other than (i) the Loans, (ii) the New Senior Subordinated Notes, (iii) any Remaining Notes, (iv) Indebtedness listed on Schedule 6.01 and (v) the Investor Preferred Stock. The Lenders shall be satisfied in all respects with the terms of the Investor Preferred Stock. (o) The Borrower shall have received gross cash proceeds from the issuance of the New Senior Subordinated Notes and the Warrants in a public offering or Rule 144A offering, in an aggregate amount equal to $214,055,600 less the aggregate principal amount of any Remaining Notes. The terms of the New Senior Subordinated Documents shall be satisfactory in all respects to the Lenders (it being understood that the terms specified in the offering memorandum related to the New Senior Subordinated Notes and the Warrants dated May 25, 2000 are satisfactory). (p) All material consents and approvals required to be obtained from any Governmental Authority or other Person in connection with the Transactions shall have been obtained, all applicable waiting periods and appeal periods shall have expired, in each case without the imposition of any burdensome conditions, 101 and there shall be no action by any Governmental Authority, actual or threatened, that would restrain, prevent or impose burdensome conditions on the Transactions. (q) There shall be no litigation or administrative proceeding that would have a Material Adverse Effect, or a material adverse effect on the ability of the parties to consummate the Transactions or the other transactions contemplated hereby. (r) The consummation of the Transactions shall not (a) violate any applicable law, statute, rule or regulation or (b) conflict with, or result in a default or event of default under, any material indenture or other agreement of the Borrower or any of their subsidiaries. Notwithstanding the foregoing, the amendments to the Original Credit Agreement that would be effected hereby and the obligations of the Lenders to make the Loans shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 6:00 p.m., New York City time, on May 31, 2000 (and, in the event such conditions are not so satisfied or waived, the Original Credit Agreement shall remain in effect without giving effect to any amendments thereto contemplated hereby). The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions: (a) The representations and warranties of each Loan Party set forth in the Loan Documents qualified as to materiality shall be true and correct and those not so qualified shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except to the extent such representations and 102 warranties expressly relate to an earlier date in which case such representations and warranties shall be true and correct as of such earlier date. (b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing. The making of any Loan on the occasion of each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. ARTICLE V Affirmative Covenants Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that: SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent and each Lender: (a) within 90 days after the end of each fiscal year of the Borrower, its audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Arthur Andersen LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit other than as to Unrestricted Subsidiaries) to 103 the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations with respect to compliance with Sections 6.09, 6.13, 6.14 and 6.15, (iii) setting forth a reasonably detailed calculation of the Borrower Amount, (iv) stating whether any change in GAAP or in the application thereof has occurred since the date of the Borrower's audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate and (v) if any Unrestricted Subsidiary exists (or existed at any time during the period covered by such financial statements), attaching consolidating balance sheets and income statements as of the same dates and covering the same 104 periods, certified as to the fair presentation thereof in accordance with GAAP as provided in Section 5.01(b); (d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines); (e) not later than 30 days following the commencement of each fiscal year of the Borrower, a detailed consolidated budget for such fiscal year (including a projected consolidated balance sheet and related statements of projected operations and cash flow as of the end of and for such fiscal year) and, promptly when available, any significant revisions of such budget; (f) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, as the case may be; and (g) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request. SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; 105 (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or, to the knowledge of an executive officer or a Financial Officer of the Borrower, affecting the Borrower or any Affiliate thereof that would reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, would reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $10,000,000; and (d) any other development that results in, or would reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.03. Information Regarding Collateral. The Borrower and/or the Mexico Borrower will furnish to the Administrative Agent prompt written notice of any change (i) in any Loan Party's corporate name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, including any such change arising as a result of Section 6.10 of the Recapitalization Agreement, (ii) in the location of any Loan Party's chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it having an aggregate fair value in excess of $100,000 is located (including the establishment of any such new office or facility), (iii) in any Loan Party's identity or corporate structure, (iv) in any Loan Party's Federal Taxpayer Identification Number or (v) in any Loan Party's jurisdiction of incorporation. The Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Administrative Agent to 106 continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral; provided that the Administrative Agent shall take any action reasonably requested by the Borrower to maintain a valid, legal and perfected security interest in all the Collateral. SECTION 5.04. Existence; Conduct of Business. The Borrower will, and will cause each of its Restricted Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of the business of the Borrower and its Restricted Subsidiaries, taken as a whole; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.04. SECTION 5.05. Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay (i) all material Taxes and other charges of any Governmental Authority imposed on it or any of its properties or assets or in respect of any of its franchises, business, income or property before any material penalty or interest accrues thereon and (ii) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien (other than a Lien permitted under Section 6.03) upon any of the property or assets of the Borrower or any of its Subsidiaries, prior to the time when any penalty or fine shall be incurred with respect thereto, except where (a) the validity or amount thereof is being contested in good faith by appropriate procedures or proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) such contest effectively suspends collection of the contested obligation and the enforcement of any Lien securing such obligation and (d) the failure to make payment pending such contest would not reasonably be expected to result in a Material Adverse Effect. SECTION 5.06. Maintenance of Properties. The Borrower will, and will cause each of its Restricted 107 Subsidiaries to, keep and maintain all property material to the conduct of the business of the Borrower and its Restricted Subsidiaries taken as a whole in good working order and condition, ordinary wear and tear excepted. SECTION 5.07. Insurance. The Borrower will, and will cause each of its Restricted Subsidiaries to, maintain insurance with respect to its material properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons. Such insurance shall be maintained with financially sound and reputable insurers, except that a portion of such insurance program (not to exceed that which is customary in the case of companies engaged in the same or similar business or having similar properties similarly situated) may be effected through self-insurance, provided adequate reserves therefor, in accordance with GAAP, are maintained. All insurance policies or certificates (or certified copies thereof) with respect to such insurance (A) shall be endorsed to the Collateral Agent's reasonable satisfaction for the benefit of the Lenders (including, without limitation, by naming the Collateral Agent as loss payee or additional insured, as appropriate); and (B) shall state that such insurance policy shall not be canceled or revised without thirty days' prior written notice thereof by the insurer to the Administrative Agent and (iii) furnish to the Administrative Agent, on the Effective Date and on the date of delivery of each annual financial statement, full information as to the insurance carried. At any time that insurance at levels described in Schedule 5.07 is not being maintained by or on behalf of the Borrower or any of its Restricted Subsidiaries, the Borrower will notify the Lenders in writing within two Business Days thereof and, if thereafter notified by the Administrative Agent or the Required Lenders to do so, the Borrower or any such Restricted Subsidiary, as the case may be, shall obtain insurance at such levels at least equal to those set forth on Schedule 5.07, provided that such insurance can be obtained at commercially reasonable rates. SECTION 5.08. Casualty and Condemnation. (a) The Borrower will furnish to the Administrative Agent and the Lenders prompt written notice of any casualty or other 108 insured damage to any portion of any Collateral or the commencement of any action or proceeding for the taking of any Collateral or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding, where the fair market value of the Collateral so affected in connection with any such casualty event or condemnation is at least $1,000,000. (b) If any event described in paragraph (a) of this Section results in Net Proceeds (whether in the form of insurance proceeds, condemnation award or otherwise), the Collateral Agent is authorized to collect such Net Proceeds and, if received by the Borrower or any Subsidiary, such Net Proceeds shall be paid over to the Collateral Agent; provided that (i) if the aggregate Net Proceeds in respect of such event (other than proceeds of business interruption insurance) are less than $5,000,000, such Net Proceeds shall be paid over to the Borrower unless a Default has occurred and is continuing, and (ii) all proceeds of business interruption insurance shall be paid over to the Borrower unless a Default has occurred and is continuing. All such Net Proceeds retained by or paid over to the Collateral Agent shall be held by the Collateral Agent and released from time to time to pay the costs of repairing, restoring or replacing the affected property or funding expenditures for assets in any business permitted under Section 6.04(b), in each case in accordance with the terms of the applicable Security Document, subject to the provisions of the applicable Security Document regarding application of such Net Proceeds during a Default. (c) If any Net Proceeds retained by or paid over to the Collateral Agent as provided above continue to be held by the Collateral Agent on the date that is 365 days after the receipt of such Net Proceeds, then such Net Proceeds shall be applied to prepay Term Borrowings as provided in Section 2.11(b), subject to Section 2.11(e). SECTION 5.09. Books and Records; Inspection and Audit Rights. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made in all material respects of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit 109 any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants (and the Borrower shall be provided the opportunity to participate in any such discussions with such independent accountants), all at such reasonable times and as often as reasonably requested. SECTION 5.10. Compliance with Laws. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, including Environmental Laws except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.11. Use of Proceeds and Letters of Credit. The proceeds of the Term Loans will be used solely to (a) effect the Equity Redemption, (b) purchase any Existing Notes tendered (and not withdrawn) pursuant to the Debt Tender Offer, including any premium associated therewith, (c) pay the Transaction Costs and (d) repay the outstanding loans under the Original Credit Agreement. The proceeds of the Revolving Loans and Swingline Loans will be used on the Effective Date to fund a portion of the items described in the immediately preceding sentence and thereafter solely for general corporate purposes, including (i) Permitted Acquisitions and (ii) the purchase of Remaining Notes from time to time following the Effective Date at prices not exceeding the price payable pursuant to the Debt Tender Offer. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. Letters of Credit will be issued only for general corporate purposes. SECTION 5.12. Additional Subsidiaries. If any additional Subsidiary is formed or acquired after the Effective Date, the Borrower will notify the Administrative Agent and the Lenders thereof and (a) if such Subsidiary is a Subsidiary Loan Party, the Borrower will cause such Subsidiary to become a party to the Guarantee Agreement, the Indemnity, Subrogation and Contribution Agreement and 110 each applicable Security Document in the manner provided therein within three Business Days after such Subsidiary is formed or acquired and promptly take such actions to create and perfect Liens on such Subsidiary's assets to secure the Obligations as the Administrative Agent or the Required Lenders shall reasonably request and (b) if such Subsidiary is a Restricted Subsidiary and any shares of capital stock or Indebtedness of such Subsidiary are owned by or on behalf of any Loan Party, the Borrower will cause such shares and promissory notes evidencing such Indebtedness to be pledged pursuant to the Pledge Agreement within three Business Days after such Subsidiary is formed or acquired (except that, if such Subsidiary is a Foreign Subsidiary and is not a Subsidiary Loan Party, shares of common stock of such Subsidiary that are owned by or on behalf of the Borrower or a Subsidiary Loan Party and that are to be pledged pursuant to the Pledge Agreement may be limited to 65% of the outstanding shares of common stock of such Subsidiary). SECTION 5.13. Further Assurances. (a) The Borrower will, and will cause each Subsidiary Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), that may be required under any applicable law, or which the Administrative Agent or the Required Lenders may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Loan Parties. The Borrower also agrees to provide to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents. (b) If any material assets (including any real property or improvements thereto or any interest therein) are acquired by the Borrower or any Subsidiary Loan Party after the Effective Date (other than assets constituting Collateral under the Security Agreement that become subject 111 to the Lien of the Security Agreement upon acquisition thereof), the Borrower will notify the Administrative Agent and the Lenders thereof, and, if requested by the Administrative Agent or the Required Lenders, the Borrower will cause such assets to be subjected to a Lien securing the Obligations and will take, and cause the Subsidiary Loan Parties to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect such Liens, including actions described in paragraph (a) of this Section, all at the expense of the Loan Parties, provided that the following property shall not be covered by this Section 5.13(b): (i) intellectual property a security interest in which would require filings or recordations under laws other than the laws of the United States or any jurisdiction thereof, (ii) owned real estate or leasehold interests with an aggregate fair market value of less than $10,000,000, (iii) any other items of tangible personal property with, in each case, a fair market value of less than $500,000 and (iv) items explicitly excluded by exceptions in the Security Agreement, the Pledge Agreement or any other Security Document. SECTION 5.14. Interest Rate Hedging. The Borrower will enter into prior to December 31, 2000, and thereafter to maintain for successive periods of not less than three years, Bank Hedge Agreements, the effect of which shall be to ensure that at least 50% of the sum of (a) the outstanding Term Loans and (b) the outstanding Senior Subordinated Notes of the Borrower and its consolidated Subsidiaries is effectively subject to a fixed rate of interest. ARTICLE VI Negative Covenants Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that: 112 SECTION 6.01. Indebtedness. The Borrower will not, and will not permit any Restricted Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except: (i) Indebtedness created under the Loan Documents; (ii) Indebtedness existing on the Effective Date and set forth in Schedule 6.01 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; (iii) Indebtedness of the Borrower to any Restricted Subsidiary and of any Restricted Subsidiary to the Borrower or any other Restricted Subsidiary; provided that Indebtedness of any Restricted Subsidiary that is not a Loan Party to the Borrower or any Subsidiary Loan Party shall be subject to Section 6.05; (iv) Guarantees by the Borrower of Indebtedness of any Restricted Subsidiary, Joint Venture or Unrestricted Subsidiary and by any Restricted Subsidiary of Indebtedness of the Borrower, any other Restricted Subsidiary, any Joint Venture or any Unrestricted Subsidiary; provided that (i) Guarantees by the Borrower or any Subsidiary Loan Party of Indebtedness of any Restricted Subsidiary that is not a Loan Party, and Guarantees by the Borrower or any Restricted Subsidiary of Indebtedness of a Joint Venture or an Unrestricted Subsidiary, in each case shall be subject to Section 6.05 and (ii) any Guarantee of the Senior Subordinated Notes by a Restricted Subsidiary shall be subordinated on the same terms as the Senior Subordinated Notes and shall be given only by a Restricted Subsidiary that is a Subsidiary Loan Party that is a party to the Guarantee Agreement; (v) Indebtedness of the Borrower or any Restricted Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations 113 and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, including Capital Lease Obligations incurred pursuant to transactions permitted by Section 6.07, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (A) such Indebtedness is incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement and (B) the aggregate principal amount of Indebtedness permitted by this clause (v) and clause (vi) below shall not exceed $25,000,000 at any time outstanding; (vi) Indebtedness of any Person that becomes a Restricted Subsidiary after the Effective Date and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (A) such Indebtedness exists at the time such Person becomes a Restricted Subsidiary and is not created in contemplation of or in connection with such Person becoming a Restricted Subsidiary and (B) the aggregate principal amount of Indebtedness permitted by this clause (vi) and clause (v) above shall not exceed $25,000,000 at any time outstanding; (vii) the New Senior Subordinated Notes in an aggregate principal amount not exceeding the principal amount thereof issued on or prior to the Effective Date and any Remaining Notes; (viii) unsecured Indebtedness representing the deferred purchase price for Permitted Acquisitions; provided that (a) no Restricted Subsidiary shall be liable (pursuant to a Guarantee or otherwise) for any such Indebtedness incurred in connection with any Permitted Acquisition other than any Restricted Subsidiary resulting from such Permitted Acquisition, (b) any financial covenants relating to such Indebtedness shall be no more restrictive to the Borrower and its Subsidiaries than, and the other material terms with respect to such Indebtedness shall be no more restrictive to the Borrower and its 114 Restricted Subsidiaries, taken as a whole, than, the equivalent such covenants and terms contained in this Agreement and (c) the aggregate principal amount of Indebtedness permitted by this clause (viii) shall not exceed $15,000,000 at any time outstanding; (ix) Indebtedness with respect to surety, appeal and performance bonds obtained by the Borrower or any of its Restricted Subsidiaries in the ordinary course of business; (x) other Indebtedness (including borrowings under overdraft facilities) in an aggregate principal amount not exceeding $15,000,000 at any time outstanding; provided that (a) the aggregate principal amount of Indebtedness of the Borrower's Restricted Subsidiaries permitted by this clause (x) shall not exceed $10,000,000 at any time outstanding and (b) all such Indebtedness shall be unsecured, except that overdraft facilities may be secured to the extent permitted by clause (f) of Section 6.03; and (xi) Permitted Mexico Indebtedness. SECTION 6.02. Certain Equity Securities. The Borrower will not, nor will it permit any Restricted Subsidiary to, issue any preferred stock (other than Qualified Preferred Stock) or be or become liable in respect of any obligation (contingent or otherwise) to purchase, redeem, retire, acquire or make any other payment in respect of any shares of capital stock of the Borrower or any Restricted Subsidiary or any option, warrant or other right to acquire any such shares of capital stock, except for (i) the warrants issued in connection with the Investor Preferred Stock, (ii) the Warrants and (iii) actions otherwise permitted under Section 6.09. SECTION 6.03. Liens. The Borrower will not, and will not permit any Restricted Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Liens created under the Loan Documents; 115 (b) Permitted Encumbrances; (c) any Lien on any property or asset of the Borrower or any Restricted Subsidiary existing on the Effective Date and set forth in Schedule 6.03; provided that (i) such Lien shall not apply to any other property or asset of the Borrower or any Restricted Subsidiary, except assets financed by the same financing source and (ii) such Lien shall secure only those obligations that it secures on the Effective Date and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (d) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the Effective Date prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Borrower or any Restricted Subsidiary, except assets financed by the same financing source and (iii) such Lien shall secure only those obligations that it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (e) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Restricted Subsidiary; provided that (i) such Liens secure Indebtedness permitted by clause (v) of Section 6.01, (ii) such Liens and the Indebtedness secured thereby are incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and other fixed or capital assets being financed by the same financing source and (iv) such 116 security interests shall not apply to any other property or assets of the Borrower or any Restricted Subsidiary other than (A) property directly related to such fixed or capital assets and of a type customarily covered by such Liens, except that such security interests may not apply to any accounts receivable or inventory and (B) other assets then being financed by the same financing source; (f) Liens securing Indebtedness under (i) the Borrower's domestic overdraft facilities in an amount not exceeding $10,000,000 and (ii) foreign overdraft facilities of Foreign Subsidiaries in an amount not exceeding $10,000,000; provided that Liens permitted by clause (ii) shall apply only to properties and assets of Foreign Subsidiaries; (g) leases and subleases of real property and tangible personal property and licenses and sublicenses of intellectual property rights, in each case granted in the ordinary course of business and not interfering individually or in the aggregate (with all such licenses and subleases being taken as a whole) in any material respect with the conduct of the business of the Borrower and the Subsidiaries; and (h) Liens to secure compensation and indemnity obligations to the trustee under the indenture for the New Senior Subordinated Notes and the warrant agent under the warrant agreement for the Warrants. SECTION 6.04. Fundamental Changes. (a) The Borrower will not and will not permit any Restricted Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Restricted Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (ii) any Restricted Subsidiary may merge into any Subsidiary Loan Party in a transaction in which the surviving entity is a Subsidiary Loan Party, (iii) any Restricted Subsidiary that is not a Loan Party may merge into any Restricted Subsidiary that is not a Loan Party, 117 (iv) any Subsidiary may merge into any other Person that becomes a Subsidiary Loan Party in connection with a Permitted Acquisition, (v) any Restricted Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided that any such merger involving a Person that is not a Wholly Owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.05 and (vi) the Borrower may merge with an Affiliate incorporated under the laws of the State of Delaware solely for the purpose of incorporating or organizing the Borrower under the laws of the State of Delaware. (b) The Borrower will not, and will not permit any of its Restricted Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the Effective Date and businesses reasonably related, ancillary or complementary thereto. SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a Wholly Owned Subsidiary prior to such merger) any capital stock, evidences of indebtedness or other securities (including any option, warrant or other security granting the right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except: (a) Permitted Investments; (b) investments set forth on Schedule 6.05, to the extent such investments would not be permitted under any other clause of this Section; (c) investments by the Borrower and its Restricted Subsidiaries in the capital stock of 118 Restricted Subsidiaries; provided that (i) any such shares of capital stock owned by a Loan Party shall be pledged pursuant to the Pledge Agreement (subject to the limitations applicable to common stock of a Foreign Subsidiary that is not a Subsidiary Loan Party, referred to in Section 5.12) and (ii) the amount of such investments by the Loan Parties in Restricted Subsidiaries that are not Loan Parties, plus the amount of all loans and advances referred to in clause (d) below that are made by Loan Parties to Restricted Subsidiaries that are not Loan Parties, plus the amount of Indebtedness referred to in clause (e) below of Restricted Subsidiaries that are not Loan Parties that is Guaranteed by any Loan Party, shall not exceed $10,000,000 in the aggregate at any time outstanding; provided further that (A) investments in, loans and advances to, and Guarantees of Indebtedness of, the Mexico Borrower and its subsidiaries shall be permitted without regard to the limitations of clause (ii) of the foregoing proviso, provided that the aggregate amount thereof at any time outstanding in reliance upon this clause (A) shall not exceed $15,000,000, in addition to any amounts permitted as investments in, loans and advances to, and Guarantees of Indebtedness of, the Mexico Borrower and its subsidiaries pursuant to clause (ii) of the foregoing proviso, and (B) the Mexico Term Loans and Guarantees thereof shall be disregarded for purposes of determining compliance with the foregoing limitations; (d) loans or advances made by the Borrower to any Restricted Subsidiary and made by any Restricted Subsidiary to the Borrower or any other Restricted Subsidiary; provided that any such loans and advances made by a Loan Party shall be evidenced by a promissory note pledged pursuant to the Pledge Agreement and the amount of all such loans and advances by Loan Parties to Subsidiaries that are not Loan Parties shall not exceed the limitations set forth in clause (c) above; (e) Guarantees constituting Indebtedness permitted by Section 6.01; provided that (i) the amount of Indebtedness (other than the Mexico Term Loans) of Restricted Subsidiaries that are not Loan 119 Parties that is Guaranteed by any Loan Party shall not exceed $10,000,000 in the aggregate at any time outstanding and (ii) the amount of Indebtedness of Joint Ventures and Unrestricted Subsidiaries that is Guaranteed by the Borrower or any Restricted Subsidiary shall be subject to the limitations of clause (i) below; (f) Guarantees by the Borrower or any Restricted Subsidiary of the obligations (other than Indebtedness) of the Borrower or any Restricted Subsidiary, which obligations are permitted by this Agreement; (g) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business; (h) the Permitted Acquisitions; provided that at the time of and after giving effect to the consummation of any Permitted Acquisition the sum of the unused Revolving Commitments and the Borrower's and Restricted Subsidiaries' Permitted Investments and cash balances shall not be less than $15,000,000; (i) investments in Joint Ventures and Unrestricted Subsidiaries in an aggregate amount, on a cumulative basis subsequent to the Effective Date, not exceeding the sum of (i) $25,000,000, plus (ii) the aggregate amount of dividends, interest, principal payments and returns of capital received after the Effective Date by the Borrower and its Restricted Subsidiaries in respect of investments made under this clause (i), plus (iii) the unutilized portion of the Borrower Amount as of the date of investment, provided that (A) the aggregate amount invested in Joint Ventures and in Unrestricted Subsidiaries subsequent to the Effective Date (excluding amounts invested in reliance upon clause (ii) above) shall not at any time exceed $50,000,000, (B) if an Unrestricted Subsidiary is declared to be a Restricted Subsidiary, compliance with the foregoing limitations shall thereafter be 120 determined as though such Subsidiary had never been an Unrestricted Subsidiary and (C) for purposes of determining compliance with the foregoing limitations, any Guarantee by the Borrower or any Restricted Subsidiary of Indebtedness or other monetary obligations of a Joint Venture or Unrestricted Subsidiary shall be deemed to constitute an investment therein in an amount equal to the Indebtedness or other monetary obligations so Guaranteed; (j) loans or advances to employees, officers, directors or consultants of the Borrower and the Subsidiaries in their capacity as such, for the purpose of acquiring capital stock of the Borrower; (k) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (l) investments of any Person existing at the time such Person becomes a Restricted Subsidiary or at the time such Person merges or consolidates with the Borrower or any of its Restricted Subsidiaries, in either case in compliance with the terms of this Agreement, provided that such investments were not made by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary or such merger or consolidation; (m) Hedging Agreements entered into in the ordinary course of business; (n) other loans, advances and investments not in excess of $15,000,000 outstanding at any time; and (o) notes or other evidence of Indebtedness acquired as consideration in connection with a sale, transfer, lease or other disposition of any asset by the Borrower or any of the Restricted Subsidiaries. SECTION 6.06. Asset Sales. The Borrower will not, and will not permit any of its Restricted Subsidiaries 121 to, sell, transfer, lease or otherwise dispose of any asset, including any capital stock (other than any such sale, transfer, lease or other disposition resulting from any casualty or condemnation of any assets of the Borrower or any of its Subsidiaries), nor will the Borrower permit any of its Restricted Subsidiaries to issue any additional shares of its capital stock or other ownership interest in such Restricted Subsidiary, except: (a) sales of inventory, used or surplus tangible property and Permitted Investments in the ordinary course of business; (b) sales, transfers, issuances and dispositions to the Borrower or a Restricted Subsidiary; provided that any such sales, transfers or dispositions involving a Restricted Subsidiary that is not a Loan Party shall be made in compliance with Section 6.10; (c) leases and licenses entered into in the ordinary course of business; (d) sales in connection with sale-leasebacks permitted under Section 6.07; (e) sales of investments referred to in clauses (a), (b), (g), (i), (m), (n) and (o) of Section 6.05; (f) sales, transfers and dispositions of assets (other than capital stock of a Subsidiary) that are not permitted by any other clause of this Section; provided that the aggregate fair market value of all assets sold, transferred or otherwise disposed of in reliance upon this clause (f) shall not, in the aggregate, exceed $50,000,000 during the term of this Agreement; and (g) sales, transfers and dispositions of Foreign Assets; and (h) transfers and dispositions constituting investments permitted under Section 6.05; provided that all sales, transfers, leases and other dispositions permitted hereby (other than those permitted 122 by clause (b) above) shall be made for an amount not less than fair value (as determined in good faith by the Board of Directors of the Borrower), or, in the case of clause (d) above, for an amount, if less, equal to the aggregate cost expended for the property that is the subject of such sale-leaseback (except that those permitted by clause (a) above shall be made on terms that are customary in the ordinary course) and for consideration at least 80% of which is (i) cash, (ii) in the form of properties or assets to be owned by the Borrower or any Subsidiary Loan Party for use in a business permitted by this Agreement or (iii) voting capital stock in one or more Persons engaged in a Permitted Business that are or are to become Subsidiary Loan Parties in connection with such transaction (provided that, in the case of clauses (ii) and (iii), the applicable transaction involves a Permitted Acquisition). For purposes of this Section 6.06, the following shall be deemed to be cash: (a) the assumption of any liabilities of the Borrower or any Restricted Subsidiary with respect to, and the release of the Borrower or such Restricted Subsidiary from all liability in respect of, any Indebtedness of the Borrower or the Restricted Subsidiaries permitted hereunder (in the amount of such Indebtedness) in connection with a sale, transfer, lease or other disposition permitted under Section 6.06 and (b) securities received by the Borrower or any Restricted Subsidiary from the transferee that are immediately convertible into cash without breach of their terms or the agreement pursuant to which they were purchased and that are promptly converted by the Borrower or such Restricted Subsidiary into cash. SECTION 6.07. Sale and Lease-Back Transactions. The Borrower will not, and will not permit any Restricted Subsidiary to, enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred, except for any such sale of fixed or capital assets that is consummated within 120 days after the date the Borrower or such Restricted Subsidiary acquires or finishes construction of such fixed or capital asset. 123 SECTION 6.08. Hedging Agreements. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, enter into any Hedging Agreement, other than Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Restricted Subsidiary is or expects to be exposed in the conduct of its business or the management of its liabilities. SECTION 6.09. Restricted Payments; Certain Payments of Indebtedness. (a) The Borrower will not, and will not permit any Restricted Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except (i) Wholly Owned Subsidiaries may declare and pay dividends with respect to their capital stock and Restricted Subsidiaries that are not Wholly Owned Subsidiaries may declare and pay dividends ratably with respect to their capital stock, (ii) the Borrower may make payments of purchase price adjustments to shareholders or former shareholders of the Borrower in accordance with the Recapitalization Agreement (as in effect on the Effective Date), (iii) the Borrower may, subject to Section 6.02, make dividends consisting solely of shares of its capital stock and (iv) the Borrower may make Restricted Payments to management or employees of the Borrower and its Subsidiaries or their Permitted Transferees (as defined in the Stockholders Agreement) during any fiscal year in amount not to exceed the amount set forth below opposite such year, pursuant to and in accordance with the Stockholders Agreement, employment agreements, stock option plans or agreements or other benefit plans or agreements:
Year Ending December 31 Amount - ----------------------- ------ 2000 $10,000,000 2001 $12,000,000 2002 $14,000,000 2003 $16,000,000 2004 $18,000,000 2005 and each fiscal year thereafter $20,000,000
124 (b) The Borrower will not, and will not permit any Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Senior Subordinated Note, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancelation or termination of any Senior Subordinated Note, except (i) payment of regularly scheduled interest payments as and when due in respect of the Senior Subordinated Notes and (ii) purchases of any Remaining Notes from time to time following the Effective Date at prices not exceeding the price payable pursuant to the Debt Tender Offer, including pursuant to a change of control offer pursuant to the Existing Indenture arising as a result of the Transactions. SECTION 6.10. Transactions with Affiliates. The Borrower will not, and will not permit any Restricted Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates (including any Subsidiary), except (a) transactions in the ordinary course of business that are at prices and on terms and conditions not less favorable to the Borrower or such Restricted Subsidiary than could be obtained on an arm's-length basis from unrelated third parties (as determined in good faith by members of the Board of Directors of the Borrower having a majority of the voting power held by all disinterested members of the Board of Directors of the Borrower), (b) transactions between or among the Borrower and the Subsidiary Loan Parties not involving any other Affiliate (except to the extent the involvement with the other Affiliate otherwise complies with this Section 6.10), (c) any Restricted Payment permitted by Section 6.09, and (d) transactions expressly contemplated by Schedule 6.10. SECTION 6.11. Restrictive Agreements. The Borrower will not and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Restricted Subsidiary to 125 create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Restricted Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock (it being understood that the priority of any preferred stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock shall not be deemed a restriction on the ability to make distributions on capital stock) or to make or repay loans or advances to the Borrower or any other Restricted Subsidiary (it being understood that the subordination of loans or advances made to the Borrower or any Restricted Subsidiary to other Indebtedness incurred by the Borrower or such Restricted Subsidiary shall not be deemed a restriction on the ability to make loans or advances) or to Guarantee Indebtedness of the Borrower or any other Restricted Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by any Loan Document, (ii) the foregoing shall not apply to restrictions and conditions existing on the Effective Date identified on Schedule 6.11, (iii) the foregoing shall not apply to any restriction or condition with respect to a Restricted Subsidiary pursuant to an agreement relating to any capital stock or Indebtedness of such Restricted Subsidiary, in each case incurred by such Restricted Subsidiary prior to the date on which such Restricted Subsidiary was acquired by the Borrower (other than capital stock or Indebtedness incurred as consideration in, in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Borrower) and outstanding on such date; (iv) the foregoing shall not apply to any restriction or condition pursuant to an agreement refinancing an agreement referred to in clause (i), (ii) or (iii) or this clause (iv) or contained in any amendment to an agreement referred to in clause (i), (ii) or (iii) or this clause (iv); provided, however, that the conditions and restrictions contained in any such refinancing agreement or amendment are no more restrictive, taken as a whole, than the encumbrances and restrictions contained in the applicable predecessor agreement; (v) the foregoing shall not apply to customary restrictions and conditions contained in agreements 126 relating to the sale of a Subsidiary or assets pending such sale, provided such restrictions and conditions apply only to the Subsidiary or assets that are to be sold and such sale is permitted hereunder, (vi) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness, (vii) clause (a) of the foregoing shall not apply to customary provisions in contracts restricting the assignment thereof, or the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract; (viii) the foregoing shall not apply to restrictions imposed by any agreement relating to Indebtedness of a Foreign Subsidiary that applies only to such Foreign Subsidiary and its assets (including its subsidiaries); (ix) the foregoing shall not apply to customary provisions in Joint Venture agreements and other similar agreements entered into in the ordinary course of business; and (x) the foregoing shall not apply to net worth provisions in lease and other agreements entered into by the Borrower or any Restricted Subsidiary in the ordinary course of business. SECTION 6.12. Amendment of Material Documents. The Borrower will not, and will not permit any Restricted Subsidiary to, amend, modify or waive any of its rights under (a) its certificate of incorporation, by-laws or other organizational documents, including the terms related to the Investor Preferred Stock (other than amendments and modifications that are not adverse to the interests of the Lenders and do not impair the exercise of remedies under any Security Document) or (b) the New Senior Subordinated Notes, any New Senior Subordinated Note Document or, so long as any Remaining Notes are outstanding, the Existing Notes Indenture (other than amendments to the Existing Notes Indenture to be made on the Effective Date as contemplated by the Debt Tender Offer and other amendments and modifications that are not adverse to the interests of the Lenders and do not impair the exercise of remedies under any Security Document). SECTION 6.13. Capital Expenditures. The Borrower will not make, and will not permit its Restricted Subsidiaries to make, Capital Expenditures other than 127 Capital Expenditures made by the Borrower and its Restricted Subsidiaries in any fiscal year of the Borrower in an aggregate amount not exceeding (a) with respect to (i) the fiscal year ending on December 31, 2000, $60,000,000 and (ii) each fiscal year thereafter, $50,000,000 (in either case, the "Permitted Amount") plus, for each fiscal year following the Effective Date (commencing with the 2001 fiscal year), an amount equal to the excess, if any, of the Permitted Amount for the immediately preceding fiscal year over the aggregate amount of Capital Expenditures made in the immediately preceding fiscal year, plus (b) amounts available from time to time to be invested in Joint Ventures and Unrestricted Subsidiaries under clause (i) of Section 6.05, provided that (i) to the extent that Capital Expenditures are made in reliance upon clause (b) above, amounts available to be invested in Joint Ventures and Unrestricted Subsidiaries under clause (i) of Section 6.05 shall be deemed utilized thereunder for purposes of determining compliance therewith, and (ii) the Borrower and its Restricted Subsidiaries may make Capital Expenditures in any fiscal year exceeding the amount otherwise permitted for such fiscal year pursuant to the foregoing provisions of this Section, provided that the aggregate amount of Capital Expenditures made in reliance upon this clause (ii), on a cumulative basis, shall not exceed $30,000,000. The foregoing limitations shall not apply to (x) expenditures with proceeds resulting from sales of assets or capital stock or equity issuances or from casualty or condemnation events, in each case to the extent such expenditures are permitted under this Agreement and (y) Permitted Acquisitions. (b) In the event that the Borrower or any Subsidiary makes any Capital Expenditures in connection with the construction or acquisition of any fixed or capital asset and the Borrower or any of its Subsidiaries consummates a sale and lease-back transaction with respect to such fixed or capital asset within 120 days after the completion of the construction or acquisition of such fixed or capital asset, the amount of Capital Expenditures set forth in paragraph (a) for the fiscal year of the Borrower in which the Borrower or its Restricted Subsidiaries receive the Net Proceeds from such sale and lease-back transaction shall be increased by an amount equal to the 128 lesser of (A) the amount of such Net Proceeds or (B) the amount of Capital Expenditures made with respect to such fixed or capital asset during the same and all prior fiscal years ending on or after December 31, 2000. SECTION 6.14. Leverage Ratio. The Borrower will not permit the Leverage Ratio as of the last day of any fiscal quarter during any period set forth below (inclusive of the specified first and last day of such period) to be in excess of the ratio set forth below opposite such period:
Period Ratio ------ ----- September 30, 2000 through December 30, 2000 5.50 to 1.00 December 31, 2000 through March 30, 2001 5.00 to 1.00 March 31, 2001 through June 29, 2001 4.90 to 1.00 June 30, 2001 through September 29, 2001 4.75 to 1.00 September 30, 2001 through December 30, 2001 4.50 to 1.00 December 31, 2001 through March 30, 2002 4.25 to 1.00 March 31, 2002 through June 29, 2002 4.00 to 1.00 June 30, 2002 through December 30, 2002 3.75 to 1.00 December 31, 2002 and thereafter 3.50 to 1.00
SECTION 6.15. Interest Coverage Ratio. The Borrower will not permit the ratio of Consolidated EBITDA to Cash Interest Expense for any period of four consecutive fiscal quarters ending during any period set forth below (inclusive of the specified first and last day of such period) to be less than the ratio set forth below opposite such period:
Period Ratio ------ ----- September 30, 2000 through March 30, 2001 1.75 to 1.00 March 31, 2001 through September 29, 2001 2.00 to 1.00 September 30, 2001 through June 29, 2002 2.25 to 1.00 June 30, 2002 through December 30, 2002 2.50 to 1.00 December 31, 2002 and thereafter 2.75 to 1.00
SECTION 6.16. Designated Senior Debt. The Borrower shall not designate any Indebtedness (other than indebtedness under the Loan Documents) as "Designated Senior Debt" for purposes of and as defined in the New Senior Subordinated Note Documents. 129 ARTICLE VII Events of Default If any of the following events ("Events of Default") shall occur: (a) the Borrower or the Mexico Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower or the Mexico Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days; (c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall have been incorrect in any material respect when made or deemed made; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.04 (with respect to the existence of the Borrower), 5.11 or 5.14 or in Article VI; (e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (a), (b) or (d) of this Article), and such 130 failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender); (f) the Borrower or any Restricted Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable, including any applicable grace period; (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale, transfer or other disposition (including as a result of a casualty or condemnation event) of the property or assets securing such Indebtedness in a manner not prohibited by this Agreement; (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Restricted Subsidiary (other than Immaterial Subsidiaries) or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Restricted Subsidiary (other than Immaterial Subsidiaries) or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; 131 (i) the Borrower or any Restricted Subsidiary (other than Immaterial Subsidiaries) shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Restricted Subsidiary (other than Immaterial Subsidiaries) or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any proceeding described in clause (h) of this Article, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (j) the Borrower or any Restricted Subsidiary (other than Immaterial Subsidiaries) shall become unable, admit in writing its inability or fail generally to pay its debts as they become due; (k) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 (net of amounts covered by insurance as to which the insurer has not denied liability) shall be rendered against the Borrower, any Restricted Subsidiary (other than Immaterial Subsidiaries) or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Restricted Subsidiary (other than Immaterial Subsidiaries) to enforce any such judgment; (l) an ERISA Event shall have occurred that, in the reasonable opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an 132 aggregate amount exceeding (i) $7,000,000 in any year or (ii) $10,000,000 for all periods; (m) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any Collateral, with the priority required by the Loan Documents, except (i) as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents, (ii) as a result of (x) the Collateral Agent's failure to take any action reasonably requested by the Borrower in order to maintain a valid and perfected Lien on any Collateral or (y) any action taken by the Collateral Agent to release any Lien on any Collateral or (iii) Liens on any item of Collateral with a fair market value not exceeding $500,000; or (n) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Borrower or the Mexico Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower and the Mexico Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable (the "remaining Loans") may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations (other than any remaining Loans) of the Borrower and the Mexico Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and the Mexico Borrower; and in case of any event with respect to the Borrower or the Mexico Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal 133 of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and the Mexico Borrower. ARTICLE VIII The Administrative Agent Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set forth in the Loan Documents, the 134 Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or wilful misconduct. The Administrative Agent shall not be deemed to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower or the Mexico Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. 135 The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. Subject to the appointment and acceptance of a successor to the Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, with the consent of the Borrower (such consent not to be unreasonably withheld), to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent that shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall he discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent. 136 Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder. The provisions of this Article shall apply to the Collateral Agent as though named herein as the Administrative Agent. ARTICLE IX Miscellaneous SECTION 9.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower or the Mexico Borrower, to it at 500 Huntsman Way, Salt Lake City 84108, Attention of Scott K. Sorensen (Telecopy No. (801) 584-5783), with a copy to Ronald G. Moffitt (Telecopy No. (801) 584-5783); (b) if to the Administrative Agent or the Collateral Agent, to Bankers Trust Company, One Bankers Trust Plaza, New York, New York 10006, Attention of Maria Pina (Telecopy No. (212) 250-2340); (c) if to the Issuing Bank, to Bankers Trust Company, One Bankers Trust Plaza, New York, New York 137 10006, Attention of Maria Pina (Telecopy No. (212) 250-2340); (d) if to the Swingline Lender, to Bankers Trust Company, One Bankers Trust Plaza, New York, New York 10006, Attention of Maria Pina (Telecopy No. (212) 250-2340; (e) if to the Syndication Agent, to The Chase Manhattan Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Janet Belden (Telecopy No. (212) 552-5658), with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017, Attention of Peter Dedousis (Telecopy No. (212) 270-1355); and (f) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which 138 given. Without limiting the generality of the foregoing, the making of a Loan or issuance or a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent or Collateral Agent, as applicable, and the Loan Party or Loan Parties that are parties thereto, in each case with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of the term "Required Lenders" or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as the case may be), (vi) release any Subsidiary Loan Party from its Guarantee under the Guarantee Agreement (except as expressly provided in the Guarantee Agreement), or limit its liability in respect of such Guarantee, without the written consent of each Lender, (vii) release all or any substantial part of the Collateral from the Liens of the Security Documents (except as 139 expressly provided therein), without the written consent of each Lender or (viii) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class, without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each affected Class; provided further that (A) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender without the prior written consent of the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender, as the case may be, and (B) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Revolving Lenders (but not the Term Loan Lenders) or the Term Loan Lenders (but not the Revolving Lenders) may be effected by an agreement or agreements in writing entered into by the Borrower and the percentage in interest of the affected Class of Lenders that would be required to consent thereto under this Section if such Class of Lenders were the only Class of Lenders hereunder at the time. SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Collateral Agent, the Syndication Agent, the Documentation Agent, the Arranger and their respective Affiliates (other than the Sponsor or any Person Controlled by the Sponsor), including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, the Collateral Agent, the Syndication Agent, the Documentation Agent and the Arranger, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, the Collateral Agent, the Issuing 140 Bank, the Syndication Agent, the Documentation Agent, the Arranger or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, the Collateral Agent, the Issuing Bank, the Syndication Agent, the Documentation Agent, the Arranger or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. (b) The Borrower shall indemnify the Administrative Agent, the Collateral Agent, the Issuing Bank, the Syndication Agent, the Documentation Agent, the Arranger and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any other agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release of Hazardous Materials on or from any Mortgaged Property or any other property currently or formerly owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be 141 available to the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or wilful misconduct of such Indemnitee or any Affiliate of such Indemnitee (or of any officer, director, employee, advisor or agent of such Indemnitee or any such Indemnitee's Affiliates) or to the extent such damages constitute special, indirect or consequential damages (as opposed to direct or actual damages), and provided, further, that, for purposes of the foregoing proviso, The Chase Manhattan Bank and its Affiliates (other than the Sponsor and any Persons Controlled by the Sponsor) shall not be deemed to be Affiliates of the Sponsor or any Person Controlled by the Sponsor. (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, the Collateral Agent, the Issuing Bank, the Syndication Agent, the Documentation Agent, the Arranger or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, the Collateral Agent, the Issuing Bank, the Syndication Agent, the Documentation Agent, the Arranger or the Swingline Lender, as the case may be, such Lender's pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Collateral Agent, the Issuing Bank or the Swingline Lender in its capacity as such. For purposes hereof, a Lender's "pro rata share" shall be determined based upon its share of the sum of the total Revolving Exposures, outstanding Term Loans and unused Commitments at the time. (d) To the extent permitted by applicable law, neither the Borrower nor the Mexico Borrower shall assert, and each hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof. 142 (e) All amounts due under this Section shall be payable promptly after written demand therefor. The Mexico Borrower shall be jointly liable with the Borrower for all expense reimbursement and indemnification obligations under this Section that relate to or arise out of the Mexico Term Loans or the Mexico Borrower. SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that neither the Borrower nor the Mexico Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower or the Mexico Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or a Lender Affiliate, each of the Borrower (only so long as an Event of Default shall not have occurred and be continuing) and the Administrative Agent (and, in the case of an assignment of all or a portion of a Revolving Commitment or any Lender's obligations in respect of its LC Exposure or Swingline Exposure, the Issuing Bank and the Swingline Lender) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or a Lender Affiliate or an assignment of the entire remaining amount of the assigning Lender's Commitment or Loans, the amount of the Commitment or Loans of the 143 assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause (iii) shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender's rights and obligations in respect of one or more Classes of Commitments or Loans, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500; provided, however, that, in the case of contemporaneous assignments by a Lender to more than one fund managed by the same investment advisor, only a single $3,500 fee shall be payable for all such contemporaneous assignments, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent and the Borrower an Administrative Questionnaire; and provided further that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default under clause (h) or (i) of Article VII has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17, 9.03 and 9.13). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. 144 (c) The Administrative Agent, acting for this purpose as an agent of the Borrower and the Mexico Borrower shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive (absent manifest error), and the Borrower, the Mexico Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of the Borrower, the Mexico Borrower, the Administrative Agent, the Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Mexico Borrower, the Administrative Agent, the Issuing 145 Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement including with respect to any withholding Taxes or any filing or reporting requirements relating to such Participant. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower and the Mexico Borrower agree that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. (f) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the Loans or Commitments with respect to which such participation has been sold to such Participant, unless this restriction is waived by the Borrower. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower and the Mexico Borrower, to comply with Section 2.17(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations 146 hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17, 9.03 and 9.13 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Document and any separate letter agreements with respect to fees payable to the Administrative Agent or the Issuing Bank constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received 147 counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower or the Mexico Borrower against any of and all the obligations of the Borrower or the Mexico Borrower now or hereafter existing under this Agreement or any other Loan Document held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender may have. SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) Each of the Borrower and the Mexico Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the 148 Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or the Mexico Borrower or its properties in the courts of any jurisdiction. (c) Each of the Borrower and the Mexico Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF 149 OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Collateral Agent, the Syndication Agent, the Documentation Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' investment advisors, directors, officers, employees and agents, including accountants, legal counsel and other advisors (the "Representatives") and any direct or indirect contractual counterparty in swap agreements entered into in connection with a Lender's outstanding Loans from time to time or to such contractual counterparty's professional advisor (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential and, in the case of any such contractual counterparty or its professional advisor, such persons shall agree in writing to be bound by the provisions of this Section 9.12), (b) to the extent requested or demanded by any Governmental Authority or any self-regulatory organization (including the National Association of Insurance Commissioners or other similar organization), (c) to the extent required by applicable laws or regulations or by any subpoena, order or similar legal process; provided that, to the extent reasonably practicable and not prohibited by applicable laws or regulations or by any judicial or administrative order, such Person will provide the Borrower with prior notice of 150 such disclosure, (d) any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender, (e) to any other party to this Agreement, (f) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (g) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (h) with the consent of the Borrower or (i) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower, any Subsidiary or any of their Representatives that is not known to such Person to be subject to any obligation of confidentiality to the Borrower or any Subsidiary. For the purposes of this Section, "Information" means all information received from the Borrower, any Subsidiary or any of their Representatives relating to the Borrower, the Subsidiaries or their businesses, other than any such information that is available to the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 9.13. Conversion of Currencies. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures in the relevant 151 jurisdiction the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given. (b) The obligations of the Borrower and the Mexico Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, each of the Borrower and the Mexico Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrower and the Mexico Borrower contained in this Section 9.13 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder. SECTION 9.14. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with 152 interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 9.15. Release of Mexico Borrower. If the Mexico Borrower incurs Permitted Mexico Indebtedness, then, at the option of the Borrower, the Borrower may assume all or a portion of the obligations of the Mexico Borrower in respect of the Mexico Term Loans and become the borrower thereof for all purposes of the Loan Documents. Any such assumption shall be effected pursuant to an instrument reasonably satisfactory to the Administrative Agent, but otherwise shall not require the consent of any Lender. Upon the effectiveness of an assumption made in accordance with this Section, the Mexico Borrower shall be released from all liability under this Agreement in respect of the obligations so assumed by the Borrower. SECTION 9.16. Effectiveness of the Amendment and Restatement; Original Credit Agreement. This Agreement shall become effective on the Effective Date, and thereafter shall be binding upon and inure to the benefit of the parties hereto and the parties to the Original Credit Agreement and their respective successors and assigns. Until this Agreement becomes effective, the Original Credit Agreement shall remain in full force and effect and shall not be affected hereby. After the Effective Date, all obligations of the Borrower and the Mexico Borrower under the Original Credit Agreement shall become obligations of the Borrower and the Mexico Borrower hereunder, secured by the Liens granted under the Security Documents, and the provisions of the Original Credit Agreement shall be superseded by the provisions hereof. Except as otherwise expressly stated hereunder, the term of this 153 Agreement is for all purposes deemed to have commenced on the Effective Date. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. HUNTSMAN PACKAGING CORPORATION, by /s/ SCOTT K. SORENSEN ------------------------------- Name: Scott K. Sorensen Title: Executive Vice President and Chief Financial Officer ASPEN INDUSTRIAL, S.A. DE C.V., by /s/ SCOTT K. SORENSEN ------------------------------- Name: Scott K. Sorensen Title: Executive Vice President and Chief Financial Officer BANKERS TRUST COMPANY, individually and as Administrative Agent, by /s/ ROBERT R. TELESCA ------------------------------- Name: Robert R. Telesca Title: Assistant Vice President THE CHASE MANHATTAN BANK, as Syndication Agent, by /s/ THOMAS H. KOZLARK ------------------------------- Name: Thomas H. Kozlark Title: Vice President 154 THE BANK OF NOVA SCOTIA, individually and as Documentation Agent, by /s/ F.C.H. ASHBY ------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations THE BANK OF NEW YORK By /s/ MEHRASA RAYGANI ------------------------- Name: Mehrasa Raygani Title: Assistant Vice President THE CHASE MANHATTAN CORPORATION By /s/ LOUIS M. MORRELL ------------------------- Name: Louis M. Morrell Title: Managing Agents ERSTE BANK By /s/ ARCINEE HOVANESSIAN ------------------------- Name: Arcinee Hovanessian Title: Vice President Erste Bank New York Branch FIRSTRUST BANK, By /s/ KENT D. NELSON ------------------------- Name: Kent D. Nelson Title: Vice President & Group Manager FIRST SECURITY BANK, N.A., as Managing Agent, By /s/ STEVEN M. KOHLER ------------------------- Name: Steven M. Kohler Title: Vice President THE FUJI BANK, LIMITED By /s/ MASAHITO FUKUDA ------------------------- Name: Masahito Fukuda Title: Senior Vice President GALAXY CLO 1999-1, LTD By: SAI Investment Adviser Inc. It's Collateral Manager By /s/ DEBORAH A. GERO ------------------------- Name: Deborah A. Gero Title: Authorized Agent 155 METROPOLITAN LIFE INSURANCE COMPANY, By /s/ JAMES R. DINGLER ------------------------- Name: James R. Dingler Title: Director THE MITSUBISHI TRUST AND BANKING CORPORATION, as Managing Agent, By /s/ TOSHIHIRO HAYASHI ------------------------- Name: Toshihiro Hayashi Title: Senior Vice President MUIRFIELD TRADING LLC By /s/ ASHLEY R. HAMILTON ------------------------- Name: Ashley R. Hamilton Title: Asst. Vice President NATIONAL CITY BANK By /s/ LISA B. LISI ------------------------- Name: Lisa B. Lisi Title: Vice President National City Bank OPPENHEIMER FUNDS, INC., By /s/ SCOTT FARRAR ------------------------- Name: Scott Farrar Title: Vice President PPM SPYGLASS FUNDING TRUST as Lender BY /s/ ASHLEY R. HAMILTON ------------------------- Ashley R. Hamilton Authorized Agent U.S. BANK NATIONAL ASSOCIATION, as Managing Agent, By /s/ SCOTT J. BELL ------------------------- Name: Scott J. Bell Title: Vice President U.S. BANK NATIONAL ASSOCIATION, as Co-Agent, By /s/ SCOTT J. BELL ------------------------- Name: Scott J. Bell Title: Vice President WEBSTER BANK, By /s/ JOHN GILSENAN ------------------------- Name: John Gilsenan Title: Vice President WINGED FOOT FUNDING TRUST, as Lender /s/ ASHLEY R. HAMILTON ------------------------- Ashley R. Hamilton Authorized Agent ZIONS FIRST NATIONAL BANK, By /s/ DAVID S. MATHIS ------------------------- Name: David S. Mathis Title: Vice President FIRSTRUST BANK By: /s/ KENT D. NELSON ------------------------- Name: Kent D. Nelson Title: Vice President & Group Manager 156 Stein Roe Floating Rate Limited Liability Company By /s/ JAMES R. FELLOWS ------------------------- Name: James R. Fellows Title: Senior Vice President LIBERTY - STEIN ROE ADVISOR FLOATING RATE ADVANTAGE FUND, by Stein Roe & Farnham Incorporated, as Advisor By /s/ JAMES R. FELLOWS ------------------------- Name: James R. Fellows Title: Sr. Vice President & Portfolio Manager FIRST UNION NATIONAL BANK, By /s/ J. ANDREW PHEIPS ------------------------- Name: J. Andrew Pheips Title: Vice President FRANKLIN FLOATING RATE TRUST By /s/ CHAUNCEY LUFKIN ------------------------- Name: Chauncey Lufkin Title: Vice President NUVEEN SENIOR INCOME FUND BY: NUVEEN SENIOR LOAN ASSET MANAGEMENT INC. By /s/ LISA M. MINCHESKI ------------------------- Name: Lisa M. Mincheski Title: Managing Director EX-10.8 15 ex10-8.txt GUARANTEE AGREEMENT 1 EXHIBIT 10.8 EXECUTION COPY GUARANTEE AGREEMENT dated as of September 30, 1997, as amended and restated as of May 31, 2000, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Borrower"), each of the subsidiaries of the Borrower listed on Schedule I hereto (each such subsidiary individually, a "Subsidiary Guarantor" and collectively, the "Subsidiary Guarantors"; the Borrower and the Subsidiary Guarantors, individually a "Guarantor" and, collectively, the "Guarantors") of HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Borrower"), and BANKERS TRUST COMPANY, a New York banking corporation, as administrative agent (the "Administrative Agent") for the Lenders under the Credit Agreement referred to below. Reference is made to the Credit Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, Aspen Industrial, S.A. de C.V., a Mexico corporation (the "Mexico Borrower"), the lenders from time to time party thereto (the "Lenders") and the Administrative Agent. Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Subsidiary Guarantors and the Administrative Agent have entered into a Guarantee Agreement dated as of September 30, 1997, and the parties hereto are entering into this Agreement to amend and restate such Guarantee Agreement in its entirety in the form hereof. The Lenders have agreed to make Loans to the Borrower and the Mexico Borrower, and the Issuing Bank has agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. The Borrower and the Mexico Borrower have requested that the Subsidiary Guarantors guarantee the Obligations (as defined 2 below) by entering into this Agreement. Each of the Subsidiary Guarantors is a Subsidiary of the Borrower and an affiliate of the Mexico Borrower and acknowledges that it will derive substantial benefit from the making of the Loans by the Lenders, and the issuance of the Letters of Credit by the Issuing Bank. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Guarantors of a Guarantee Agreement in the form hereof. As consideration therefor and in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit, the Guarantors are willing to execute this Agreement. Accordingly, the parties hereto agree as follows: 3 SECTION 1. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, (a) the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obligations of the Borrower and the Mexico Borrower, monetary or otherwise, under each Hedging Agreement entered into with any counterparty that was a Lender (or an Affiliate thereof) at the time such Hedging Agreement was entered into and (d) the due and punctual payment of all monetary obligations of the Borrower (but not in excess of $10,000,000 in the aggregate) under any domestic overdraft facilities entered into by the Borrower (all the monetary and other obligations referred to in the preceding clauses (a) through (d) being collectively called the "Obligations"). Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. The Borrower is entering into this Agreement as a Guarantor in order to Guarantee the Obligations of the 4 Mexico Borrower, and its obligations under the foregoing paragraph shall be construed accordingly. Anything contained in this Agreement to the contrary notwithstanding, the obligations of each Subsidiary Guarantor hereunder shall be limited to a maximum aggregate amount equal to the greatest amount that would not render such Subsidiary Guarantor's obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any provisions of applicable state law (collectively, the "Fraudulent Transfer Laws"), in each case after giving effect to all other liabilities of such Subsidiary Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws (specifically excluding, however, any liabilities of such Subsidiary Guarantor (a) in respect of intercompany indebtedness to the Borrower or Affiliates of the Borrower to the extent that such indebtedness would be discharged in an amount equal to the amount paid by such Subsidiary Guarantor hereunder and (b) under any Guarantee of senior unsecured indebtedness or Indebtedness subordinated in right of payment to the Obligations which Guarantee contains a limitation as to maximum amount similar to that set forth in this paragraph, pursuant to which the liability of such Subsidiary Guarantor hereunder is included in the liabilities taken into account in determining such maximum amount) and after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, contribution, reimbursement, indemnity or similar rights of such Subsidiary Guarantor pursuant to (i) applicable law or (ii) any agreement providing for an equitable allocation among such Subsidiary Guarantor and other Affiliates of the Borrower of obligations arising under Guarantees by such parties (including the Indemnity, Subrogation and Contribution Agreement). SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable law, each Guarantor waives presentment to, demand of payment from and protest to the Borrower or the Mexico Borrower of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of each 5 Guarantor hereunder shall not be affected by (a) the failure of the Collateral Agent or any other Secured Party to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower, the Mexico Borrower or any other Subsidiary Guarantor under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of this Agreement, any other Loan Document, any Guarantee or any other agreement, including with respect to any other Subsidiary Guarantor under this Agreement or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Collateral Agent or any other Secured Party. SECTION 3. Security. Each of the Guarantors authorizes the Collateral Agent and each of the other Secured Parties to (a) take and hold security pursuant to the Security Agreement for the payment of this Guarantee and the Obligations and exchange, enforce, waive and release any such security, (b) apply such security and direct the order or manner of sale thereof as they in their sole discretion may determine and (c) release or substitute any one or more endorsees, other Subsidiary Guarantors or other obligors. SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Collateral Agent or any other Secured Party to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Collateral Agent or any other Secured Party in favor of the Borrower, the Mexico Borrower or any other Person. SECTION 5. No Discharge or Diminishment of Guarantee. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, 6 illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any other Secured Party to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, wilful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or that would otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). SECTION 6. Defenses of Borrower or Mexico Borrower Waived. To the fullest extent permitted by applicable law, each of the Guarantors waives any defense based on or arising out of any defense of the Borrower or the Mexico Borrower or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower or the Mexico Borrower, other than the final and indefeasible payment in full in cash of the Obligations. The Collateral Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower, the Mexico Borrower or any other guarantor or exercise any other right or remedy available to them against the Borrower, the Mexico Borrower or any other guarantor, without affecting or impairing in any way the liability of any Subsidiary Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. Pursuant to applicable law, each of the Guarantors waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower, the Mexico Borrower or any other Guarantor or guarantor, as the case may be, or any security. 7 SECTION 7. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower, the Mexico Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent or such other Secured Party as designated thereby in same day funds the amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to the Administrative Agent or any Secured Party as provided above, all rights of such Guarantor against the Borrower or Mexico Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in same day funds of all the Obligations. In addition, any indebtedness of the Borrower or Mexico Borrower now or hereafter held by any Subsidiary Guarantor is hereby subordinated in right of payment to the prior payment in full of the Obligations. If any amount shall erroneously be paid to any Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower or Mexico Borrower, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. SECTION 8. Information. Each of the Guarantors assumes all responsibility for being and keeping itself informed of the Borrower's and the Mexico Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Administrative Agent or the other Secured Parties will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks. 8 SECTION 9. Representations and Warranties. Each of the Guarantors represents and warrants as to itself that all representations and warranties relating to it contained in the Credit Agreement are true and correct in all material respects. SECTION 10. Termination. The Guarantees made hereunder (a) shall terminate when all the Obligations have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the LC Exposure has been reduced to zero and the Issuing Bank has no further obligation to issue Letters of Credit under the Credit Agreement and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Secured Party or any Guarantor upon the bankruptcy or reorganization of the Borrower, the Mexico Borrower, any Guarantor or otherwise. SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Guarantors that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective as to any Guarantor when a counterpart hereof executed on behalf of such Guarantor shall have been delivered to the Administrative Agent, and a counterpart hereof shall have been executed on behalf of the Administrative Agent, and thereafter shall be binding upon such Guarantor and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of such Guarantor, the Administrative Agent and the other Secured Parties, and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). If all of the capital stock of a Subsidiary Guarantor is sold, transferred or otherwise disposed of pursuant to a transaction permitted by Section 6.06 of the Credit Agreement, such Subsidiary Guarantor shall be released from 9 its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Subsidiary Guarantor and may be amended, modified, supplemented, waived or released with respect to any Guarantor without the approval of any other Subsidiary Guarantor and without affecting the obligations of any other Guarantor hereunder. SECTION 12. Waivers; Amendment. (a) No failure or delay of the Administrative Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent hereunder and of the other Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantors with respect to which such waiver, amendment or modification relates and the Administrative Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 14. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications 10 and notices hereunder to each Subsidiary Guarantor shall be given to it at its address set forth in Schedule I. SECTION 15. Survival of Agreement; Severability. (a) All covenants, agreements, representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Administrative Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the LC Exposure does not equal zero and as long as the Commitments have not been terminated. (b) In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 16. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract, and shall become effective as provided in Section 11. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. 11 SECTION 17. Rules of Interpretation. The rules of interpretation specified in Section 1.03 of the Credit Agreement shall be applicable to this Agreement. SECTION 18. Jurisdiction; Consent to Service of Process. (a) Each Subsidiary Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Subsidiary Guarantor or its properties in the courts of any jurisdiction. (b) Each Subsidiary Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 14. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. 12 SECTION 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19. SECTION 20. Additional Subsidiary Guarantors. Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary Loan Party that was not in existence on the date of the Credit Agreement is required to enter into this Agreement as a Subsidiary Guarantor upon becoming a Subsidiary Loan Party. Upon execution and delivery after the date hereof by the Administrative Agent and such a Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Subsidiary Guarantor hereunder with the same force and effect as if originally named as a Subsidiary Guarantor herein. The execution and delivery of any instrument adding an additional Subsidiary Guarantor as a party to this Agreement shall not require the consent of any other Subsidiary Guarantor hereunder. The rights and obligations of each Subsidiary Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Subsidiary Guarantor as a party to this Agreement. SECTION 21. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Secured Party is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Secured Party to or for the credit or the account of any Guarantor against any or all the obligations of such Guarantor now or hereafter existing under this Agreement and the other Loan Documents held by such Secured Party, irrespective of whether or not 13 such Secured Party shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each 14 14 Secured Party under this Section 21 are in addition to other rights and remedies (including other rights of setoff) which such Secured Party may have. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. HUNTSMAN PACKAGING CORPORATION, by /s/ SCOTT K. SORENSEN ----------------------- Name: Scott K. Sorensen Title: Executive Vice President and CIO EACH OF THE SUBSIDIARIES LISTED ON SCHEDULE I HERETO, by /s/ SCOTT K. SORENSEN ----------------------- Name: Scott K. Sorensen Title: Authorized Officer BANKERS TRUST COMPANY, as Administrative Agent, by /s/ ROBERT R. TELESCA ----------------------- Name: Robert R. Telesca Title: Assistant Vice President 15 SCHEDULE I SUBSIDIARY GUARANTORS --------------------- Edison Plastics International Inc. Huntsman Bulk Packaging Corporation Huntsman Container Corporation International Huntsman Edison Films Corporation Huntsman Film Products of Mexico, Inc. Huntsman KCL Corporation Huntsman Packaging Georgia, Inc. Huntsman Packaging of Canada, LLC 16 Annex 1 to the Guarantee Agreement SUPPLEMENT NO. dated as of , to the Guarantee Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Borrower"), each of the subsidiaries of the Borrower listed on Schedule I thereto (each such subsidiary individually, a "Subsidiary Guarantor" and collectively, the "Subsidiary Guarantors") of, and BANKERS TRUST COMPANY, a New York banking corporation, as administrative agent (the "Administrative Agent") for the Lenders under the Credit Agreement referred to below. A. Reference is made to the Credit Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, Aspen Industrial, S.A. de C.V., a Mexico corporation, the lenders from time to time party thereto (the "Lenders") and the Administrative Agent. Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. B. The Borrower and the Subsidiary Guarantors have entered into the Guarantee Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary Loan Party that was not in existence or not a Subsidiary on the date of the Credit Agreement is required to enter into the Guarantee Agreement as a Subsidiary Guarantor upon becoming a Subsidiary. Section 20 of the Guarantee Agreement provides that additional Subsidiaries of the Borrower may become Subsidiary Guarantors under the Guarantee Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the "New Subsidiary Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Guarantor under the Guarantee Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional 17 Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Administrative Agent and the New Subsidiary Guarantor agree as follows: SECTION 1. In accordance with Section 20 of the Guarantee Agreement, the New Subsidiary Guarantor by its signature below becomes a Subsidiary Guarantor under the Guarantee Agreement with the same force and effect as if originally named therein as a Subsidiary Guarantor and the New Subsidiary Guarantor hereby (a) agrees to all the terms and provisions of the Guarantee Agreement applicable to it as a Subsidiary Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Subsidiary Guarantor thereunder are true and correct on and as of the date hereof. Each reference to a "Subsidiary Guarantor" or "Guarantor" in the Guarantee Agreement shall be deemed to include the New Subsidiary Guarantor. The Guarantee Agreement is hereby incorporated herein by reference. SECTION 2. The New Subsidiary Guarantor represents and warrants to the Administrative Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Administrative Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Subsidiary Guarantor and the Administrative Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Guarantee Agreement shall remain in full force and effect. 18 SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 14 of the Guarantee Agreement. All communications and notices hereunder to the New Subsidiary Guarantor shall be given to it at the address set forth under its signature below, with a copy to the Borrower. SECTION 8. The New Subsidiary Guarantor agrees to reimburse the Administrative Agent for its out-of-pocket expenses in connection with this Supplement, including the fees, disbursements and other charges of counsel for the Administrative Agent. IN WITNESS WHEREOF, the New Subsidiary Guarantor and the Administrative Agent have duly executed this Supplement to the Guarantee Agreement as of the day and year first above written. [Name of New Subsidiary Guarantor], by --------------------------- Name: Title: Address: BANKERS TRUST COMPANY, as Administrative Agent, by ----------------------------- Name: Title: EX-10.9 16 ex10-9.txt SECURITY AGREEMENT 1 EXHIBIT 10.9 EXECUTION COPY SECURITY AGREEMENT dated as of September 30, 1997, as amended and restated as of May 31, 2000, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Borrower"), each subsidiary of the Borrower listed on Schedule I hereto (each such subsidiary individually a "Guarantor" and collectively, the "Guarantors"; the Guarantors and the Borrower are referred to collectively herein as the "Grantors") and BANKERS TRUST COMPANY, a New York banking corporation ("Bankers Trust"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined herein). Reference is made to (a) the Credit Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, Aspen Industrial, S.A. de C.V., a Mexico corporation (the "Mexico Borrower"), the lenders from time to time party thereto (the "Lenders") and Bankers Trust, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders, and (b) the Guarantee Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as amended, supplemented or otherwise modified from time to time, the "Guarantee Agreement"), among the Borrower, the Guarantors and the Administrative Agent. The parties hereto have entered into a Security Agreement dated as of September 30, 1997, and are entering into this Agreement to amend and restate such Security Agreement in its entirety in the form hereof. The Lenders have agreed to make Loans to the Borrower and the Mexico Borrower, and the Issuing Bank has agreed to issue Letters of Credit for the account of the Borrower, in an amount up to $580,000,000, pursuant to, and 2 upon the terms and subject to the conditions specified in, the Credit Agreement. The Guarantors have agreed to guarantee, among other things, all the obligations of the Borrower and the Mexico Borrower under the Credit Agreement. The Borrower has agreed to guarantee, among other things, all the obligations of the Mexico Borrower under the Credit Agreement. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit under the Credit Agreement are conditioned upon, among other things, the execution and delivery by the Grantors of an agreement in the form hereof to secure (a) the due and punctual payment by the Borrower and the Mexico Borrower of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obligations of the Borrower or the Mexican Borrower, monetary or otherwise, under each Hedging Agreement entered into with any counterparty that was a Lender (or an Affiliate thereof) at the time such Hedging Agreement was entered into and (d) the due and punctual payment of all monetary obligations of the Borrower (but not in excess of $10,000,000 in the aggregate) under any domestic overdraft facilities entered into by the Borrower (all the monetary and other obligations described in the 3 preceding clauses (a) through (d) being collectively called the "Obligations"). Accordingly, the Grantors and the Collateral Agent, on behalf of itself and each Secured Party (and each of their respective successors or assigns), hereby agree as follows: ARTICLE I Definitions SECTION 1.01. Definition of Terms Used Herein. Unless the context otherwise requires, all capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement. SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the following terms shall have the following meanings: "Account Debtor" shall mean any Person who is or who may become obligated to any Grantor under, with respect to or on account of an Account. "Accounts" shall mean any and all right, title and interest of any Grantor to payment for goods and services sold or leased, including any such right evidenced by chattel paper, whether due or to become due, whether or not it has been earned by performance, and whether now or hereafter acquired or arising in the future, including accounts receivable from Affiliates of the Grantors. "Accounts Receivable" shall mean all Accounts and all right, title and interest in any returned goods, together with all rights, titles, securities and guarantees with respect thereto, including any rights to stoppage in transit, replevin, reclamation and resales, and all related security interests, liens and pledges, whether voluntary or involuntary, in each case whether now existing or owned or hereafter arising or acquired. "Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c) Equipment, (d) General 4 Intangibles, (e) Inventory, (f) cash and cash accounts, (g) Investment Property and (h) Proceeds; provided, however, that Collateral shall not include with respect to any Grantor, any item of property to the extent the grant by such Grantor of a security interest pursuant to this Agreement in such Grantor's right, title and interest in such item of property is prohibited by an applicable contractual obligation (including but not limited to a Capital Lease Obligation) or requirement of law or would give any other Person the right to terminate its obligations with respect to such item of property and provided, further, that the limitation in the foregoing proviso shall not affect, limit, restrict or impair the grant by any Grantor of a security interest pursuant to this Agreement in any money or other amounts due or to become due under any Account, contract, agreement or General Intangible. "Commodity Account" shall mean an account maintained by a Commodity Intermediary in which a Commodity Contract is carried out for a Commodity Customer. "Commodity Contract" shall mean a commodity futures contract, an option on a commodity futures contract, a commodity option or any other contract that, in each case, is (a) traded on or subject to the rules of a board of trade that has been designated as a contract market for such a contract pursuant to the federal commodities laws or (b) traded on a foreign commodity board of trade, exchange or market, and is carried on the books of a Commodity Intermediary for a Commodity Customer. "Commodity Customer" shall mean a Person for whom a Commodity Intermediary carries a Commodity Contract on its books. "Commodity Intermediary" shall mean (a) a Person who is registered as a futures commission merchant under the federal commodities laws or (b) a Person who in the ordinary course of its business provides clearance or settlement services for a board of trade that has been designated as a contract market pursuant to federal commodities laws. 5 "Copyright License" shall mean any written agreement, now or hereafter in effect, granting any right to any third party under any Copyright now or hereafter owned by any Grantor or which such Grantor otherwise has the right to license, or granting any right to such Grantor under any Copyright now or hereafter owned by any third party, and all rights of such Grantor under any such agreement. "Copyrights" shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States, whether as author, assignee, transferee or otherwise, and (b) all registrations and applications for registration of any such copyright in the United States, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office, including those listed on Schedule II. "Credit Agreement" shall have the meaning assigned to such term in the preliminary statement of this Agreement. "Documents" shall mean all instruments, files, records, ledger sheets and documents covering or relating to any of the Collateral. "Entitlement Holder" shall mean a Person identified in the records of a Securities Intermediary as the Person having a Security Entitlement against the Securities Intermediary. If a Person acquires a Security Entitlement by virtue of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such Person is the Entitlement Holder. "Equipment" shall mean all equipment, furniture and furnishings, including tools, parts and supplies of every kind and description, and all improvements, accessions or appurtenances thereto, that are now or hereafter owned by any Grantor. "Financial Asset" shall mean (a) a Security, (b) an obligation of a Person or a share, participation or other interest in a Person or in property or an enterprise of a Person, which is, or is of a type, dealt with in or 6 traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment or (c) any property that is held by a Securities Intermediary for another Person in a Securities Account if the Securities Intermediary has expressly agreed with the other Person that the property is to be treated as a Financial Asset under Article 8 of the Uniform Commercial Code. As the context requires, the term Financial Asset shall mean either the interest itself or the means by which a Person's claim to it is evidenced, including a certificated or uncertificated Security, a certificate representing a Security or a Security Entitlement. "General Intangibles" shall mean all choses in action and causes of action and all other assignable intangible personal property of any Grantor of every kind and nature (other than Accounts Receivable) now owned or hereafter acquired by any Grantor, including corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, Hedging Agreements and other agreements but excluding contract rights in contracts which prohibit assignment or the granting of a security interest), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit, guarantee, claim, security interest or other security held by or granted to any Grantor to secure payment by an Account Debtor of any of the Accounts Receivable. "Intellectual Property" shall mean all intellectual and similar property of any Grantor of every kind and nature now owned or hereafter acquired by any Grantor, including inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade secrets, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation and registrations, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing. "Inventory" shall mean all goods of any Grantor, whether now owned or hereafter acquired, held for sale or lease, or furnished or to be furnished by any Grantor under 7 contracts of service, or consumed in any Grantor's business, including raw materials, intermediates, work in process, packaging materials, finished goods, semi-finished inventory, scrap inventory, manufacturing supplies and spare parts, and all such goods that have been returned to or repossessed by or on behalf of any Grantor. "License" shall mean any Patent License, Trademark License, Copyright License or other franchise agreement, license or sublicense to which any Grantor is a party, including those listed on Schedule III (other than those agreements in existence on the date hereof and listed on Schedule III and those agreements entered into after the date hereof, which by their terms prohibit assignment or a grant of a security interest by such Grantor as licensee thereunder). "Investment Property" shall mean all Securities (whether certificated or uncertificated), Security Entitlements, Securities Accounts, Commodity Contracts and Commodity Accounts of any Grantor, whether now owned or hereafter acquired by any Grantor. "Obligations" shall have the meaning assigned to such term in the preliminary statement of this Agreement. "Patent License" shall mean any written agreement, now or hereafter in effect, granting to any third party any right to make, use or sell any invention on which a Patent, now or hereafter owned by any Grantor or which any Grantor otherwise has the right to license, is in existence, or granting to any Grantor any right to make, use or sell any invention on which a Patent, now or hereafter owned by any third party, is in existence, and all rights of any Grantor under any such agreement. "Patents" shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all letters patent of the United States, all registrations and recordings thereof, and all applications for letters patent of the United States, including registrations, recordings and pending applications in the United States Patent and Trademark Office, including those listed on Schedule IV, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and 8 the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein. "Perfection Certificate" shall mean a certificate substantially in the form of Annex 1 hereto, completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Financial Officer and the chief legal officer of the Borrower. "Proceeds" shall mean any consideration received from the sale, exchange, license, lease or other disposition of any asset or property that constitutes Collateral, any value received as a consequence of the possession of any Collateral and any payment received from any insurer or other person or entity as a result of the destruction, loss, theft, damage or other involuntary conversion of whatever nature of any asset or property which constitutes Collateral, and shall include, (a) any claim of any Grantor against any third party for (and the right to sue and recover for and the rights to damages or profits due or accrued arising out of or in connection with) (i) past, present or future infringement of any Patent now or hereafter owned by any Grantor, or licensed under a Patent License, (ii) past, present or future infringement or dilution of any Trademark now or hereafter owned by any Grantor or licensed under a Trademark License or injury to the goodwill associated with or symbolized by any Trademark now or hereafter owned by any Grantor, (iii) past, present or future breach of any License and (iv) past, present or future infringement of any Copyright now or hereafter owned by any Grantor or licensed under a Copyright License and (b) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Secured Parties" shall mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent, (d) the Issuing Bank, (e) each counterparty to an Hedging Agreement entered into with the Borrower if such counterparty was a Lender (or an Affiliate of a Lender) at the time the Hedging Agreement was entered into, (f) the beneficiaries of each indemnification obligation undertaken by any Grantor under any Loan Document, (g) any lender under any domestic overdraft facility entered into by the Borrower 9 (but only to the extent the aggregate amount outstanding under all such facilities does not exceed $10,000,000) including, but not limited to, Mellon Bank, N.A., pursuant to the Line of Credit Agreement and Automatic Borrowing Service Agreement entered into with the Borrower, and (h) the permitted successors and assigns of each of the foregoing. "Securities" shall mean any obligations of an issuer or any shares, participations or other interests in an issuer or in property or an enterprise of an issuer which (a) are represented by a certificate representing a security in bearer or registered form, or the transfer of which may be registered upon books maintained for that purpose by or on behalf of the issuer, (b) are one of a class or series or by its terms is divisible into a class or series of shares, participations, interests or obligations and (c)(i) are, or are of a type, dealt with or traded on securities exchanges or securities markets or (ii) are a medium for investment and by their terms expressly provide that they are a security governed by Article 8 of the Uniform Commercial Code. "Securities Account" shall mean an account to which a Financial Asset is or may be credited in accordance with an agreement under which the Person maintaining the account undertakes to treat the Person for whom the account is maintained as entitled to exercise rights that comprise the Financial Asset. "Security Entitlements" shall mean the rights and property interests of an Entitlement Holder with respect to a Financial Asset. "Security Interest" shall have the meaning assigned to such term in Section 2.01. "Security Intermediary" shall mean (a) a clearing corporation or (b) a Person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity. "Trademark License" shall mean any written agreement, now or hereafter in effect, granting to any 10 third party any right to use any Trademark now or hereafter owned by any Grantor or which any Grantor otherwise has the right to license, or granting to any Grantor any right to use any Trademark now or hereafter owned by any third party, and all rights of any Grantor under any such agreement. "Trademarks" shall mean all of the following now owned or hereafter acquired by any Grantor: (a) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office, any State of the United States, and all extensions or renewals thereof, including those listed on Schedule V, (b) all goodwill associated therewith or symbolized thereby and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill. SECTION 1.03. Rules of Interpretation. The rules of interpretation specified in Section 1.03 of the Credit Agreement shall be applicable to this Agreement. ARTICLE II Security Interest 11 SECTION 2.01. Security Interest. As security for the payment or performance, as the case may be, in full of the Obligations, each Grantor hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates and transfers to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in, all of such Grantor's right, title and interest in, to and under the Collateral (the "Security Interest"). Without limiting the foregoing, the Collateral Agent is hereby authorized to file one or more financing statements, continuation statements, filings with the United States Patent and Trademark Office or United States Copyright Office (or any successor office) or other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Grantor, without the signature of any Grantor (but, prior to the occurrence of any Event of Default or Default, the Collateral Agent shall provide notice of such filing to such Grantor), and naming any Grantor or the Grantors as debtors and the Collateral Agent as secured party. SECTION 2.02. No Assumption of Liability. The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral. ARTICLE III Representations and Warranties The Grantors jointly and severally represent and warrant to the Collateral Agent and the Secured Parties that: SECTION 3.01. Title and Authority. Each Grantor has good and valid rights in and title to the Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such 12 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other Person other than any consent or approval which has been obtained or the failure of which to obtain could not reasonably be expected to have a Material Adverse Effect. SECTION 3.02. Filings. (a) The Perfection Certificate has been duly prepared, completed and executed and the information set forth therein is correct and complete. Fully executed Uniform Commercial Code financing statements, as applicable, or other appropriate filings, recordings or registrations containing a description of the Collateral have been delivered to the Collateral Agent for filing in each governmental, municipal or other office specified in Schedule 6 to the Perfection Certificate, which are all the filings, recordings and registrations (other than filings, recordings and registrations required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in Collateral consisting of United States Patents, United States Trademarks and United States Copyrights) that are necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof), and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements and such filings, recordings and registrations as may be necessary to perfect the Security Interest as a result of any event described in Section 5.03 of the Credit Agreement. (b) Each Grantor represents and warrants that fully executed security agreements in the form hereof and containing a description of all Collateral consisting of Intellectual Property shall have been received and recorded within three months after the execution of this Agreement with respect to United States Patents and United States registered Trademarks (and Trademarks for which United 13 States registration applications are pending) and within one month after the execution of this Agreement with respect to United States registered Copyrights by the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. Section 261, 15 U.S.C. Section 1060 or 17 U.S.C. Section 205 and the regulations thereunder, as applicable, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Collateral Agent (for the ratable benefit of the Secured Parties) in respect of all Collateral consisting of Patents, Trademarks and Copyrights in which a security interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than such actions as are necessary to perfect the Security Interest with respect to any Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the date hereof). SECTION 3.03. Validity of Security Interest. The Security Interest constitutes (a) a legal and valid security interest in all the Collateral securing the payment and performance of the Obligations, (b) subject to the filings described in Section 3.02 above, a perfected security interest in all Collateral in which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (c) a security interest that shall be perfected in all Collateral in which a security interest may be perfected in the United States Patent and Trademark Office and the United States Copyright Office upon the receipt and recording of this Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, within the three month period (commencing as of the date hereof) pursuant to 35 U.S.C. Section 261 or 15 U.S.C. Section 1060 or the one-month period (commencing as of the date hereof) pursuant to 17 U.S.C. Section 205 and otherwise as may be required pursuant to the laws of any other necessary jurisdiction. The Security Interest is and shall be prior to any other Lien on any of the Collateral, other than Liens expressly permitted to be 14 prior to the Security Interest pursuant to Section 6.03 of the Credit Agreement. SECTION 3.04. Absence of Other Liens. The Collateral is owned by the Grantors free and clear of any Lien, except for Liens expressly permitted pursuant to Section 6.03 of the Credit Agreement. No Grantor has filed or consented to the filing of (a) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Collateral, (b) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral in the United States Patent and Trademark Office or the United States Copyright Office or (c) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.03 of the Credit Agreement. ARTICLE IV Covenants SECTION 4.01. Records. Each Grantor agrees to maintain, at its own cost and expense, such complete and accurate records with respect to the Collateral owned by it as is consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any part of the Collateral, and, at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any and all Collateral. SECTION 4.02. Protection of Security. Each Grantor shall, at its own cost and expense, take any and all actions necessary to defend title to the Collateral 15 against all persons and to defend the Security Interest of the Collateral Agent in the Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.03 of the Credit Agreement. SECTION 4.03. Further Assurances. Each Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any financing statements or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument, such note or instrument shall be immediately pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent. Without limiting the generality of the foregoing, each Grantor hereby authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to supplement this Agreement by supplementing Schedule II, III, IV or V hereto or adding additional schedules hereto to specifically identify any registered asset or item that may constitute Copyrights, Patents or Trademarks; provided, however, that any Grantor shall have the right, exercisable within 30 days after it has been notified by the Collateral Agent of the specific identification of such Collateral, to advise the Collateral Agent in writing of any inaccuracy of the representations and warranties made by such Grantor hereunder with respect to such Collateral. Each Grantor agrees that it will use its best efforts to take such action as shall be necessary in order that all representations and warranties hereunder shall be true and correct with respect to such Collateral within 30 days after the date it has been notified by the Collateral Agent of the specific identification of such Collateral. SECTION 4.04. Inspection and Verification. Subject to the limitations set forth in Section 5.09 of the 16 Credit Agreement, the Collateral Agent and such Persons as the Collateral Agent may reasonably designate shall have the right, at the Grantors' own cost and expense, to inspect the Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Collateral is located, to discuss the Grantors' affairs with the officers of the Grantors and their independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Collateral, including, in the case of Accounts or Collateral in the possession of any third party, by contacting Account Debtors or the third person possessing such Collateral for the purpose of making such a verification. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any Secured Party (it being understood that any such information shall be deemed to be "Information" subject to the provisions of Section 9.12 of the Credit Agreement). SECTION 4.05. Taxes; Encumbrances. At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Collateral and not permitted pursuant to Section 6.03 of the Credit Agreement, and may pay for the maintenance and preservation of the Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that nothing in this Section 4.05 shall be interpreted as excusing any Grantor from the performance of, or imposing any obligation on the Collateral Agent or any Secured Party to cure or perform, any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents. SECTION 4.06. Assignment of Security Interest. If at any time any Grantor shall take a security interest in any property of an Account Debtor or any other Person to 17 secure payment and performance of an Account, such Grantor shall promptly assign such security interest to the Collateral Agent. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of and transferees from the Account Debtor or other Person granting the security interest. SECTION 4.07. Continuing Obligations of the Grantors. Each Grantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Collateral, all in accordance with the terms and conditions thereof, and each Grantor jointly and severally agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance. SECTION 4.08. Use and Disposition of Collateral. None of the Grantors shall make or permit to be made an assignment, pledge or hypothecation of the Collateral or shall grant any other Lien in respect of the Collateral, except as expressly permitted by Section 6.03 of the Credit Agreement. Unless and until the Collateral Agent shall notify the Grantors that (i) an Event of Default shall have occurred and be continuing and (ii) during the continuance thereof the Grantors shall not sell, convey, lease, assign, transfer or otherwise dispose of any Collateral (which notice may be given by telephone if promptly confirmed in writing), the Grantors may use and dispose of the Collateral in any lawful manner not inconsistent with the provisions of this Agreement, the Credit Agreement or any other Loan Document. Without limiting the generality of the foregoing, each Grantor agrees that it shall not permit any Inventory to be in the possession or control of any warehouseman, bailee, agent or processor at any time, other than Inventory that is in transit by any means, unless such warehouseman, bailee, agent or processor shall have been notified of the Security Interest and each Grantor shall use its best efforts to obtain a written agreement in form and substance reasonably satisfactory to the Collateral Agent to hold the Inventory subject to the Security Interest and the instructions of the Collateral Agent and to waive and release any Lien held by it with respect to such Inventory, whether arising by operation of law or otherwise. 18 SECTION 4.09. Limitation on Modification of Accounts. None of the Grantors will, without the Collateral Agent's prior written consent, grant any extension of the time of payment of any of the Accounts Receivable, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any Person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises or settlements granted or made in the ordinary course of business and consistent with its current practices and in accordance with such prudent and standard practices used in industries that are the same as or similar to those in which such Grantor is engaged. SECTION 4.10. Insurance. The Grantors, at their own expense, shall maintain or cause to be maintained insurance covering physical loss or damage to the Inventory and Equipment in accordance with Section 5.07 of the Credit Agreement. Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Grantors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems reasonably advisable. All sums disbursed by the Collateral Agent in connection with this Section 4.10, including reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Obligations secured hereby. 19 SECTION 4.11. Legend. Each Grantor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, its Accounts Receivable and its books, records and documents evidencing or pertaining thereto with an appropriate reference to the fact that such Accounts Receivable have been assigned to the Collateral Agent for the benefit of the Secured Parties and that the Collateral Agent has a security interest therein. SECTION 4.12. Covenants Regarding Patent, Trademark and Copyright Collateral. (a) Each Grantor agrees that it will not, nor will it permit any of its licensees to, do any act, or omit to do any act, whereby any Patent which is material to the conduct of such Grantor's business may become invalidated or dedicated to the public, and agrees, to the extent practicable, that it shall continue to mark any products covered by a Patent with the relevant patent number as necessary and sufficient to establish and preserve its maximum rights under applicable patent laws. (b) Each Grantor (either itself or through its licensees or its sublicensees) will, for each Trademark material to the conduct of such Grantor's business, (i) maintain such Trademark in full force free from any claim of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of Federal or foreign registration to the extent necessary and sufficient to establish and preserve its maximum rights under applicable law and (iv) not knowingly use or knowingly permit the use of such Trademark in violation of any third party rights. (c) Each Grantor (either itself or through licensees) will, for each work covered by a material Copyright, continue to publish, reproduce, display, adopt and distribute the work with appropriate copyright notice as necessary and sufficient to establish and preserve its maximum rights under applicable copyright laws. (d) Each Grantor shall notify the Collateral Agent promptly if it knows that any Patent, Trademark or Copyright material to the conduct of its business may 20 become abandoned, lost or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or United States Copyright Office) regarding such Grantor's ownership of any Patent, Trademark or Copyright, its right to register the same, or to keep and maintain the same. (e) In no event shall any Grantor, either itself or through any agent, employee, licensee or designee, file an application for any Patent, Trademark or Copyright (or for the registration of any Trademark or Copyright) with the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States, unless it promptly informs the Collateral Agent, and, upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may request to evidence the Collateral Agent's security interest in such Patent, Trademark or Copyright, and each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to execute and file such writings for the foregoing purposes (and, prior to the occurrence of any Event of Default or Default, such Grantor shall be notified of such filing), all acts of such attorney being hereby ratified and confirmed; such power, being coupled with an interest, is irrevocable. (f) Each Grantor will take all necessary steps that are consistent with the practice in any proceeding before the United States Patent and Trademark Office, United States Copyright Office or any office or agency in any political subdivision of the United States, to maintain and pursue each material application relating to the Patents, Trademarks and/or Copyrights (and to obtain the relevant grant or registration) and to maintain each issued Patent and each registration of the Trademarks and Copyrights that is material to the conduct of any Grantor's business, including timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if consistent with good business judgment, to initiate opposition, interference and cancelation proceedings against third parties. 21 (g) In the event that any Grantor has reason to believe that any Collateral consisting of a Patent, Trademark or Copyright material to the conduct of any Grantor's business has been or is about to be infringed, misappropriated or diluted by a third party, such Grantor promptly shall notify the Collateral Agent and shall, if consistent with good business judgment, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as are appropriate under the circumstances to protect such Collateral. (h) Upon and during the continuance of an Event of Default, each Grantor shall use its reasonable best efforts to obtain all requisite consents or approvals by the licensor of each Copyright License, Patent License or Trademark License to effect the assignment of all of such Grantor's right, title and interest thereunder to the Collateral Agent or its designee. ARTICLE V Power of Attorney 22 Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantor's true and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent shall have the right, with power of substitution for each Grantor and in each Grantor's name or otherwise, for the use and benefit of the Collateral Agent and the Secured Parties, upon the occurrence and during the continuance of an Event of Default (a) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to sign the name of any Grantor on any invoice or bill of lading relating to any of the Collateral; (d) to send verifications of Accounts Receivable to any Account Debtor; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to notify, or to require any Grantor to notify, Account Debtors to make payment directly to the Collateral Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent or any Secured Party to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or any Secured Party, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby, and no action taken or omitted to be taken by the Collateral Agent or any Secured Party with respect to the Collateral or any part thereof shall give rise to any defense, counterclaim or offset in favor of any Grantor or 23 (unless such action is the result of gross negligence or willful misconduct) to any claim or action against the Collateral Agent or any Secured Party. It is understood and agreed that the appointment of the Collateral Agent as the agent and attorney-in-fact of the Grantors for the purposes set forth above is coupled with an interest and is irrevocable. The provisions of this Section shall in no event relieve any Grantor of any of its obligations hereunder or under any other Loan Document with respect to the Collateral or any part thereof or impose any obligation on the Collateral Agent or any Secured Party to proceed in any particular manner with respect to the Collateral or any part thereof, or in any way limit the exercise by the Collateral Agent or any Secured Party of any other or further right which it may have on the date of this Agreement or hereafter, whether hereunder, under any other Loan Document, by law or otherwise. ARTICLE VI Remedies 24 SECTION 6.01. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, each Grantor agrees to deliver each item of Collateral to the Collateral Agent on demand, and it is agreed that the Collateral Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Collateral by the applicable Grantors to the Collateral Agent, or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any such Collateral throughout the world on such terms and conditions and in such manner as the Collateral Agent shall determine (other than in violation of any then-existing licensing or contractual arrangements to the extent that waivers cannot be obtained), and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Collateral and without liability for trespass to enter any premises where the Collateral may be located for the purpose of taking possession of or removing the Collateral and, generally, to exercise any and all rights afforded to a secured party under the Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Grantor agrees that the Collateral Agent shall have the right, subject to the mandatory requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral, at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by law) all rights of redemption, stay 25 and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Collateral Agent shall give the Grantors 10 days' prior written notice (which each Grantor agrees is reasonable notice within the meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions) of the Collateral Agent's intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker's board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by law, private) sale made pursuant to this Section, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor (all said rights being also hereby waived and 26 released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Grantor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. SECTION 6.02. Application of Proceeds. The Collateral Agent shall apply the proceeds of any collection or sale of the Collateral, as well as any Collateral consisting of cash, as follows: FIRST, to the payment of all costs and expenses incurred by the Administrative Agent or the Collateral Agent (in its capacity as such hereunder or under any other Loan Document) in connection with such collection or sale or otherwise in connection with this Agreement or any of the Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Collateral Agent hereunder or under any other Loan Document on behalf of any Grantor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document; SECOND, to the payment in full of the Obligations (the amounts so applied to be distributed among the 27 Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution); and THIRD, to the Grantors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct. The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. SECTION 6.03. Grant of License to Use Intellectual Property. For the purpose of enabling the Collateral Agent to exercise rights and remedies under this Article at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Grantors) to the extent that such license does not violate any then existing licensing arrangements (to the extent that waivers cannot be obtained) to use, license or sub-license any of the Collateral consisting of Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof and sufficient rights of quality control in favor of Grantor to avoid the invalidation of the Trademarks subject to the license. The use of such license by the Collateral Agent shall be exercised, at the option of the Collateral Agent, upon the occurrence and during the continuation of an Event of Default; provided that any 28 license, sub-license or other transaction entered into by the Collateral Agent in accordance herewith shall be binding upon the Grantors notwithstanding any subsequent cure of an Event of Default. ARTICLE VII Miscellaneous SECTION 7.01. Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Guarantor shall be given to it at its address or telecopy number set forth on Schedule I, with a copy to the Borrower. SECTION 7.02. Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest and all obligations of the Grantors hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Obligations or this Agreement. SECTION 7.03. Survival of Agreement. All covenants, agreements, representations and warranties made by any Grantor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Secured Parties and shall survive the 29 making by the Lenders of the Loans, and the execution and delivery to the Lenders of any notes evidencing such Loans, regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect until this Agreement shall terminate. SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall become effective as to any Grantor when a counterpart hereof executed on behalf of such Grantor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Grantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of such Grantor, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder. SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Grantor or the Collateral Agent that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. SECTION 7.06. Collateral Agent's Expenses; Indemnification. (a) Each Grantor jointly and severally agrees to pay upon demand to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees, disbursements and other charges of its counsel and of any experts or agents, which the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or 30 the sale of, collection from or other realization upon any of the Collateral, (iii) the exercise, enforcement or protection of any of the rights of the Collateral Agent hereunder or (iv) the failure of any Grantor to perform or observe any of the provisions hereof. (b) Without limitation of its indemnification obligations under the other Loan Documents, each Grantor jointly and severally agrees to indemnify the Collateral Agent and the other Indemnitees against, and hold each of them harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable fees, disbursements and other charges of counsel, incurred by or asserted against any of them arising out of, in any way connected with, or as a result of, the execution, delivery or performance of this Agreement or any claim, litigation, investigation or proceeding relating hereto or to the Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) Any such amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 7.06 shall remain operative and in full force and effect regardless of the termination of this Agreement or any other Loan Document, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Collateral Agent or any Lender. All amounts due under this Section 7.06 shall be payable on written demand therefor. SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 7.08. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right 31 or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the Collateral Agent, the Issuing Bank, the Administrative Agent and the Lenders under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or any other Loan Document or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Grantor in any case shall entitle such Grantor or any other Grantor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Collateral Agent and the Grantor or Grantors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.02 of the Credit Agreement. SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.09. SECTION 7.10. Severability. In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the 32 remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7.11 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract (subject to Section 7.04), and shall become effective as provided in Section 7.04. Delivery of an executed signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. SECTION 7.12. Headings. Article and Section headings used herein are for the purpose of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each Grantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent, the Administrative Agent, the Issuing Bank or any Lender 33 may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Grantor or its properties in the courts of any jurisdiction. (b) Each Grantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State court or Federal court of the United States of America sitting in New York City. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 7.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 7.14. Termination. This Agreement and the Security Interest shall terminate when all the Obligations have been indefeasibly paid in full, the Lenders have no further commitment to lend, the LC Exposure has been reduced to zero and the Issuing Bank has no further commitment to issue Letters of Credit under the Credit Agreement, at which time the Collateral Agent shall execute and deliver to the Grantors, at the Grantors' expense, all Uniform Commercial Code termination statements and similar documents which the Grantors shall reasonably request to evidence such termination. Any execution and delivery of termination statements or documents pursuant to this Section 7.14 shall be without recourse to or warranty by the Collateral Agent. A Guarantor shall automatically be released from its obligations hereunder and the Security Interest in the Collateral of such Guarantor shall be automatically released in the event that all the capital stock of such Guarantor shall be sold, transferred or otherwise disposed of to a Person that is not an Affiliate of the Borrower in accordance with the terms of the Credit Agreement; provided that the Required Lenders shall have consented to such sale, transfer or other disposition (to 34 the extent required by the Credit Agreement) and the terms of such consent did not provide otherwise. SECTION 7.15. Additional Grantors. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Annex 2 hereto, such Subsidiary shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of any such instrument shall not require the consent of any Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. HUNTSMAN PACKAGING CORPORATION, by /s/ RONALD G. MOFFITT -------------------------- Name: Ronald G. Moffitt Title: Executive Vice President, Secretary and General Counsel EACH OF THE GUARANTORS LISTED ON SCHEDULE I HERETO, by /s/ RONALD G. MOFFITT --------------------------- Name: /s/ Ronald G. Moffitt Title: Authorized Officer BANKERS TRUST COMPANY, as Collateral Agent, by /s/ ROBERT R. TELESCA --------------------------- Name: Robert R. Telesca Title: Assistant Vice President 35 SCHEDULE I GUARANTORS ---------- Edison Plastics International Inc. Huntsman Bulk Packaging Corporation Huntsman Container Corporation International Huntsman Edison Films Corporation Huntsman Film Products of Mexico, Inc. Huntsman KCL Corporation Huntsman Packaging Georgia, Inc. Huntsman Packaging of Canada, LLC 36 Schedule II to the Security Agreement COPYRIGHTS 37 38 Schedule III to the Security Agreement LICENSES 38 Schedule IV to the Security Agreement PATENTS 39 40 Schedule V to the Security Agreement TRADEMARKS 40 1 Annex 1 to the Security Agreement [Form Of] PERFECTION CERTIFICATE Reference is made to (a) the Credit Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Borrower"), ASPEN INDUSTRIAL, S.A. DE C.V., a Mexico corporation, the lenders from time to time party thereto (the "Lenders"), and BANKERS TRUST COMPANY, a New York banking corporation ("Bankers Trust"), as administrative agent (in such capacity, the "Administrative Agent") for the Lenders, and (b) the Guarantee Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as supplemented or otherwise modified from time to time, the "Guarantee Agreement"), among the Borrower, the Guarantors and the Administrative Agent. Capitalized terms used herein and not defined herein shall have meanings assigned to such terms in the Credit Agreement. The undersigned, a Financial Officer and a Legal Officer, respectively, of the Borrower, hereby certify to the Collateral Agent and each other Secured Party as follows: 1. Names. (a) The exact corporate name of each Grantor, as such name appears in its respective certificate of incorporation, is as follows: (b) Set forth below is each other corporate name each Grantor has had in the past five years, together with the date of the relevant change: (c) Except as set forth in Schedule 1 hereto, no Grantor has changed its identity or corporate structure in any way within the past five years. Changes in identity or corporate structure would include mergers, consolidations and acquisitions, as well as any change in the form, nature 41 2 or jurisdiction of corporate organization. If any such change has occurred, include in Schedule 1 the information required by Sections 1 and 2 of this certificate as to each acquiree or constituent party to a merger or consolidation. (d) The following is a list of all other names (including trade names or similar appellations) used by each Grantor or any of its divisions or other business units in connection with the conduct of its business or the ownership of its properties at any time during the past five years: (e) Set forth below is the Federal Taxpayer Identification Number of each Grantor: 2. Current Locations. (a) The chief executive office of each Grantor is located at the address set forth opposite its name below: Grantor Mailing Address County State (b) Set forth below opposite the name of each Grantor are all locations where such Grantor maintains any books or records relating to any Accounts Receivable (with each location at which chattel paper, if any, is kept being indicated by an "*"): Grantor Mailing Address County State (c) Set forth below opposite the name of each Grantor are all the material places of business of such Grantor not identified in paragraph (a) or (b) above: Grantor Mailing Address County State 42 3 (d) Set forth below opposite the name of each Grantor are all the locations where such Grantor maintains any Collateral not identified above: Grantor Mailing Address County State (e) Set forth below opposite the name of each Grantor are the names and addresses of all Persons other than such Grantor that have possession of any of the Collateral of such Grantor: Grantor Mailing Address County State 3. Unusual Transactions. All Accounts Receivable have been originated by the Grantors and all Inventory has been acquired by the Grantors in the ordinary course of business. 4. File Search Reports. Attached hereto as Schedule 4(A) are true copies of file search reports from the Uniform Commercial Code filing offices where filings described in Section 3.16 of the Credit Agreement are to be made. Attached hereto as Schedule 4(B) is a true copy of each financing statement or other filing identified in such file search reports. 5. UCC Filings. Duly signed financing statements on Form UCC-1 in substantially the form of Schedule 5 hereto have been prepared for filing in the Uniform Commercial Code filing office in each jurisdiction where a Grantor has Collateral as identified in Section 2 hereof. 6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule setting forth, with respect to the filings described in Section 5 above, each filing and the filing office in which such filing is to be made. 43 4 7. Filing Fees. All filing fees and taxes payable in connection with the filings described in Section 5 above have been paid. 8. Stock Ownership. Attached hereto as Schedule 8 is a true and correct list of all the duly authorized, issued and outstanding stock of each Subsidiary and the record and beneficial owners of such stock. Also set forth on Schedule 8 is each Subsidiary that represents 50% or less of the equity of the entity in which such investment was made. 9. Notes. Attached hereto as Schedule 9 is a true and correct list of all notes held by each Subsidiary and all intercompany notes between the Borrower and each Subsidiary of the Borrower and between each Subsidiary of the Borrower and each other such Subsidiary. 10. Advances. Attached hereto as Schedule 10 is (a) a true and correct list of all advances made by the Borrower to any Subsidiary of the Borrower or made by any Subsidiary of the Borrower to the Borrower or any other Subsidiary of the Borrower, which advances will be on and after the date hereof evidenced by one or more intercompany notes pledged to the Collateral Agent under the Pledge Agreement, and (b) a true and correct list of all unpaid intercompany transfers of goods sold and delivered by or to the Borrower or any Subsidiary of the Borrower. 11. Mortgage Filings. Attached hereto as Schedule 11 is a schedule setting forth, with respect to each Mortgaged Property, (i) the exact corporate name of the corporation that owns such property as such name appears in its certificate of incorporation, (ii) if different from the name identified pursuant to clause (i), the exact name of the current record owner of such property reflected in the records of the filing office for such property identified pursuant to the following clause and (iii) the filing office in which a Mortgage with respect to such property must be filed or recorded in order for the Collateral Agent to obtain a perfected security interest therein. 44 5 IN WITNESS WHEREOF, the undersigned have duly executed this certificate on this 31st day of May, 2000. HUNTSMAN PACKAGING CORPORATION, by -------------------------- Name: Title: [Financial Officer] by -------------------------- Name: Title: [Legal Officer] 45 6 Annex 2 to the Security Agreement SUPPLEMENT NO. __ dated as of , to the Security Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Borrower"), each subsidiary of the Borrower listed on Schedule I thereto (each such subsidiary individually a "Guarantor" and collectively, the "Guarantors"; the Guarantors and the Borrower are referred to collectively herein as the "Grantors") and BANKERS TRUST COMPANY, a New York banking corporation ("Bankers Trust") as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined herein). A. Reference is made to (a) the Credit Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, Aspen Industrial, S.A. de C.V., a Mexico corporation, the lenders from time to time party thereto (the "Lenders") and Bankers Trust, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders, and (b) the Guarantee Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as amended, supplemented or otherwise modified from time to time, the "Guarantee Agreement"), among the Borrower, the Guarantors and the Administrative Agent. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement and the Credit Agreement. C. The Grantors have entered into the Security Agreement in order to induce the Lenders to make Loans and 46 the Issuing Bank to issue Letters of Credit. Section 7.15 of the Security Agreement provides that additional Subsidiaries of the Borrower may become Grantors under the Security Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Grantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Grantor under the Security Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Grantor agree as follows: SECTION 1. In accordance with Section 7.15 of the Security Agreement, the New Grantor by its signature below becomes a Grantor under the Security Agreement with the same force and effect as if originally named therein as a Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of the Security Agreement applicable to it as a Grantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Grantor, as security for the payment and performance in full of the Obligations (as defined in the Security Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Grantor's right, title and interest in and to the Collateral (as defined in the Security Agreement) of the New Grantor. Each reference to a "Grantor" in the Security Agreement shall be deemed to include the New Grantor. The Security Agreement is hereby incorporated herein by reference. SECTION 2. The New Grantor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective 47 when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Grantor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. The New Grantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of the location of any and all Collateral of the New Grantor and (b) set forth under its signature hereto, is the true and correct location of the chief executive office of the New Grantor. SECTION 5. Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect. SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Security Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Security Agreement. All communications and notices hereunder to the New Grantor shall be given to it at the address set forth under its signature below. 48 SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly executed this Supplement to the Security Agreement as of the day and year first above written. [Name of New Grantor], by ---------------------- Name: Title: Address: BANKERS TRUST COMPANY, as Collateral Agent, by ---------------------- Name: Title: 49 SCHEDULE I to Supplement No.___ to the Security Agreement LOCATION OF COLLATERAL Description Location EX-10.10 17 ex10-10.txt PLEDGE AGREEMENT 1 EXHIBIT 10.10 EXECUTION COPY PLEDGE AGREEMENT dated as of September 30, 1997, as amended and restated as of May 31, 2000, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Borrower"), each Subsidiary of the Borrower listed on Schedule I hereto (each such Subsidiary individually a "Subsidiary Pledgor" and collectively, the "Subsidiary Pledgors"; the Borrower and the Subsidiary Pledgors are referred to collectively herein as the "Pledgors") and BANKERS TRUST COMPANY, a New York banking corporation ("Bankers Trust"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to (a) the Credit Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, Aspen Industrial, S.A. de C.V., a Mexico corporation (the "Mexico Borrower"), the lenders from time to time party thereto (the "Lenders") and Bankers Trust, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders, and (b) the Guarantee Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as amended, supplemented or otherwise modified from time to time, the "Guarantee Agreement"), among the Borrower, the Subsidiary Pledgors and the Collateral Agent. Capitalized terms used herein and not defined herein shall have meanings assigned to such terms in the Credit Agreement. The parties hereto have entered into a Pledge Agreement dated as of September 30, 1997, and are entering into this Agreement to amend and restate such Pledge Agreement in its entirety in the form hereof. The Lenders have agreed to make Loans to the Borrower and the Mexico Borrower and the Issuing Bank has agreed to 2 issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. The Subsidiary Guarantors have agreed to guarantee, among other things, all the obligations of the Borrower and the Mexico Borrower under the Credit Agreement. The Borrower has agreed to guarantee, among other things, all the obligations of the Mexico Borrower under the Credit Agreement. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned upon, among other things, the execution and delivery by the Pledgors of a Pledge Agreement in the form hereof to secure (a) the due and punctual payment by the Borrower and the Mexico Borrower of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Secured Parties under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obligations of the Borrower or the Mexico Borrower, monetary or otherwise, under each Hedging Agreement entered into with any counterparty that was a Lender (or an Affiliate thereof) at the time such Hedging Agreement was entered into and (d) the due and punctual payment of all monetary obligations of the Borrower (but not in excess of $10,000,000 in the aggregate) under any domestic overdraft facilities entered into by the Borrower 3 (all the monetary and other obligations referred to in the preceding clauses (a) through (d) being referred to collectively as the "Obligations"). Accordingly, the Pledgors and the Collateral Agent, on behalf of itself and each Secured Party (and each of their respective successors or assigns), hereby agree as follows: 4 SECTION 1. Pledge. As security for the payment and performance, as the case may be, in full of the Obligations, each Pledgor hereby transfers, grants, bargains, sells, conveys, hypothecates, pledges, sets over and delivers, and pursuant to the English charge over shares between Huntsman Container Company International and [ ], with respect to the shares of Huntsman Film Products U.K. Limited (the "English Pledged Stock"), pledges the English Pledged Stock, unto the Collateral Agent, its successors and assigns, and hereby grants to the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, a security interest in all of the Pledgor's right, title and interest in, to and under (a) the shares of capital stock owned by it and listed on Schedule II hereto and any shares of capital stock of any Subsidiary obtained in the future by the Pledgor and the certificates representing all such shares (the "Pledged Stock"); (b)(i) the debt securities listed opposite the name of the Pledgor on Schedule II hereto, (ii) any debt securities in the future issued to the Pledgor and (iii) the promissory notes and any other instruments evidencing such debt securities (the "Pledged Debt Securities"); (c) subject to Section 5, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed, in respect of, in exchange for or upon the conversion of the securities referred to in clauses (a) and (b) above; (d) subject to Section 5, all rights and privileges of the Pledgor with respect to the securities and other property referred to in clauses (a), (b), (c) and (d) above; and (e) all proceeds of any of the foregoing (the items referred to in clauses (a) through (e) above being collectively referred to as the "Collateral"). Notwithstanding any of the foregoing, the Pledged Stock shall not include (i) more than 65% of the issued and outstanding shares of common stock of any Foreign Subsidiary that is not a Subsidiary Loan Party or (ii) to the extent that applicable law requires that a Subsidiary of the Pledgor issue directors' qualifying shares, such qualifying shares. Upon delivery to the Collateral Agent, (a) any stock certificates, notes or other securities now or hereafter included in the Collateral (the "Pledged Securities") shall be accompanied by stock powers duly executed in blank or 5 other instruments of transfer satisfactory to the Collateral Agent and by such other instruments and documents as the Collateral Agent may reasonably request and (b) all other property comprising part of the Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Pledgor and such other instruments or documents as the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities then being pledged hereunder, which schedule shall be attached hereto as Schedule II and made a part hereof. Each schedule so delivered shall supplement any prior schedules so delivered. TO HAVE AND TO HOLD the Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and assigns, for the ratable benefit of the Secured Parties, forever; subject, however, to the terms, covenants and conditions hereinafter set forth. SECTION 2. Delivery of the Collateral. (a) Each Pledgor agrees promptly to deliver or cause to be delivered to the Collateral Agent any and all Pledged Securities, and any and all certificates or other instruments or documents representing the Collateral. (b) Each Pledgor will cause any Indebtedness for borrowed money owed to the Pledgor by the Borrower or any Subsidiary to be evidenced by a duly executed promissory note that is pledged and delivered to the Collateral Agent pursuant to the terms thereof. SECTION 3. Representations, Warranties and Covenants. Each Pledgor hereby represents, warrants and covenants, as to itself and the Collateral pledged by it hereunder, to and with the Collateral Agent that: (a) the Pledged Stock represents that percentage as set forth on Schedule II of the issued and outstanding shares of each class of the capital stock of the issuer with respect thereto; (b) except for the security interest granted hereunder and except as permitted by the Credit 6 Agreement, the Pledgor (i) is and will at all times continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II, (ii) holds the same free and clear of all Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Collateral, other than pursuant hereto, and (iv) subject to Section 5, will cause any and all Collateral, whether for value paid by the Pledgor or otherwise, to be forthwith deposited with the Collateral Agent and pledged or assigned hereunder; (c) the Pledgor (i) has the power and authority to pledge the Collateral in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or therein against any and all Liens (other than the Lien created by this Agreement), however arising, of all Persons whomsoever; (d) no consent which has not been obtained of any other Person (including stockholders or creditors of any Pledgor) and no consent or approval which has not been obtained of any Governmental Authority or any securities exchange is necessary to the validity of the pledge effected hereby; (e) by virtue of the execution and delivery by the Pledgors of this Agreement, when the Pledged Securities, certificates or other documents representing or evidencing the Collateral are delivered to the Collateral Agent in accordance with this Agreement, the Collateral Agent will obtain a valid and perfected first lien upon and security interest in such Pledged Securities as security for the payment and performance of the Obligations; (f) the pledge effected hereby is effective to vest in the Collateral Agent, on behalf of the Secured Parties, the rights of the Collateral Agent in the Collateral as set forth herein; (g) all of the Pledged Stock has been duly authorized and validly issued and is fully paid and nonassessable; 7 (h) all information set forth herein relating to the Pledged Stock is accurate and complete in all material respects as of the date hereof; and (i) the pledge of the Pledged Stock pursuant to this Agreement does not violate Regulation U or X of the Federal Reserve Board or any successor thereto as of the date hereof. SECTION 4. Registration in Nominee Name; Denominations. The Collateral Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of the Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent. Each Pledgor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Pledgor. The Collateral Agent shall at all times have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement. SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and until an Event of Default shall have occurred and be continuing: (i) Each Pledgor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Securities or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided, however, that such Pledgor will not be entitled to exercise any such right if the result thereof could materially and adversely affect the rights inuring to a holder of the Pledged Securities or the rights and remedies of any of the Secured Parties under this Agreement or the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same. 8 (ii) The Collateral Agent shall execute and deliver to each Pledgor, or cause to be executed and delivered to each Pledgor, all such proxies, powers of attorney and other instruments as such Pledgor may reasonably request for the purpose of enabling such Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above and to receive the cash dividends it is entitled to receive pursuant to subparagraph (iii) below. (iii) Each Pledgor shall be entitled to receive and retain any and all cash dividends, interest and principal paid on the Pledged Securities to the extent and only to the extent that such cash dividends, interest and principal are permitted by, and otherwise paid in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws. All noncash dividends, interest and principal, and all dividends, interest and principal paid or payable in cash or otherwise in connection with a partial or total liquidation or dissolution, return of capital, capital surplus or paid-in surplus, and all other distributions (other than distributions referred to in the preceding sentence) made on or in respect of the Pledged Securities, whether paid or payable in cash or otherwise, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock of the issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Collateral, and, if received by any Pledgor, shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and shall be forthwith delivered to the Collateral Agent in the same form as so received (with any necessary endorsement). (b) Upon the occurrence and during the continuance of an Event of Default, all rights of any Pledgor to 9 dividends, interest or principal that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) above shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest or principal. All dividends, interest or principal received by the Pledgor contrary to the provisions of this Section 5 shall be held in trust for the benefit of the Collateral Agent, shall be segregated from other property or funds of such Pledgor and shall be forthwith delivered to the Collateral Agent upon demand in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this paragraph (b) shall be retained by the Collateral Agent in an account to be established by the Collateral Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 7. After all Events of Default have been cured or waived, the Collateral Agent shall, within five Business Days after all such Events of Default have been cured or waived, repay to each Pledgor all cash dividends, interest or principal (without interest), that such Pledgor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) above and which remain in such account. (c) Upon the occurrence and during the continuance of an Event of Default, all rights of any Pledgor to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 5, and the obligations of the Collateral Agent under paragraph (a)(ii) of this Section 5, shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers, provided that, unless otherwise directed by the Required Lenders, the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Pledgors to exercise such rights. After all Events of Default have been cured or waived, such Pledgor will have the right to exercise the voting and consensual rights and powers that it would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above. 10 SECTION 6. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, subject to applicable regulatory and legal requirements, the Collateral Agent may sell the Collateral, or any part thereof, at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. The Collateral Agent shall be authorized at any such sale (if it deems it advisable to do so) to restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or sale thereof, and upon consummation of any such sale the Collateral Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Pledgor, and, to the extent permitted by applicable law, the Pledgors hereby waive all rights of redemption, stay, valuation and appraisal any Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Collateral Agent shall give a Pledgor 10 days' prior written notice (which each Pledgor agrees is reasonable notice within the meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions) of the Collateral Agent's intention to make any sale of such Pledgor's Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker's board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice of such sale. At any such sale, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) 11 determine. The Collateral Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case any sale of all or any part of the Collateral is made on credit or for future delivery, the Collateral so sold may be retained by the Collateral Agent until the sale price is paid in full by the purchaser or purchasers thereof, but the Collateral Agent shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may be sold again upon like notice. At any public (or, to the extent permitted by applicable law, private) sale made pursuant to this Section 6, any Secured Party may bid for or purchase, free from any right of redemption, stay or appraisal on the part of any Pledgor (all said rights being also hereby waived and released), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to it from such Pledgor as a credit against the purchase price, and it may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to such Pledgor therefor. For purposes hereof, (a) a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof, (b) the Collateral Agent shall be free to carry out such sale pursuant to such agreement and (c) such Pledgor shall not be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose upon the Collateral and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 6 shall be 12 deemed to conform to the commercially reasonable standards as provided in Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New York or its equivalent in other jurisdictions. SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of Collateral pursuant to Section 6, as well as any Collateral consisting of cash, shall be applied by the Collateral Agent as follows: FIRST, to the payment of all costs and expenses incurred by the Collateral Agent or the Administrative Agent in connection with such sale or otherwise in connection with this Agreement, any other Loan Document or any of the Obligations, including all court costs and the reasonable fees and expenses of its agents and legal counsel, the repayment of all advances made by the Collateral Agent hereunder or under any other Loan Document on behalf of any Pledgor and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document; SECOND, to the payment in full of the Obligations (the amounts so applied to be distributed among the Secured Parties pro rata in accordance with the amounts of the Obligations owed to them on the date of any such distribution); and THIRD, to the Pledgors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct. 13 The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Collateral Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof. SECTION 8. Reimbursement of Collateral Agent. (a) The Pledgors agree to pay upon demand to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees, other charges and disbursements of its counsel and of any experts or agents, that the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Collateral Agent hereunder or (iv) the failure by such Pledgor to perform or observe any of the provisions hereof. (b) Without limitation of its indemnification obligations under the other Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and the Indemnitees (as defined in Section 9.03 of the Credit Agreement) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, other charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated thereby or (ii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto, provided that such indemnity shall not, as to any 14 Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) Any amounts payable as provided hereunder shall be additional Obligations secured hereby and by the other Security Documents. The provisions of this Section 8 shall remain operative and in full force and effect regardless of the termination of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document or any investigation made by or on behalf of the Collateral Agent or any other Secured Party. All amounts due under this Section 8 shall be payable on written demand therefor and shall bear interest at the rate specified in Section 2.13 of the Credit Agreement. SECTION 9. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor, upon the occurrence and during the continuance of a Default, for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Collateral Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Collateral Agent's name or in the name of such Pledgor, to ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due under and by virtue of any Collateral, to endorse checks, drafts, orders and other instruments for the payment of money payable to the Pledgor representing any interest or dividend or other distribution payable in respect of the Collateral or any part thereof or on account thereof and to give full discharge for the same, to settle, compromise, prosecute or defend any action, claim or proceeding with respect thereto, and to sell, assign, endorse, pledge, transfer and to make any agreement respecting, or otherwise deal with, the same; provided, however, that nothing herein contained shall be construed as requiring or obligating the 15 Collateral Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Collateral Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Pledgor for any act or failure to act hereunder, except for their own gross negligence or wilful misconduct. SECTION 10. Waivers; Amendment. (a) No failure or delay of the Collateral Agent in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Collateral Agent hereunder and of the other Secured Parties under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provisions of this Agreement or consent to any departure by any Pledgor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Pledgor in any case shall entitle such Pledgor to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Collateral Agent and the Pledgor or Pledgors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.02 of the Credit Agreement. SECTION 11. Securities Act, etc. In view of the position of the Pledgors in relation to the Pledged 16 Securities, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the "Federal Securities Laws") with respect to any disposition of the Pledged Securities permitted hereunder. Each Pledgor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Collateral Agent if the Collateral Agent were to attempt to dispose of all or any part of the Pledged Securities, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Securities could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Collateral Agent in any attempt to dispose of all or part of the Pledged Securities under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Pledgor recognizes that in light of such restrictions and limitations the Collateral Agent may, with respect to any sale of the Pledged Securities, limit the purchasers to those who will agree, among other things, to acquire such Pledged Securities for their own account, for investment, and not with a view to the distribution or resale thereof. Each Pledgor acknowledges and agrees that in light of such restrictions and limitations, the Collateral Agent, in its discretion, (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under the Federal Securities Laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Pledgor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Collateral Agent shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price that the Collateral Agent, in its discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this 17 Section 11 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Collateral Agent sells. SECTION 12. Registration, etc. Each Pledgor agrees that, upon the occurrence and during the continuance of an Event of Default hereunder, if for any reason the Collateral Agent desires to sell any of the Pledged Securities of the Borrower at a public sale, it will, at any time and from time to time, upon the written request of the Collateral Agent, use its best efforts to take or to cause the issuer of such Pledged Securities to take such action and prepare, distribute and/or file such documents, as are required or advisable in the reasonable opinion of counsel for the Collateral Agent to permit the public sale of such Pledged Securities. Each Pledgor further agrees to indemnify, defend and hold harmless the Collateral Agent, each other Secured Party, any underwriter and their respective officers, directors, affiliates and controlling persons from and against all loss, liability, expenses, costs of counsel (including, without limitation, reasonable fees and expenses to the Collateral Agent of legal counsel), and claims (including the costs of investigation) that they may incur insofar as such loss, liability, expense or claim arises out of or is based upon any untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any omission to state a material fact required to be stated therein or necessary to make the statements in any thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished to such Pledgor or the issuer of such Pledged Securities by the Collateral Agent or any other Secured Party expressly for use therein. Each Pledgor further agrees, upon such written request referred to above, to use its best efforts to qualify, file or register, or cause the issuer of such Pledged Securities to qualify, file or register, any of the Pledged Securities under the Blue Sky or other securities laws of such states as may be requested by the Collateral Agent and keep effective, or cause to be kept effective, all such qualifications, filings or registrations. The Pledgors will bear all costs and expenses of carrying out their 18 obligations under this Section 12. Each Pledgor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section 12 and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section 12 may be specifically enforced. SECTION 13. Security Interest Absolute. All rights of the Collateral Agent hereunder, the grant of a security interest in the Collateral and all obligations of each Pledgor hereunder, shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument relating to any of the foregoing, (c) any exchange, release or nonperfection of any other collateral, or any release or amendment or waiver of or consent to or departure from any guaranty, for all or any of the Obligations or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Pledgor in respect of the Obligations or in respect of this Agreement (other than the indefeasible payment in full of all the Obligations). SECTION 14. Termination or Release. (a) This Agreement and the security interests granted hereby shall terminate when all the Obligations (except for contingent indemnity and expense reimbursement obligations for which no claim has been made) have been indefeasibly paid in full and the Lenders have no further commitment to lend under the Credit Agreement, the LC Exposure has been reduced to zero and the Issuing Bank has no further obligation to issue Letters of Credit under the Credit Agreement. (b) Upon any sale or other transfer by any Pledgor of any Collateral that is permitted under the Credit Agreement to any Person that is not a Pledgor, or, upon the effectiveness of any written consent to the release of the 19 security interest granted hereby in any Collateral pursuant to Section 9.02(b) of the Credit Agreement, the security interest in such Collateral shall be automatically released. (c) In connection with any termination or release pursuant to paragraph (a) or (b), the Collateral Agent shall execute and deliver to any Pledgor, at such Pledgor's expense, all documents that such Pledgor shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 14 shall be without recourse to or warranty by the Collateral Agent. SECTION 15. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Pledgor shall be given to it at the address for notices set forth on Schedule I. SECTION 16. Further Assurances. Each Pledgor agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements and instruments, as the Collateral Agent may at any time reasonably request in connection with the administration and enforcement of this Agreement or with respect to the Collateral or any part thereof or in order better to assure and confirm unto the Collateral Agent its rights and remedies hereunder. SECTION 17. Binding Effect; Several Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Pledgor that are contained in this Agreement shall bind and inure to the benefit of its successors and assigns. This Agreement shall become effective as to any Pledgor when a counterpart hereof executed on behalf of such Pledgor shall have been delivered to the Collateral Agent and a counterpart hereof shall have been executed on behalf of the Collateral Agent, and thereafter shall be binding upon such Pledgor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of 20 such Pledgor, the Collateral Agent and the other Secured Parties, and their respective successors and assigns, except that no Pledgor shall have the right to assign its rights hereunder or any interest herein or in the Collateral (and any such attempted assignment shall be void), except as expressly contemplated by this Agreement or the other Loan Documents. If all of the capital stock of a Pledgor is sold, transferred or otherwise disposed of to a Person that is not an Affiliate of the Borrower pursuant to a transaction permitted by Section 6.06 of the Credit Agreement, such Pledgor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Pledgor and may be amended, modified, supplemented, waived or released with respect to any Pledgor without the approval of any other Pledgor and without affecting the obligations of any other Pledgor hereunder. SECTION 18. Survival of Agreement; Severability. (a) All covenants, agreements, representations and warranties made by each Pledgor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank, regardless of any investigation made by the Secured Parties or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the LC Exposure does not equal zero and as long as the Commitments have not been terminated. (b) In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith 21 negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 20. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute a single contract, and shall become effective as provided in Section 17. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 21. Rules of Interpretation. The rules of interpretation specified in Section 1.03 of the Credit Agreement shall be applicable to this Agreement. Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting this Agreement. SECTION 22. Jurisdiction; Consent to Service of Process. (a) Each Pledgor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that, to the extent permitted by applicable law, all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Collateral Agent 22 or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Pledgor or its properties in the courts of any jurisdiction. (b) Each Pledgor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 15. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 23. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 24. Additional Pledgors. Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary Loan Party that was not in existence or not a Subsidiary Loan Party on the date of the Credit Agreement is required to enter in this Agreement as a Subsidiary Pledgor upon becoming a Subsidiary Loan Party. Upon execution and delivery by the Collateral Agent and a Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Subsidiary Pledgor hereunder with the same force and effect as if 23 originally named as a Subsidiary Pledgor herein. The execution and delivery of such instrument shall not require the consent of any Pledgor hereunder. 24 The rights and obligations of each Pledgor hereunder shall remain in full force and effect notwithstanding the addition of any new Subsidiary Pledgor as a party to this Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. HUNTSMAN PACKAGING CORPORATION, by /s/ RONALD G. MOFFITT ----------------------------- Name: Ronald G. Moffitt Title: Vice President, Secretary and General Counsel THE SUBSIDIARY PLEDGORS LISTED ON SCHEDULE I HERETO, by /s/ RONALD G. MOFFITT ----------------------------- Name: Ronald G. Moffitt Title: Authorized Officer BANKERS TRUST COMPANY, as Collateral Agent, by /s/ ROBERT R. TELESCA ----------------------------- Name: Robert R. Telesca Title: Assistant Vice President 25 SCHEDULE 1 SUBSIDIARY GUARANTORS --------------------- Edision Plastics International Inc. Huntsman Bulk Packaging Corporation Huntsman Container Corporation International Huntsman Edision Films Corporation Huntsman Film Products of Mexico Huntsman KLC Products Huntsman Packaging Georgia, Inc. Huntsman Packaging Products of Canada, LLC 26 SCHEDULE II PLEDGED CAPITAL STOCK AND DEBT SECURITIES Pledged Capital Stock
- ------------------------------------------------------------------------------------------------------------------------------- STOCK NUMBER OF CERTIFICATE SHARES PERCENTAGE ISSUER RECORD OWNER NUMBER PLEDGED PLEDGED - ------------------------------------------------------------------------------------------------------------------------------- Edison Plastics International, Huntsman Edison Films Corporation Inc. (Delaware) (successor by merger to Blessings 1 25 Corporation) 3 475 100% - ------------------------------------------------------------------------------------------------------------------------------- Huntsman Bulk Packaging Huntsman Packaging Corporation 3 1,000 100% Corporation (Utah) - ------------------------------------------------------------------------------------------------------------------------------- Huntsman Container Huntsman Packaging Corporation 8 1,000 100% Corporation International (Utah) - ------------------------------------------------------------------------------------------------------------------------------- Huntsman Edison Films Huntsman Packaging Corporation 2 1,000 100% Corporation (Delaware) - ------------------------------------------------------------------------------------------------------------------------------- Huntsman Film Products of Huntsman Packaging Corporation 2 1,000 100% Mexico, Inc. (Utah) - ------------------------------------------------------------------------------------------------------------------------------- Huntsman KCL Huntsman Packaging Corporation 1 1,000 100% Corporation, Inc. (Utah) - ------------------------------------------------------------------------------------------------------------------------------- Huntsman Packaging Huntsman Packaging Corporation 2 1,000 100% Georgia, Inc. (Georgia) - ------------------------------------------------------------------------------------------------------------------------------- ASPEN Industrial, Huntsman Packaging Corporation and 8 361,731,315 65% S.A. de C.V. (Mexico) Huntsman Container Corporation International (100% in the aggregate) - ------------------------------------------------------------------------------------------------------------------------------- Huntsman Film Products of Huntsman Packaging Corporation (successor C-2 65 65% Canada Ltd. (Canada) by merger to Huntsman Film Products Corporation) - -------------------------------------------------------------------------------------------------------------------------------
2 27 - ------------------------------------------------------------------------------------------------------------------------------- STOCK NUMBER OF CERTIFICATE SHARES PERCENTAGE ISSUER RECORD OWNER NUMBER PLEDGED PLEDGED - ------------------------------------------------------------------------------------------------------------------------------- Huntsman Film Products UK, Huntsman Container Corporation 7 65 65% Limited (UK) International - ------------------------------------------------------------------------------------------------------------------------------- Huntsman Film Products Pty. Huntsman Packaging Corporation ACT 5 975,000 65% Ltd. (Australia) - ------------------------------------------------------------------------------------------------------------------------------- Huntsman Packaging Corporation Richard P. Durham 9 14,500 N/A - ------------------------------------------------------------------------------------------------------------------------------- Huntsman Packaging Corporation Jack E. Knott 10 7,750 N/A - ------------------------------------------------------------------------------------------------------------------------------- Huntsman Packaging Corporation Ronald G. Moffitt 11 3,750 N/A - ------------------------------------------------------------------------------------------------------------------------------- Huntsman Packaging Corporation Scott K. Sorensen 12 6,750 N/A - -------------------------------------------------------------------------------------------------------------------------------
Pledged Promissory Notes 1. Intercompany Promissory Note issued by VA Acquisition Corp. (now known as Huntsman Edison Films Corporation) in favor of the Company, dated May 19, 1998. 2. Revolving Loan Note issued by ASPEN Industrial S.A. de C.V. in favor of the Company in the aggregate principal amount of $5,000,000, dated as of May 20, 1998. 3. Amended and Restated Intercompany Promissory Note issued by Huntsman Film Products of Canada Ltd. in favor of Huntsman Packaging Corporation in the aggregate principal amount of $3,904,533.07. 4. Intercompany Promissory Notes issued by the Borrower to each of the other Grantors and issued by each of the Grantors to the Borrower and each other Grantor. 5. Promissory Note dated as of October 1, 1997, issued by Richard P. Durham to the Borrower in the original principal amount of $700,000. 6. Amended and Restated Promissory Note issued by Richard P. Durham to the Borrower in the original principal amount of $1,573,400. 7. Amended and Restated Promissory Note issued by Scott K. Sorensen to the Borrower in the original principal amount of $786,700. 3 28 8. Amended and Restated Promissory Note issued by Ronald G. Moffitt to the Borrower in the original principal amount of $262,200. 9. Promissory Note dated as of October 1, 1998, issued by Ronald G. Moffitt to the Borrower in the original principal amount of $60,000. 10. Secured Promissory Note issued by Richard P. Durham to the Borrower in the original principal amount of $7,005,389. 11. Secured Promissory Note issued by Jack E. Knott to the Borrower in the original principal amount of $3,744,260. 12. Secured Promissory Note issued by Scott K. Sorensen to the Borrower in the original principal amount of $3,261,129. 13. Secured Promissory Note issued by Ronald G. Moffitt to the Borrower in the original principal amount of $1,811,739. 4 29 Schedule II to the Pledge Agreement CAPITAL STOCK
Number of Number of Issuer Certificate Certificate - ------ ----------- ----------- Registered Owner - - ------- Number and Class of Shares - -------- - - - - Percentage of Shares - ---------
DEBT SECURITIES
Date of Maturity Principal ------- -------- Issuer Amount Note Date - ------ ------ ---- ----
30 Annex 1 to the Pledge Agreement SUPPLEMENT NO. dated as of , to the PLEDGE AGREEMENT dated as of September 30, 1997, as amended and restated as of May 31, 2000, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Borrower"), and each subsidiary of the Borrower listed on Schedule I hereto (each such subsidiary individually a "Subsidiary Pledgor" and collectively, the "Subsidiary Pledgors"; the Borrower and the Subsidiary Pledgors are referred to collectively herein as the "Pledgors") and BANKERS TRUST COMPANY, a New York banking corporation ("Bankers Trust"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below) A. Reference is made to (a) the Credit Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the lenders from time to time party thereto (the "Lenders"), Aspen Industrial, S.A. de C.V., a Mexico corporation, and Bankers Trust, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders and (b) the Guarantee Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as amended, supplemented or otherwise modified from time to time, the "Guarantee Agreement"), among the Borrower, the Subsidiary Pledgors and the Collateral Agent. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. C. The Pledgors have entered into the Pledge Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary Loan Party that was not in existence or not a Subsidiary Loan Party on the date of the Credit Agreement is required to enter into the Pledge Agreement as a Subsidiary Pledgor 31 upon becoming a Subsidiary Loan Party. Section 24 of the Pledge Agreement provides that such Subsidiaries may become Subsidiary Pledgors under the Pledge Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Pledgor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Pledgor under the Pledge Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Pledgor agree as follows: SECTION 1. In accordance with Section 24 of the Pledge Agreement, the New Pledgor by its signature below becomes a Pledgor under the Pledge Agreement with the same force and effect as if originally named therein as a Pledgor and the New Pledgor hereby agrees (a) to all the terms and provisions of the Pledge Agreement applicable to it as a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Pledgor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Pledgor, as security for the payment and performance in full of the Obligations (as defined in the Pledge Agreement), does hereby create and grant to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and lien on all of the New Pledgor's right, title and interest in and to the Collateral (as defined in the Pledge Agreement) of the New Pledgor. Each reference to a "Subsidiary Pledgor" or a "Pledgor" in the Pledge Agreement shall be deemed to include the New Pledgor. The Pledge Agreement is hereby incorporated herein by reference. SECTION 2. The New Pledgor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. 32 SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Pledgor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. The New Pledgor hereby represents and warrants that set forth on Schedule I attached hereto is a true and correct schedule of all its Pledged Securities. SECTION 5. Except as expressly supplemented hereby, the Pledge Agreement shall remain in full force and effect. SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 7. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Pledge Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 15 of the Pledge Agreement. All communications and notices hereunder to the New Pledgor shall be given to it at the address set forth under its signature hereto. 33 SECTION 9. The New Pledgor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent. IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly executed this Supplement to the Pledge Agreement as of the day and year first above written. [Name of New Pledgor], by ------------------------ Name: Title: Address: BANKERS TRUST COMPANY, as Collateral Agent, by ------------------------ Name: Title: Address: 34 Schedule I to Supplement No. to the Pledge Agreement Pledged Securities of the New Pledgor CAPITAL STOCK
Number of Number of Issuer Certificate Certificate - ------ ----------- ----------- Registered Owner - Number and Class of Shares ------ - - - - Percentage of Shares - ---------
DEBT SECURITIES
Principal Date of Maturity Issuer Amount Note Date - ------ ------ --- ----
EX-10.11 18 ex10-11.txt INDEMNITY 1 EXHIBIT 10.11 EXECUTION COPY INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT dated as of September 30, 1997, as amended and restated as of May 31, 2000, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Borrower"), each Subsidiary of the Borrower listed on Schedule I hereto (the "Guarantors") and BANKERS TRUST COMPANY, a New York banking corporation ("Bankers Trust"), as collateral agent (in such capacity, the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). Reference is made to (a) the Credit Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000, (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, Aspen Industrial, S.A. de C.V., a Mexico corporation (the "Mexico Borrower"), the lenders from time to time party thereto (the "Lenders") and Bankers Trust, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders, and (b) the Guarantee Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000, among the Borrower, Guarantors and the Administrative Agent (the "Guarantee Agreement"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The parties hereto have entered into the Indemnity, Subrogation and Contribution Agreement dated as of September 30, 1997, and are entering into this Agreement to amend and restate such Indemnity, Subrogation and Contribution Agreement in its entirety in the form hereof. The Lenders have agreed to make Loans to the Borrower and the Mexico Borrower, and the Issuing Bank has agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. The Guarantors have guaranteed such Loans and the other Obligations (as defined in the Guarantee Agreement) of the Borrower and the Mexico Borrower under the Credit Agreement pursuant to the Guarantee Agreement; the Borrower has guaranteed such Loans and the other 2 Obligations of the Mexico Borrower under the Credit Agreement pursuant to the Guarantee Agreement; the Borrower and the Guarantors also have granted Liens on and security interests in certain of their assets to secure such guarantees. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Borrower and the Guarantors of an agreement in the form hereof. Accordingly, the Borrower, each Guarantor and the Collateral Agent agree as follows: SECTION 1. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 3), the Borrower agrees that (a) in the event a payment shall be made by any Guarantor under the Guarantee Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the Person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold pursuant to any Security Document to satisfy a claim of any Secured Party, the Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold. SECTION 2. Contribution and Subrogation. Each Guarantor (a "Contributing Guarantor") agrees (subject to Section 3) that, in the event a payment shall be made by any other Guarantor under the Guarantee Agreement or assets of any other Guarantor shall be sold pursuant to any Security Document to satisfy a claim of any Secured Party and such other Guarantor (the "Claiming Guarantor") shall not have been fully indemnified by the Borrower as provided in Section 1, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as the case may be, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date 3 hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 12, the date of the Supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 2 shall be subrogated to the rights of such Claiming Guarantor under Section 1 to the extent of such payment. SECTION 3. Subordination. Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 1 and 2 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor to make the payments required by Sections 1 and 2 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor hereunder. SECTION 4. Termination. Subject to the provisions of the last sentence of Section 8 of this Agreement, this Agreement shall survive and be in full force and effect so long as any Obligation is outstanding and has not been indefeasibly paid in full in cash, and so long as the LC Exposure has not been reduced to zero or any of the Commitments under the Credit Agreement have not been terminated, and shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Secured Party or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. SECTION 5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. No Waiver; Amendment. (a) No failure on the part of the Collateral Agent or any Guarantor to exercise, and no delay in exercising, any right, power or 4 remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Collateral Agent or any Guarantor preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. None of the Collateral Agent and the Guarantors shall be deemed to have waived any rights hereunder unless such waiver shall be in writing and signed by such parties. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Borrower, the Guarantors and the Collateral Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 7. Notices. All communications and notices hereunder shall be in writing and given as provided in the Guarantee Agreement and addressed as specified therein. SECTION 8. Binding Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the parties that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. Neither the Borrower nor any Guarantor may assign or transfer any of its rights or obligations hereunder (and any such attempted assignment or transfer shall be void) without the prior written consent of the Required Lenders. Notwithstanding the foregoing, at the time any Guarantor is released from its obligations under the Guarantee Agreement in accordance with such Guarantee Agreement and the Credit Agreement, such Guarantor will cease to have any rights or obligations under this Agreement. SECTION 9. Survival of Agreement; Severability. (a) All covenants and agreements made by the Borrower and each Guarantor herein and in the certificates or other instruments prepared or delivered in connection with this Agreement or the other Loan Documents shall be considered to have been relied upon by the Collateral Agent, the other 5 Secured Parties and each Guarantor and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loans or any other fee or amount payable under the Credit Agreement or this Agreement or under any of the other Loan Documents is outstanding and unpaid or the LC Exposure does not equal zero and as long as the Commitments have not been terminated. (b) In case any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 10. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement shall be effective with respect to any Guarantor when a counterpart bearing the signature of such Guarantor shall have been delivered to the Collateral Agent. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. SECTION 11. Rules of Interpretation. The rules of interpretation specified in Section 1.03 of the Credit Agreement shall be applicable to this Agreement. 6 SECTION 12. Additional Guarantors. Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary Loan Party that was not in existence or not such a Subsidiary Loan Party on the date of the Credit Agreement is required to enter into the Guarantee Agreement as a Guarantor upon becoming such a Subsidiary. Upon execution and delivery, after the date hereof, by the Collateral Agent and such a Subsidiary of an instrument in the form of Annex 1 hereto, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor hereunder. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first appearing above. HUNTSMAN PACKAGING CORPORATION, by /s/ RICHARD P. DURHAM ----------------------------- Name: Richard P. Durham Title: President and CEO EACH OF THE SUBSIDIARIES LISTED ON SCHEDULE I HERETO, as a Guarantor, by /s/ RICHARD P. DURHAM ----------------------------- Name: Richard P. Durham Title: Authorized Officer BANKERS TRUST COMPANY, as Collateral Agent, by /s/ ROBERT R. TELESCA ----------------------------- Name: Robert R. Telesca Title: Assistant Vice President 8 SCHEDULE I GUARANTORS ---------- Edison Plastics International Inc. Huntsman Bulk Packaging Corporation Huntsman Container Corporation International Huntsman Edison Films Corporation Huntsman Films Products of Mexico, Inc. Huntsman KCL Corporation Huntsman Packaging Georgia, Inc. Huntsman Packaging of Canada, LLC 9 Annex 1 to the Indemnity, Subrogation and Contribution Agreement SUPPLEMENT NO. dated as of May 31, to the Indemnity, Subrogation and Contribution Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as the same may be amended, supplemented or otherwise modified from time to time, the "Indemnity, Subrogation and Contribution Agreement"), among HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Borrower"), each Subsidiary of the Borrower listed on Schedule I thereto (the "Guarantors"), and BANKERS TRUST COMPANY, a New York banking corporation ("Bankers Trust"), as collateral agent (the "Collateral Agent") for the Secured Parties (as defined in the Credit Agreement referred to below). A. Reference is made to (a) the Credit Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, Aspen Industrial, S.A. de C.V., a Mexico corporation, the lenders from time to time party thereto (the "Lenders") and Bankers Trust, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders, and (b) the Guarantee Agreement dated as of September 30, 1997, as amended and restated as of May 31, 2000 (the "Guarantee Agreement"), among the Borrower, the Guarantors and the Administrative Agent. B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Indemnity, Subrogation and Contribution Agreement and the Credit Agreement. C. The Borrower and the Guarantors have entered into the Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders to make Loans and the Issuing 10 Bank to issue Letters of Credit. Pursuant to Section 5.12 of the Credit Agreement, each Subsidiary Loan Party that was not in existence or not a Subsidiary Loan Party on the date of the Credit Agreement is required to enter into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary. Section 12 of the Indemnity, Subrogation and Contribution Agreement provides that additional Subsidiaries of the Borrower may become Guarantors under the Indemnity, Subrogation and Contribution Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. Accordingly, the Collateral Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 12 of the Indemnity, Subrogation and Contribution Agreement, the New Guarantor by its signature below becomes a Guarantor under the Indemnity, Subrogation and Contribution Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby agrees to all the terms and provisions of the Indemnity, Subrogation and Contribution Agreement applicable to it as a Guarantor thereunder. Each reference to a "Guarantor" in the Indemnity, Subrogation and Contribution Agreement shall be deemed to include the New Guarantor. The Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different 11 counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Collateral Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Collateral Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Indemnity, Subrogation and Contribution Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Indemnity, Subrogation and Contribution Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 7 of the Indemnity, Subrogation and Contribution Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature. 12 SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Collateral Agent. 13 IN WITNESS WHEREOF, the New Guarantor and the Collateral Agent have duly executed this Supplement to the Indemnity, Subrogation and Contribution Agreement as of the day and year first above written. [Name Of New Guarantor], by ---------------------- Address: BANKERS TRUST COMPANY, as Collateral Agent, by ---------------------- Name: Title: Address: 14 SCHEDULE I to Supplement No.___ to the Indemnity, Subrogation and Contribution Agreement Guarantors Name Address - ---- -------
EX-10.12 19 ex10-12.txt EMPLOYMENT AGREEMENT 1 EXHIBIT 10.12 EMPLOYMENT AGREEMENT dated as of May 31, 2000, between HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), and RICHARD P. DURHAM (the "Executive"). Reference is made to the Recapitalization Agreement dated as of March 31, 2000 (as the same may be amended from time to time, the "Recapitalization Agreement") among the Company, Chase Domestic Investments, L.L.C., a Delaware limited liability company (the "Investor"), and the other Persons signatory thereto. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Recapitalization Agreement. Each of the Company and its Subsidiaries is engaged in the business (the "Business") of producing and distributing polymer-based, value-added films and flexible packaging products for food, personal care, medical, agricultural, industrial and other applications. The Executive is, and prior to the date hereof has been, an employee, officer, an indirect stockholder and director of the Company and as such has substantial experience that is valuable to the Business and the Company. As an inducement to the Investor to enter into the Recapitalization Agreement, the Company desires to employ the Executive, and the Executive desires to accept such employment, on the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants contained herein and in the Recapitalization Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as set forth below. SECTION 1. EMPLOYMENT. The Company hereby employs the Executive, and the Executive accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Closing Date and ending on the Termination Date determined pursuant to Section 4(a) (the "Employment Period"). SECTION 2. BASE SALARY AND BENEFITS. (a) During the Employment Period, the Executive's base salary shall be $500,000 per annum (the "Base Salary"), which salary shall be payable in such installments as is customary for senior executives of the Company. In addition, during the Employment Period, the Executive shall be entitled to participate in all employee benefit programs for which other senior executives of the Company are generally eligible, and the Executive shall be eligible to participate in all insurance plans available generally to other senior executives of the Company. The Executive shall be entitled to take four weeks of paid vacation annually, or any greater amount of paid vacation to which he is entitled under the Company's vacation policy as in effect 2 during the Employment Period. The Board shall conduct a review of the Executive's Base Salary on an annual or more frequent basis. (b) The Executive shall be entitled to participate in the Company's stock option program. The Executive understands that the stock option program is a discretionary program that may or may not result in additional compensation to the Executive in any particular year, and that the Company may modify or revoke the stock option program at any time (although the Executive would be entitled to participate in any program adopted to replace the stock option program). (c) On the Closing Date, the Company will grant the Executive 14,500 restricted shares of the Company's Common Stock, under the Restricted Stock Purchase Agreement entered into by the parties on the same date as this Agreement. (d) The Executive shall be entitled to participate in the Company's Management Incentive Plan, as amended, revised or replaced from time to time. The Executive understands that the Management Incentive Plan is a discretionary program that may or may not result in additional compensation to the Executive in any particular year, and that the Company may modify or revoke the Management Incentive Plan at any time (although the Executive would be entitled to participate in any program adopted to replace the Management Incentive Plan). Notwithstanding the foregoing, the parties agree that the Executive's minimum bonus target for calendar 2000 will be 75% of Base Salary, and that the Executive will receive a minimum bonus of 50% of the bonus target for calendar 2000. (e) The Executive will continue to be covered under the terms of the Company's leased car program, which covers the cost of his annual lease, car insurance, gasoline and maintenance. The Company will pay the cost of first class business travel for the Executive. The Executive will continue to be eligible for benefits under the Company's relocation program, should he experience an eligible relocation. The Executive will be entitled to participate in all other perquisite programs offered by the Company to senior executives of the Company. (f) The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses. (g) The Company shall deduct from any payments to be made by it to the Executive under this Agreement any amounts required to be withheld in respect of any federal, state or local income or other Taxes. SECTION 3. POSITION AND DUTIES. (a) The Company employs the Executive as President and Chief Executive Officer. His responsibilities and duties will be commensurate with the title of his position, and will include those duties and responsibilities normally performed by the Chief Executive Officer of a private corporation in the Business. The Executive will report directly to the Board. The Executive will perform his duties from the Salt Lake City, Utah location. -2- 3 (b) The Executive acknowledges and agrees to discharge his duties and otherwise act in a manner consistent with the best interests of the Company and its Subsidiaries. During the Employment Period, the Executive shall devote his best efforts, on a full-time basis, to the performance of his duties and responsibilities under this Agreement (except for vacations to which he is entitled pursuant to Section 2(a), illness or incapacity or other personal or personal investment activities that do not interfere with his full and timely performance of his duties and responsibilities under this Agreement). During the Employment Period, the Executive shall not engage in any business activity which, in the reasonable judgment of the Board (excluding the Executive if he should be a member of the Board at the time of such determination), materially conflicts with his duties under this Agreement, whether or not such activity is pursued for gain, profit or other pecuniary advantage. SECTION 4. TERMINATION. (a) Termination Date. The Executive's employment under this Agreement shall terminate upon the earliest to occur (the date of such occurrence being the "Termination Date") of (i) the fifth anniversary of the Closing Date (an "Expiration"), (ii) the effective date of the Executive's resignation (a "Resignation"), (iii) the effective date of the Executive's Resignation for Good Reason, (iv) the Executive's death, (v) the Executive's Disability (as later defined), (vi) the Executive's Retirement (as later defined), (vii) the effective date of a termination of the Executive's employment for Cause by the Board (a "Termination for Cause"), and (viii) the effective date of a termination of the Executive's employment by the Board for reasons that do not constitute Cause (a "Termination Without Cause"). The effective date of the Executive's Resignation or the Executive's Retirement shall be as determined under Section 4(b); the effective date of a Resignation for Good Reason shall be as determined under Section 4(c); the effective date of the Executive's Disability shall be the date specified in a notice delivered to the Executive by the Company; and the effective date of a Termination for Cause or a Termination Without Cause shall be the date specified in a notice delivered to the Executive by the Company of such termination. (b) Resignation or Retirement. The Executive shall give the Company and the Board at least ninety (90) days' prior written notice of a Resignation or Retirement, with the effective date of such Resignation or Retirement specified therein. The Board may, in its discretion, accelerate the effective date of the Resignation, but not of a Retirement. (c) Resignation for Good Reason. The Executive will give the Company and the Board at least thirty (30) days' prior written notice of a Resignation for Good Reason. SECTION 5. EFFECT OF TERMINATION; SEVERANCE. (a) In the event of a Termination Without Cause or a Resignation for Good Reason, the Executive or his beneficiaries or estate shall receive the following: (i) the unpaid portion of the Base Salary, computed on a pro rata basis to the Termination Date; (ii) the unpaid portion of the Base Salary for the period beginning on the Termination Date and ending on the first anniversary of the Termination Date, -3- 4 payable in the same amounts and at the same intervals as the Base Salary was paid immediately prior to the Termination Date; provided, however, that in the event of a breach by the Executive of Sections 7, 8, 9, or 10 on or after the Termination Date, the provisions of Section 12 shall apply; (iii) the quarterly bonus payment(s) that would have been payable to the Executive under the quarterly portion of the Company's Management Incentive Plan, as amended, revised or replaced from time to time for all senior executives of the Company, plus an amount equal to the annual portion of the bonus that was paid or is payable to the Executive for the year preceding the calendar year in which the Termination Date occurs, multiplied by a fraction, the numerator of which is the number of days of the then-current calendar year that elapse before the Termination Date, and the denominator of which is 365; (iv) reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(f); and (v) continued participation in the Company's comprehensive medical and dental plan for the period beginning on the Termination Date and ending on the first anniversary of the Termination Date, with the COBRA continuation coverage qualifying event, connected with the Executive's termination occurring when he loses coverage at the end of that one-year period. If it is unable to obtain the consent of its medical and/or dental plan insurer to provide coverage under this clause (v), the Company may instead pay the full premium cost of other medical and dental insurance that provides comparable coverage for the required one-year period, and require the Executive to pay an amount equal to the then-current COBRA continuation premium for the period after the one-year period during which the Executive would be entitled to COBRA continuation coverage (with the Executive and his dependents being treated for all notice, election, coverage entitlement and other administrative purposes the same as other COBRA qualified beneficiaries under the Company's medical and dental plan). The parties agree that the Executive's entitlement to medical and dental coverage during the first year after the Termination Date will end on the date he becomes eligible for comprehensive medical and dental coverage under a plan of his successor employer, if he becomes so eligible before the first anniversary of the Termination Date. (b) In the event of the Executive's death, Disability, Retirement, or Resignation, or an Expiration, the Executive or his beneficiaries or estate shall have the right to receive the following: (i) the unpaid portion of the Base Salary, computed on a pro rata basis to the Termination Date; (ii) the quarterly bonus payment(s) that would have been payable to the Executive under the quarterly portion of the Company's Management Incentive Plan, as amended, revised or replaced from time to time for all senior executives of the Company, plus an amount equal to the annual portion of the bonus that was paid or is payable to the Executive for the year preceding the calendar year in which the -4- 5 Termination Date occurred, multiplied by a fraction, the numerator of which is the number of days of the then-current calendar year that elapse before the Termination Date, and the denominator of which is 365; (iii) reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(f); and (iv) in the event of a termination due to Disability, such Executive's Base Salary will continue until such time as the Executive first receives benefits under the Company's then-effective long-term disability plan. (c) In the event of a Termination for Cause, the Executive or his beneficiaries or estate shall have the right to receive the following: (i) the unpaid portion of the Base Salary, computed on a pro rata basis to the Termination Date; and (ii) reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(f); and (d) Notwithstanding any other term of this Agreement to the contrary, upon termination of the Executive's employment for any reason, the Executive will in all events receive, when they would otherwise be then due and owing, any amounts he will have accrued and vested in under the Company's qualified and nonqualified retirement plans, all statutory rights to receive or purchase welfare benefits, reimbursement for unreimbursed expenses in accordance with the policies of the Company in effect as of the Termination Date, accrued vacation pay, and any other employee benefits owing to him, all as determined in accordance with the applicable terms of the plans themselves and the laws applicable to them. No provision of this Agreement will be deemed to curtail or reduce the Executive's rights under any Company employee benefit plan, program or arrangement. SECTION 6. REPURCHASE OF SHARES. (a) In the event that the Executive's employment with the Company or any of its Subsidiaries is terminated for whatever reason, the Company or its designee shall have the right (but not the obligation) to repurchase from (i) the Executive, (ii) each member of his Family Group, (iii) his Permitted Transferees (as defined in the Stockholders' Agreement) and (iv) Durham Capital, Ltd. or any other investment vehicle owning shares attributable to the Executive or through which the Executive otherwise owns, or has a beneficial interest in, Shares (all of the persons referred to in the foregoing clauses (i), (ii) (iii) and (iv) hereinafter collectively referred to as the "Executive Group") all or any part of the Shares owned by the Executive Group. (b) The repurchase right of the Company or its designee under this Section 6 may be exercised by written notice on one occasion (the "Repurchase Notice"), specifying the number of Shares to be repurchased, and given to the Executive within 120 days of the Termination Date (or, if the Company shall not have assigned its rights under this Section 6 and shall be legally prevented (whether by contract or statutorily) from making such repurchase during the foregoing 120-day period, then the Repurchase Notice may be delivered by the Company within forty-five -5- 6 (45) days after the date on which it shall be legally permitted to make such repurchase), but in no event shall the Company be permitted to make such election after the third anniversary of the Termination Date. Upon the delivery of a Repurchase Notice to the Executive, each member of the Executive Group shall be obligated to sell or cause to be sold to the Company or its designee the Shares specified in such Repurchase Notice. (c) In the event of the Executive's (w) Resignation for Good Reason, (x) death, (y) Disability or (z) Retirement, the Executive, or his estate, as applicable shall have the right (but not the obligation) to cause the Company to repurchase all (but not less than all) of the Shares owned by the Executive Group; provided, however, that the Executive, or his estate, as applicable, provides the Company with prior written notice (the "Put Notice") of an intent to exercise the rights hereunder and such notice is delivered to the Company not later than 120 days after the Termination Date, or, in the event of the Executive's death or the Executive's Disability resulting in legal incapacity, not later than 120 days after an executor or other legally empowered representative has been appointed to administer the Executive's estate or affairs. The Company's obligation to repurchase Shares under this Section 6(c) shall be subject to any financing or other restrictive covenants to which the Company is subject at the time of the proposed repurchase. (d) The price per Share to be paid under this Section 6 shall be the Fair Market Value of as of the last day of the calendar month ending on or immediately before the Termination Date. The purchase price to be paid for any repurchase of Shares pursuant to this Section 6 shall be paid in cash. (e) The purchasers of any Shares pursuant to this Section 6 will be entitled to require all of the sellers of Shares to provide representations and warranties from each such seller regarding (i) such seller's power, authority and legal capacity to enter into such sale and to transfer valid right, title and interest in such Shares, (ii) such seller's ownership of such Shares and the absence of any liens, pledges, and other encumbrances on such Shares and (iii) the absence of any violation, default, or acceleration of any agreement or instrument pursuant to which such seller or the assets of such seller are bound as the result of such sale. (f) Should the Company or any of its designees elect to exercise the repurchase rights pursuant to this Section 6 and any seller fails to deliver such Shares in accordance with the terms hereof, the purchaser of such Shares hereunder may, at its option, in addition to all other remedies it may have, deposit the repurchase price in an escrow account administered by an independent third party (to be held for the benefit of and payment over to such seller in accordance herewith), whereupon the Company shall by written notice to such seller (i) cancel on its books the certificates(s) representing such Shares registered in the name of such seller and (ii) issue to the purchaser, in lieu thereof, new certificate(s) representing such Shares registered in the purchaser's name, and all of the seller's right, title, and interest in and to such Shares shall terminate in all respects. (g) Notwithstanding anything to the contrary contained herein, as used in this Section 6 only, "Shares" shall not include any Shares ("Excluded Shares") which have been issued pursuant to the terms of the Restricted Stock Agreement and which have not been released from the Repurchase Option (as defined in the Restricted Stock Agreement). The Company's right to purchase the Excluded Shares shall be governed by the Restricted Stock Agreement. -6- 7 SECTION 7. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. The Executive will not disclose or use at any time, either during the Employment Period or thereafter, any Confidential Information (as later defined) of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive by the Company. SECTION 8. INVENTIONS AND PATENTS. The Executive agrees that all Work Product (as later defined) belongs to the Company. The Executive will perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm such ownership (including, without limitation, the execution and delivery of assignments, consents, powers of attorney and other instruments) and to provide reasonable assistance to the Company in connection with the prosecution of any applications for patents, trademarks, trade names, service marks or reissues thereof or in the prosecution or defense of interferences relating to any Work Product. SECTION 9. NON-COMPETE, NON-SOLICITATION, NON-DISPARAGEMENT. The Executive acknowledges and agrees that during the course of such Executive's association with the Company or any of its Subsidiaries, the Executive has had the opportunity to develop relationships with existing employees, customers and other business associates of the Company and its Subsidiaries which relationships constitute goodwill of the Company and its Subsidiaries, and the Company and its Subsidiaries would be irreparably damaged if the Executive were to take actions that would damage or misappropriate such goodwill. Accordingly, from and after the Closing Date, the Executive covenants and agrees to comply with the terms and provisions set forth in this Section 9. (a) The Executive acknowledges that the Company and its Subsidiaries currently conduct the Business throughout the world (the "Territory"). Accordingly, during the period (the "Non-Compete Period") commencing on the Closing Date and ending on (x) in the case of a termination for any reason except Expiration, the first anniversary of the Termination Date, or (y) in the case of an Expiration, the Termination Date, the Executive shall not, directly or indirectly, enter into, engage in, assist, give or lend funds to or otherwise finance, be employed by or consult with, or have a financial or other interest in, any business which competes with the Business, whether for or by himself or as an independent contractor, agent, stockholder, partner or joint venturer for any other Person. To the extent that the covenant provided for in this Section 9(a) may later be deemed by a court to be too broad to be enforced with respect to its duration or with respect to any particular activity or geographic area, the court making such determination shall have the power to reduce the duration or scope of this Section 9(a), and to add or delete specific words or phrases. This Section 9(a) as modified shall then be enforced. (b) The Executive covenants and agrees that during the Non-Compete Period, the Executive will not, directly or indirectly, either for himself or for any other Person (i) solicit any employee of the Company or any of its Subsidiaries to terminate his or her employment with the Company or any of its Subsidiaries, (ii) solicit any customer of the Company or any of its -7- 8 Subsidiaries to purchase products or services of or on behalf of the Executive or such other Person that are competitive with the products or services provided by the Company or any of its Subsidiaries or (iii) take any action intended to cause injury to the relationships between the Company or any of its Subsidiaries or any of their employees and any lessor, lessee, vendor, supplier, customer, distributor, employee, consultant or other business associate of the Company or any of its Subsidiaries as such relationship relates to the Company's or any of its Subsidiaries' conduct of their business. (c) The Executive understands that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the business of the Company and any of its Subsidiaries, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits under this Agreement and the Recapitalization Agreement to clearly justify such restrictions which, in any event, he does not believe would prevent him from otherwise earning a living. SECTION 10. DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT. The Executive shall deliver to the Company at the termination of the Employment Period or at any time the Company may request all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or Work Product which he may then possess or have under his control regardless of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that all such materials have been delivered to the Company. SECTION 11. INSURANCE. The Company may, for its own benefit, maintain "keyman" life and disability insurance policies covering the Executive. The Executive will cooperate with the Company and provide such information or other assistance as the Company may reasonably request in connection with the Company's obtaining and maintaining such policies. SECTION 12. ENFORCEMENT. Because the Executive's services are unique and because the Executive has access to Confidential Information and Work Product, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). In addition to the foregoing, and not in any way in limitation thereof, or in limitation of any right or remedy otherwise available to the Company, if the Executive violates any provision of the foregoing Sections 7, 8, 9 or 10, any payments then or thereafter due from the Company to the Executive pursuant to Section 5(a)(ii) shall be terminated forthwith and the Company's obligation to pay and the Executive's right to receive such payments shall terminate and be of no further force or effect, in each case without limiting or affecting the Executive's obligations -8- 9 under such Sections 7, 8, 9 and 10 or the Company's other rights and remedies available at law or equity. SECTION 13. REPRESENTATIONS. Each party hereby represents and warrants to the other party that the execution, delivery and performance of this Agreement by such party does not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which such party is a party or any judgment, order or decree to which such party is subject. In addition, the Executive represents and warrants to the Company that the Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, confidentiality agreement or similar agreement with any Person other than the Company or one of its affiliates. The Company and the Executive hereby terminate all existing employment or consulting agreements between them, if any, to the extent such agreements may be in effect after the date hereof. SECTION 14. DEFINITIONS. "Board" shall mean the board of directors of the Company. "Business Day" shall mean any day that is not (a) Pioneer Day in the State of Utah, (b) a Saturday, Sunday or legal holiday or (c) a day in which banks are not required to be open in New York, New York. "Cause" shall mean: (a) the conviction of the Executive of a crime involving his fraud, theft or dishonesty; (b) the material and willful breach by the Executive of his responsibilities under this Agreement or willful failure to comply with reasonable directives or policies of the Board, but only if the Company has given Executive written notice specifying the breach or failure to comply, demanding that the Executive remedy the breach or failure to comply and giving the Executive an opportunity to be heard in connection with the breach or failure to comply, and the Executive either (i) failed to remedy the alleged breach or failed to comply within thirty days after receipt of the written notice or (ii) failed to take all reasonable steps to that end during the thirty days after he received the notice; (c) the continued use of alcohol or drugs by the Executive to an extent that, in the good faith determination of the Board, such use interferes with the performance of the Executive's duties and responsibilities; or (d) the conviction of the Executive for violating any Law constituting a felony (including the Foreign Corrupt Practices Act of 1977). "Common Stock" means the common stock of the Company. -9- 10 "Confidential Information" means information that is not known to the public, that is used, developed or obtained by the Company or any of its Subsidiaries in connection with the Business, and that the Executive learns in the course of performing services for the Company or any of its Subsidiaries, including, but not limited to, (a) information, observations, procedures and data obtained by the Executive while employed by the Company (including those obtained prior to the date of this Agreement) concerning the business or affairs of the Company or any of its Subsidiaries, (b) products or services of the Company or any of its Subsidiaries, (c) costs and pricing structures of the Company or any of its Subsidiaries, (d) analyses of the Company or any of its Subsidiaries, (e) drawings, photographs and reports of the Company or any of its Subsidiaries, (f) computer software, including operating systems, applications and program listings of the Company or any of its Subsidiaries, (g) flow charts, manuals and documentation of the Company or any of its Subsidiaries, (h) data bases of the Company or any of its Subsidiaries, (i) accounting and business methods of the Company or any of its Subsidiaries, (j) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice of the Company or any of its Subsidiaries, (k) customers and customer lists of the Company or any of its Subsidiaries, (l) other copyrightable works of the Company or any of its Subsidiaries, (m) all production methods, processes, technology and trade secrets of the Company or any of its Subsidiaries, and (n) all similar and related information of the Company or any of its Subsidiaries in whatever form. Confidential Information will not include any information that is now or later becomes part of the public domain, without breach of this Agreement by the Executive. Confidential Information will not be deemed to be in the public domain merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination. "Disability" shall means a condition or disease of the Executive that would cause him to be considered "disabled" within the meaning of the Company's long-term disability plan as in effect at the relevant time, as determined by the Company's long-term disability insurance carrier. "Fair Market Value" shall mean, with respect to any Share, as of any date of determination, the fair value of each Share (or, with respect to a warrant or option, the fair value of each Share obtainable upon exercise thereof net of the exercise price), determined in accordance with the terms hereof. At any time that the Fair Market Value shall be required to be determined hereunder, the Board shall make a good faith determination (the "Board's Determination") of the fair market value of each Share within thirty (30) days of the delivery (i) by the Company of the Repurchase Notice or (ii) by the Executive of the Put Notice (in each case, without taking into account that the Shares may be "restricted securities" and without any discount for the minority position represented by the Shares) and shall provide within such 30-day period to each member of the Executive Group with respect to whose Shares such determination is being made, a written notice thereof which notice shall set forth supporting data in respect of such calculation (the "Determination Notice"). Each member of the Executive Group shall have thirty (30) days following receipt of the Determination Notice within which to deliver to the Company a written notice (the "Objection Notice") of an objection, if any, to the Board's Determination, which Objection Notice shall set forth such member of the Executive Group's good faith determination (the "Shareholder's Determination") of the fair value of each Share. The failure by such member of the Executive Group to deliver the Objection Notice -10- 11 within such 30-day period shall constitute such Person's acceptance of the Board's Determination as conclusive. In the event of the timely delivery of an Objection Notice, the Company and applicable members of the Executive Group shall attempt in good faith to arrive at an agreement with respect to the Fair Market Value, which agreement shall be set forth in writing within fifteen (15) days following delivery of the Objection Notice. If the Company and the applicable members of the Executive Group are unable to reach an agreement within such 15-day period, the matter shall be promptly referred for determination to a regionally or nationally recognized investment banking or valuation firm (the "Valuer") reasonably acceptable to the Company and the applicable members of the Executive Group. The Company and the applicable members of the Executive Group will cooperate with each other in good faith to select such Valuer. The Valuer may select the Board's Determination or the Shareholder's Determination as the Fair Market Value or may select any other number or value (determined without taking into account that the Shares may be "restricted securities" and without any discount for the minority position represented by such Shares). The Valuer's selection will be furnished to the Company and the applicable members of the Executive Group in writing and will be conclusive and binding upon the Company and the applicable members of the Executive Group. The fees and expenses of the Valuer shall be borne equally by the Company, on the one hand, and the applicable members of the Executive Group (on a pro rata basis based on the number of Shares being purchased), on the other. "Family Group" means (a) the Executive's spouse and descendants (whether natural or adopted) and (b) any trust solely for the benefit of such individual and/or the individual's spouse or descendants. Notwithstanding anything to the contrary contained herein, the terms "Family Group" shall not include The Christena Karen H. Durham Trust. "Resignation for Good Reason" occurs if the Executive terminates his employment with the Company and the Subsidiaries because, without Executive's express written consent, any of the events described below occurs during the Employment Period. (a) The Company significantly diminishes the Executive's assigned duties and responsibilities from the level or extent at which they existed before the Closing Date, including, without limitation, if the Company removes Executive's title or materially diminishes the powers associated with the Executive's title. The Executive must deliver written notice to the Company specifying the diminution in assigned duties and responsibilities that he believes constitutes Good Reason, and the Company must fail to reverse the same or to take all reasonable steps to that end within thirty days after receiving the notice. (b) The Company reduces the Executive's Base Salary below that in effect as of the Closing Date. (c) The Company requires the Executive to, or assigns duties to the Executive which would reasonably require him to, relocate his principal business office more than fifty (50) miles from where it is located on the Closing Date. (d) The Company fails to continue in effect any cash or stock-based incentive or bonus plan, retirement plan, welfare benefit plan, or other benefit plan, program or -11- 12 arrangement that applied to the Executive on the Closing Date, unless the aggregate value (as computed by an independent employee benefits consultant selected by the Company) of all such compensation, retirement and benefit plans, programs and arrangements provided to the Executive is not materially less than their aggregate value as of the Closing Date. "Restricted Stock Agreement" means the Restricted Stock Purchase Agreement dated as of the date hereof between the Company and the Executive and any other restricted stock agreement entered into between such Persons after the date hereof, as each such agreement is amended, supplemented or modified from time to time. "Retirement" means a separation from the service of the Company that would be treated as a normal retirement or early retirement under the Huntsman Packaging Corporation Defined Benefit Pension Plan. "Shares" means (a) shares of any Common Stock purchased or otherwise acquired by the Executive (including, without limitation, any shares of Common Stock purchased upon exercise of an option to acquire Common Stock or acquired upon the consummation of a merger), (b) shares of any equity securities issued or issuable directly or indirectly with respect to the Common Stock referred to in clause (a) above by way of stock dividend or stock split or in connection with a combination of shares, exchange of capital stock, recapitalization, merger, consolidation or other reorganization and (c) any other shares of capital stock of the Company purchased or otherwise acquired by the Executive. "Stockholders' Agreement" means the Stockholders' Agreement dated as of the date hereof among the Company and the stockholders of the Company from time to time, as amended, modified or supplemented from time to time. "Work Product" shall mean all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, tradenames, logos and all similar or related information (whether patentable or unpatentable) which relates to the Company's or any of its Subsidiaries' business, research and development or existing or future products or services and which are conceived, developed or made by the Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other Person) while employed by the Company (including those conceived, developed or made prior to the date of this Agreement) together with all patent applications, letters patent, trademark, tradename and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing. SECTION 15. GENERAL PROVISIONS. (a) Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or affecting the validity or enforceability of such -12- 13 provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (b) Notices. All notices, requests, demands, claims and other communications hereunder shall be in writing and sufficient if (i) delivered personally, (ii) delivered by certified United States Post Office mail, return receipt requested, (iii) telecopied or (iv) sent to the recipient by a nationally-recognized overnight courier service (charges prepaid) and addressed to the intended recipient as set forth below: (i) if to the Executive, to him at: Richard P. Durham 500 Huntsman Way Salt Lake City, Utah 84108 Telecopier: (801) 584-5783 Telephone: (801) 584-5700 with a copy to: Richard Johnson, Esq. Stoel Rives 201 S. Main Street, Suite 1100 Salt Lake City, Utah 84111 Telecopier: (801) 578-6999 Telephone: (801) 328-3131 (ii) if to the Company, to: Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, Utah 84108 Attention: Ronald G. Moffitt, General Counsel Telecopier: (801) 584-5783 Telephone: (801) 584-5700 -13- 14 with copies to: Chase Domestic Investments, L.L.C. c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020 Telephone: (212) 899-3400 Telecopier: (212) 899-3401 Attention: Timothy Walsh; and O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza, 41st Floor New York, New York 10112 Telephone: (212) 408-2400 Telecopier: (212) 408-2420 Attention: Ilan S. Nissan, Esq.; or such other address as the recipient party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. Any such communication shall deemed to have been delivered and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of delivery by mail, on the date received, (iii) if telecopied, on the date telecopied as evidenced by confirmed receipt, and (iv) in the case of delivery by nationally-recognized, overnight courier, on the Business Day following dispatch. (c) Entire Agreement. This Agreement and the documents expressly referred to herein embody the complete agreement and understanding among the parties and, with respect to the subject matter of this Agreement, supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (d) Counterparts and Facsimile Execution. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other party, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature to this Agreement that is delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement. (e) Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Executive and the Company and their respective successors, assigns, heirs, representatives and estate, as the case may be; provided, however, that the obligations of the Executive under this Agreement shall not be assigned without the prior written consent of the Company. -14- 15 (f) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and the Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement or any provision hereof. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Utah without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Utah. (h) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. (i) Mutual Contribution. The parties to this Agreement and their counsel have mutually contributed to its drafting. Consequently, no provision of this Agreement shall be construed against any party on the ground that one party drafted the provision or caused it to be drafted. (j) Descriptive Headings; Nouns and Pronouns. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice-versa. (k) Effectiveness. This Agreement shall not be deemed effective until the Closing Date. (l) Effect on Recapitalization Agreement. Notwithstanding any other provision of this Agreement, the Parties agree that if either of them breaches this Agreement, the breach will not be deemed or construed to be a breach of the Recapitalization Agreement, or to be any other type of event that would trigger the payment of damages under the Recapitalization Agreement, or would entitle any party to the Recapitalization Agreement to refuse to pay, any amounts otherwise owed under the Recapitalization Agreement. * * * * * -15- 16 IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above. HUNTSMAN PACKAGING CORPORATION By:/s/ SCOTT K. SORENSEN ------------------------------- Name: Scott K. Sorensen Title: Chief Financial Officer EXECUTIVE: /s/ RICHARD P. DURHAM ---------------------------------- Name: Richard P. Durham EX-10.13 20 ex10-13.txt EMPLOYMENT AGREEMENT 1 EXHIBIT 10.13 EMPLOYMENT AGREEMENT dated as of May 31, 2000, between HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), and JACK E. KNOTT (the "Executive"). Reference is made to the Recapitalization Agreement dated as of March 31, 2000 (as the same may be amended from time to time, the "Recapitalization Agreement") among the Company, Chase Domestic Investments, L.L.C., a Delaware limited liability company (the "Investor"), and the other Persons signatory thereto. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Recapitalization Agreement. Each of the Company and its Subsidiaries is engaged in the business (the "Business") of producing and distributing polymer-based, value-added films and flexible packaging products for food, personal care, medical, agricultural, industrial and other applications. The Executive is, and prior to the date hereof has been, an employee and officer of the Company and as such has substantial experience that is valuable to the Business and the Company. As an inducement to the Investor to enter into the Recapitalization Agreement, the Company desires to employ the Executive, and the Executive desires to accept such employment, on the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants contained herein and in the Recapitalization Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as set forth below. SECTION 1. EMPLOYMENT. The Company hereby employs the Executive, and the Executive accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Closing Date and ending on the Termination Date determined pursuant to Section 4(a) (the "Employment Period"). SECTION 2. BASE SALARY AND BENEFITS. (a) During the Employment Period, the Executive's base salary shall be $300,000 per annum (the "Base Salary"), which salary shall be payable in such installments as is customary for senior executives of the Company. In addition, during the Employment Period, the Executive shall be entitled to participate in all employee benefit programs for which other senior executives of the Company are generally eligible, and the Executive shall be eligible to participate in all insurance plans available generally to other senior executives of the Company. The Executive shall be entitled to take four weeks of paid vacation annually, or any greater amount of paid vacation to which he is entitled under the Company's vacation policy as in effect 2 during the Employment Period. The Board shall conduct a review of the Executive's Base Salary on an annual or more frequent basis. (b) The Executive shall be entitled to participate in the Company's stock option program. The Executive understands that the stock option program is a discretionary program that may or may not result in additional compensation to the Executive in any particular year, and that the Company may modify or revoke the stock option program at any time (although the Executive would be entitled to participate in any program adopted to replace the stock option program). (c) On the Closing Date, the Company will grant the Executive [ ] restricted shares of the Company's Common Stock, under the Restricted Stock Purchase Agreement entered into by the parties on the same date as this Agreement. (d) The Executive shall be entitled to participate in the Company's Management Incentive Plan, as amended, revised or replaced from time to time. The Executive understands that the Management Incentive Plan is a discretionary program that may or may not result in additional compensation to the Executive in any particular year, and that the Company may modify or revoke the Management Incentive Plan at any time (although the Executive would be entitled to participate in any program adopted to replace the Management Incentive Plan). Notwithstanding the foregoing, the parties agree that the Executive's minimum bonus target for calendar 2000 will be 50% of Base Salary, and that the Executive will receive a minimum bonus of 50% of the bonus target for calendar 2000. (e) The Executive will continue to be covered under the terms of the Company's leased car program, which covers the cost of his annual lease, car insurance, gasoline and maintenance. The Company will pay the cost of first class business travel for the Executive. The Executive will continue to be eligible for benefits under the Company's relocation program, should he experience an eligible relocation. The Executive will be entitled to participate in all other perquisite programs offered by the Company to senior executives of the Company. (f) The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses. (g) The Company shall deduct from any payments to be made by it to the Executive under this Agreement any amounts required to be withheld in respect of any federal, state or local income or other Taxes. SECTION 3. POSITION AND DUTIES. (a) The Company employs the Executive as Executive Vice President and Chief Operating Officer. His responsibilities and duties will be commensurate with the title of his position, and will include those duties and responsibilities normally performed by the Chief Operating Officer of a private corporation in the Business. The Executive will report directly to -2- 3 the Board and the Chief Executive Officer. The Executive will perform his duties from the Schaumburg, Illinois location. (b) The Executive acknowledges and agrees to discharge his duties and otherwise act in a manner consistent with the best interests of the Company and its Subsidiaries. During the Employment Period, the Executive shall devote his best efforts, on a full-time basis, to the performance of his duties and responsibilities under this Agreement (except for vacations to which he is entitled pursuant to Section 2(a), illness or incapacity or other personal or personal investment activities that do not interfere with his full and timely performance of his duties and responsibilities under this Agreement). During the Employment Period, the Executive shall not engage in any business activity which, in the reasonable judgment of the Board (excluding the Executive if he should be a member of the Board at the time of such determination), materially conflicts with his duties under this Agreement, whether or not such activity is pursued for gain, profit or other pecuniary advantage. SECTION 4. TERMINATION. (a) Termination Date. The Executive's employment under this Agreement shall terminate upon the earliest to occur (the date of such occurrence being the "Termination Date") of (i) the fifth anniversary of the Closing Date (an "Expiration"), (ii) the effective date of the Executive's resignation (a "Resignation"), (iii) the effective date of the Executive's Resignation for Good Reason, (iv) the Executive's death, (v) the Executive's Disability (as later defined), (vi) the Executive's Retirement (as later defined), (vii) the effective date of a termination of the Executive's employment for Cause by the Board (a "Termination for Cause"), and (viii) the effective date of a termination of the Executive's employment by the Board for reasons that do not constitute Cause (a "Termination Without Cause"). The effective date of the Executive's Resignation or the Executive's Retirement shall be as determined under Section 4(b); the effective date of a Resignation for Good Reason shall be as determined under Section 4(c); the effective date of the Executive's Disability shall be the date specified in a notice delivered to the Executive by the Company; and the effective date of a Termination for Cause or a Termination Without Cause shall be the date specified in a notice delivered to the Executive by the Company of such termination. (b) Resignation or Retirement. The Executive shall give the Company and the Board at least ninety (90) days' prior written notice of a Resignation or Retirement, with the effective date of such Resignation or Retirement specified therein. The Board may, in its discretion, accelerate the effective date of the Resignation, but not of a Retirement. (c) Resignation for Good Reason. The Executive will give the Company and the Board at least thirty (30) days' prior written notice of a Resignation for Good Reason. SECTION 5. EFFECT OF TERMINATION; SEVERANCE. (a) In the event of a Termination Without Cause or a Resignation for Good Reason, the Executive or his beneficiaries or estate shall receive the following: (i) the unpaid portion of the Base Salary, computed on a pro rata basis to the Termination Date; -3- 4 (ii) the unpaid portion of the Base Salary for the period beginning on the Termination Date and ending on the first anniversary of the Termination Date, payable in the same amounts and at the same intervals as the Base Salary was paid immediately prior to the Termination Date; provided, however, that in the event of a breach by the Executive of Sections 7, 8, 9, or 10 on or after the Termination Date, the provisions of Section 12 shall apply; (iii) the quarterly bonus payment(s) that would have been payable to the Executive under the quarterly portion of the Company's Management Incentive Plan, as amended, revised or replaced from time to time for all senior executives of the Company, plus an amount equal to the annual portion of the bonus that was paid or is payable to the Executive for the year preceding the calendar year in which the Termination Date occurs, multiplied by a fraction, the numerator of which is the number of days of the then-current calendar year that elapse before the Termination Date, and the denominator of which is 365; (iv) reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(f); and (v) continued participation in the Company's comprehensive medical and dental plan for the period beginning on the Termination Date and ending on the first anniversary of the Termination Date, with the COBRA continuation coverage qualifying event, connected with the Executive's termination occurring when he loses coverage at the end of that one-year period. If it is unable to obtain the consent of its medical and/or dental plan insurer to provide coverage under this clause (v), the Company may instead pay the full premium cost of other medical and dental insurance that provides comparable coverage for the required one-year period, and require the Executive to pay an amount equal to the then-current COBRA continuation premium for the period after the one-year period during which the Executive would be entitled to COBRA continuation coverage (with the Executive and his dependents being treated for all notice, election, coverage entitlement and other administrative purposes the same as other COBRA qualified beneficiaries under the Company's medical and dental plan). The parties agree that the Executive's entitlement to medical and dental coverage during the first year after the Termination Date will end on the date he becomes eligible for comprehensive medical and dental coverage under a plan of his successor employer, if he becomes so eligible before the first anniversary of the Termination Date. (b) In the event of the Executive's death, Disability, Retirement, or Resignation, or an Expiration, the Executive or his beneficiaries or estate shall have the right to receive the following: (i) the unpaid portion of the Base Salary, computed on a pro rata basis to the Termination Date; (ii) the quarterly bonus payment(s) that would have been payable to the Executive under the quarterly portion of the Company's Management Incentive Plan, as amended, revised or replaced from time to time for all senior executives of the -4- 5 Company, plus an amount equal to the annual portion of the bonus that was paid or is payable to the Executive for the year preceding the calendar year in which the Termination Date occurred, multiplied by a fraction, the numerator of which is the number of days of the then-current calendar year that elapse before the Termination Date, and the denominator of which is 365; (iii) reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(f); and (iv) in the event of a termination due to Disability, such Executive's Base Salary will continue until such time as the Executive first receives benefits under the Company's then-effective long-term disability plan. (c) In the event of a Termination for Cause, the Executive or his beneficiaries or estate shall have the right to receive the following: (i) the unpaid portion of the Base Salary, computed on a pro rata basis to the Termination Date; and (ii) reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(f); and (d) Notwithstanding any other term of this Agreement to the contrary, upon termination of the Executive's employment for any reason, the Executive will in all events receive, when they would otherwise be then due and owing, any amounts he will have accrued and vested in under the Company's qualified and nonqualified retirement plans, all statutory rights to receive or purchase welfare benefits, reimbursement for unreimbursed expenses in accordance with the policies of the Company in effect as of the Termination Date, accrued vacation pay, and any other employee benefits owing to him, all as determined in accordance with the applicable terms of the plans themselves and the laws applicable to them. No provision of this Agreement will be deemed to curtail or reduce the Executive's rights under any Company employee benefit plan, program or arrangement. SECTION 6. REPURCHASE OF SHARES. (a) In the event that the Executive's employment with the Company or any of its Subsidiaries is terminated for whatever reason, the Company or its designee shall have the right (but not the obligation) to repurchase from (i) the Executive, (ii) each member of his Family Group, (iii) his Permitted Transferees (as defined in the Stockholders' Agreement) and (iv) any investment vehicle owning shares attributable to the Executive or through which the Executive otherwise owns, or has a beneficial interest in, Shares (all of the persons referred to in the foregoing clauses (i), (ii) (iii) and (iv) hereinafter collectively referred to as the "Executive Group") all or any part of the Shares owned by the Executive Group. (b) The repurchase right of the Company or its designee under this Section 6 may be exercised by written notice on one occasion (the "Repurchase Notice"), specifying the number of Shares to be repurchased, and given to the Executive within 120 days of the Termination Date (or, if the Company shall not have assigned its rights under this Section 6 and shall be legally -5- 6 prevented (whether by contract or statutorily) from making such repurchase during the foregoing 120-day period, then the Repurchase Notice may be delivered by the Company within forty-five (45) days after the date on which it shall be legally permitted to make such repurchase), but in no event shall the Company be permitted to make such election after the third anniversary of the Termination Date. Upon the delivery of a Repurchase Notice to the Executive, each member of the Executive Group shall be obligated to sell or cause to be sold to the Company or its designee the Shares specified in such Repurchase Notice. (c) In the event of the Executive's (w) Resignation for Good Reason, (x) death, (y) Disability or (z) Retirement, the Executive, or his estate, as applicable shall have the right (but not the obligation) to cause the Company to repurchase all (but not less than all) of the Shares owned by the Executive Group; provided, however, that the Executive, or his estate, as applicable, provides the Company with prior written notice (the "Put Notice") of an intent to exercise the rights hereunder and such notice is delivered to the Company not later than 120 days after the Termination Date, or, in the event of the Executive's death or the Executive's Disability resulting in legal incapacity, not later than 120 days after an executor or other legally empowered representative has been appointed to administer the Executive's estate or affairs. The Company's obligation to repurchase Shares under this Section 6(c) shall be subject to any financing or other restrictive covenants to which the Company is subject at the time of the proposed repurchase. (d) The price per Share to be paid under this Section 6 shall be the Fair Market Value of as of the last day of the calendar month ending on or immediately before the Termination Date. The purchase price to be paid for any repurchase of Shares pursuant to this Section 6 shall be paid in cash. (e) The purchasers of any Shares pursuant to this Section 6 will be entitled to require all of the sellers of Shares to provide representations and warranties from each such seller regarding (i) such seller's power, authority and legal capacity to enter into such sale and to transfer valid right, title and interest in such Shares, (ii) such seller's ownership of such Shares and the absence of any liens, pledges, and other encumbrances on such Shares and (iii) the absence of any violation, default, or acceleration of any agreement or instrument pursuant to which such seller or the assets of such seller are bound as the result of such sale. (f) Should the Company or any of its designees elect to exercise the repurchase rights pursuant to this Section 6 and any seller fails to deliver such Shares in accordance with the terms hereof, the purchaser of such Shares hereunder may, at its option, in addition to all other remedies it may have, deposit the repurchase price in an escrow account administered by an independent third party (to be held for the benefit of and payment over to such seller in accordance herewith), whereupon the Company shall by written notice to such seller (i) cancel on its books the certificates(s) representing such Shares registered in the name of such seller and (ii) issue to the purchaser, in lieu thereof, new certificate(s) representing such Shares registered in the purchaser's name, and all of the seller's right, title, and interest in and to such Shares shall terminate in all respects. (g) Notwithstanding anything to the contrary contained herein, as used in this Section 6 only, "Shares" shall not include any Shares ("Excluded Shares") which have been issued pursuant to the terms of the Restricted Stock Agreement and which have not been released -6- 7 from the Repurchase Option (as defined in the Restricted Stock Agreement). The Company's right to purchase the Excluded Shares shall be governed by the Restricted Stock Agreement. SECTION 7. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. The Executive will not disclose or use at any time, either during the Employment Period or thereafter, any Confidential Information (as later defined) of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive by the Company. SECTION 8. INVENTIONS AND PATENTS. The Executive agrees that all Work Product (as later defined) belongs to the Company. The Executive will perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm such ownership (including, without limitation, the execution and delivery of assignments, consents, powers of attorney and other instruments) and to provide reasonable assistance to the Company in connection with the prosecution of any applications for patents, trademarks, trade names, service marks or reissues thereof or in the prosecution or defense of interferences relating to any Work Product. SECTION 9. NON-COMPETE, NON-SOLICITATION, NON-DISPARAGEMENT. The Executive acknowledges and agrees that during the course of such Executive's association with the Company or any of its Subsidiaries, the Executive has had the opportunity to develop relationships with existing employees, customers and other business associates of the Company and its Subsidiaries which relationships constitute goodwill of the Company and its Subsidiaries, and the Company and its Subsidiaries would be irreparably damaged if the Executive were to take actions that would damage or misappropriate such goodwill. Accordingly, from and after the Closing Date, the Executive covenants and agrees to comply with the terms and provisions set forth in this Section 9. (a) The Executive acknowledges that the Company and its Subsidiaries currently conduct the Business throughout the world (the "Territory"). Accordingly, during the period (the "Non-Compete Period") commencing on the Closing Date and ending on (x) in the case of a termination for any reason except Expiration, the first anniversary of the Termination Date, or (y) in the case of an Expiration, the Termination Date, the Executive shall not, directly or indirectly, enter into, engage in, assist, give or lend funds to or otherwise finance, be employed by or consult with, or have a financial or other interest in, any business which competes with the Business, whether for or by himself or as an independent contractor, agent, stockholder, partner or joint venturer for any other Person. To the extent that the covenant provided for in this Section 9(a) may later be deemed by a court to be too broad to be enforced with respect to its duration or with respect to any particular activity or geographic area, the court making such determination shall have the power to reduce the duration or scope of this Section 9(a), and to add or delete specific words or phrases. This Section 9(a) as modified shall then be enforced. (b) The Executive covenants and agrees that during the Non-Compete Period, the Executive will not, directly or indirectly, either for himself or for any other Person (i) solicit any -7- 8 employee of the Company or any of its Subsidiaries to terminate his or her employment with the Company or any of its Subsidiaries, (ii) solicit any customer of the Company or any of its Subsidiaries to purchase products or services of or on behalf of the Executive or such other Person that are competitive with the products or services provided by the Company or any of its Subsidiaries or (iii) take any action intended to cause injury to the relationships between the Company or any of its Subsidiaries or any of their employees and any lessor, lessee, vendor, supplier, customer, distributor, employee, consultant or other business associate of the Company or any of its Subsidiaries as such relationship relates to the Company's or any of its Subsidiaries' conduct of their business. (c) The Executive understands that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the business of the Company and any of its Subsidiaries, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits under this Agreement and the Recapitalization Agreement to clearly justify such restrictions which, in any event, he does not believe would prevent him from otherwise earning a living. SECTION 10. DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT. The Executive shall deliver to the Company at the termination of the Employment Period or at any time the Company may request all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or Work Product which he may then possess or have under his control regardless of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that all such materials have been delivered to the Company. SECTION 11. INSURANCE. The Company may, for its own benefit, maintain "keyman" life and disability insurance policies covering the Executive. The Executive will cooperate with the Company and provide such information or other assistance as the Company may reasonably request in connection with the Company's obtaining and maintaining such policies. SECTION 12. ENFORCEMENT. Because the Executive's services are unique and because the Executive has access to Confidential Information and Work Product, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). In addition to the foregoing, and not in any way in limitation thereof, or in limitation of any right or remedy otherwise available to the Company, if the Executive violates any provision of the foregoing Sections 7, 8, 9 or 10, any payments then or thereafter due from the Company to the Executive pursuant to Section 5(a)(ii) shall be terminated forthwith and the Company's -8- 9 obligation to pay and the Executive's right to receive such payments shall terminate and be of no further force or effect, in each case without limiting or affecting the Executive's obligations under such Sections 7, 8, 9 and 10 or the Company's other rights and remedies available at law or equity. SECTION 13. REPRESENTATIONS. Each party hereby represents and warrants to the other party that the execution, delivery and performance of this Agreement by such party does not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which such party is a party or any judgment, order or decree to which such party is subject. In addition, the Executive represents and warrants to the Company that the Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, confidentiality agreement or similar agreement with any Person other than the Company or one of its affiliates. The Company and the Executive hereby terminate all existing employment or consulting agreements between them, if any, to the extent such agreements may be in effect after the date hereof. SECTION 14. DEFINITIONS. "Board" shall mean the board of directors of the Company. "Business Day" shall mean any day that is not (a) Pioneer Day in the State of Utah, (b) a Saturday, Sunday or legal holiday or (c) a day in which banks are not required to be open in New York, New York. "Cause" shall mean: (a) the conviction of the Executive of a crime involving his fraud, theft or dishonesty; (b) the material and willful breach by the Executive of his responsibilities under this Agreement or willful failure to comply with reasonable directives or policies of the Board, but only if the Company has given Executive written notice specifying the breach or failure to comply, demanding that the Executive remedy the breach or failure to comply and giving the Executive an opportunity to be heard in connection with the breach or failure to comply, and the Executive either (i) failed to remedy the alleged breach or failed to comply within thirty days after receipt of the written notice or (ii) failed to take all reasonable steps to that end during the thirty days after he received the notice; (c) the continued use of alcohol or drugs by the Executive to an extent that, in the good faith determination of the Board, such use interferes with the performance of the Executive's duties and responsibilities; or (d) the conviction of the Executive for violating any Law constituting a felony (including the Foreign Corrupt Practices Act of 1977). "Common Stock" means the common stock of the Company. -9- 10 "Confidential Information" means information that is not known to the public, that is used, developed or obtained by the Company or any of its Subsidiaries in connection with the Business, and that the Executive learns in the course of performing services for the Company or any of its Subsidiaries, including, but not limited to, (a) information, observations, procedures and data obtained by the Executive while employed by the Company (including those obtained prior to the date of this Agreement) concerning the business or affairs of the Company or any of its Subsidiaries, (b) products or services of the Company or any of its Subsidiaries, (c) costs and pricing structures of the Company or any of its Subsidiaries, (d) analyses of the Company or any of its Subsidiaries, (e) drawings, photographs and reports of the Company or any of its Subsidiaries, (f) computer software, including operating systems, applications and program listings of the Company or any of its Subsidiaries, (g) flow charts, manuals and documentation of the Company or any of its Subsidiaries, (h) data bases of the Company or any of its Subsidiaries, (i) accounting and business methods of the Company or any of its Subsidiaries, (j) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice of the Company or any of its Subsidiaries, (k) customers and customer lists of the Company or any of its Subsidiaries, (l) other copyrightable works of the Company or any of its Subsidiaries, (m) all production methods, processes, technology and trade secrets of the Company or any of its Subsidiaries, and (n) all similar and related information of the Company or any of its Subsidiaries in whatever form. Confidential Information will not include any information that is now or later becomes part of the public domain, without breach of this Agreement by the Executive. Confidential Information will not be deemed to be in the public domain merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination. "Disability" shall means a condition or disease of the Executive that would cause him to be considered "disabled" within the meaning of the Company's long-term disability plan as in effect at the relevant time, as determined by the Company's long-term disability insurance carrier. "Fair Market Value" shall mean, with respect to any Share, as of any date of determination, the fair value of each Share (or, with respect to a warrant or option, the fair value of each Share obtainable upon exercise thereof net of the exercise price), determined in accordance with the terms hereof. At any time that the Fair Market Value shall be required to be determined hereunder, the Board shall make a good faith determination (the "Board's Determination") of the fair market value of each Share within thirty (30) days of the delivery (i) by the Company of the Repurchase Notice or (ii) by the Executive of the Put Notice (in each case, without taking into account that the Shares may be "restricted securities" and without any discount for the minority position represented by the Shares) and shall provide within such 30-day period to each member of the Executive Group with respect to whose Shares such determination is being made, a written notice thereof which notice shall set forth supporting data in respect of such calculation (the "Determination Notice"). Each member of the Executive Group shall have thirty (30) days following receipt of the Determination Notice within which to deliver to the Company a written notice (the "Objection Notice") of an objection, if any, to the Board's Determination, which Objection Notice shall set forth such member of the Executive Group's good faith determination (the "Shareholder's Determination") of the fair value of each Share. The failure by such member of the Executive Group to deliver the Objection Notice -10- 11 within such 30-day period shall constitute the such Person's acceptance of the Board's Determination as conclusive. In the event of the timely delivery of an Objection Notice, the Company and applicable members of the Executive Group shall attempt in good faith to arrive at an agreement with respect to the Fair Market Value, which agreement shall be set forth in writing within fifteen (15) days following delivery of the Objection Notice. If the Company and the applicable members of the Executive Group are unable to reach an agreement within such 15-day period, the matter shall be promptly referred for determination to a regionally or nationally recognized investment banking or valuation firm (the "Valuer") reasonably acceptable to the Company and the applicable members of the Executive Group. The Company and the applicable members of the Executive Group will cooperate with each other in good faith to select such Valuer. The Valuer may select the Board's Determination or the Shareholder's Determination as the Fair Market Value or may select any other number or value (determined without taking into account that the Shares may be "restricted securities" and without any discount for the minority position represented by such Shares). The Valuer's selection will be furnished to the Company and the applicable members of the Executive Group in writing and will be conclusive and binding upon the Company and the applicable members of the Executive Group. The fees and expenses of the Valuer shall be borne equally by the Company, on the one hand, and the applicable members of the Executive Group (on a pro rata basis based on the number of Shares being purchased), on the other. "Family Group" means (a) the Executive's spouse and descendants (whether natural or adopted) and (b) any trust solely for the benefit of such individual and/or the individual's spouse or descendants. "Resignation for Good Reason" occurs if the Executive terminates his employment with the Company and the Subsidiaries because, without Executive's express written consent, any of the events described below occurs during the Employment Period. (a) The Company significantly diminishes the Executive's assigned duties and responsibilities from the level or extent at which they existed before the Closing Date, including, without limitation, if the Company removes Executive's title or materially diminishes the powers associated with the Executive's title. The Executive must deliver written notice to the Company specifying the diminution in assigned duties and responsibilities that he believes constitutes Good Reason, and the Company must fail to reverse the same or to take all reasonable steps to that end within thirty days after receiving the notice. (b) The Company reduces the Executive's Base Salary below that in effect as of the Closing Date. (c) The Company requires the Executive to, or assigns duties to the Executive which would reasonably require him to, relocate his principal business office more than fifty (50) miles from where it is located on the Closing Date. (d) The Company fails to continue in effect any cash or stock-based incentive or bonus plan, retirement plan, welfare benefit plan, or other benefit plan, program or arrangement that applied to the Executive on the Closing Date, unless the aggregate value (as -11- 12 computed by an independent employee benefits consultant selected by the Company) of all such compensation, retirement and benefit plans, programs and arrangements provided to the Executive is not materially less than their aggregate value as of the Closing Date. "Restricted Stock Agreement" means the Restricted Stock Purchase Agreement dated as of the date hereof between the Company and the Executive and any other restricted stock agreement entered into between such Persons after the date hereof, as each such agreement is amended, supplemented or modified from time to time. "Retirement" means a separation from the service of the Company that would be treated as a normal retirement or early retirement under the Huntsman Packaging Corporation Defined Benefit Pension Plan. "Shares" means (a) shares of any Common Stock purchased or otherwise acquired by the Executive (including, without limitation, any shares of Common Stock purchased upon exercise of an option to acquire Common Stock or acquired upon the consummation of a merger), (b) shares of any equity securities issued or issuable directly or indirectly with respect to the Common Stock referred to in clause (a) above by way of stock dividend or stock split or in connection with a combination of shares, exchange of capital stock, recapitalization, merger, consolidation or other reorganization and (c) any other shares of capital stock of the Company purchased or otherwise acquired by the Executive. "Stockholders' Agreement" means the Stockholders' Agreement dated as of the date hereof among the Company and the stockholders of the Company from time to time, as amended, modified or supplemented from time to time. "Work Product" shall mean all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, tradenames, logos and all similar or related information (whether patentable or unpatentable) which relates to the Company's or any of its Subsidiaries' business, research and development or existing or future products or services and which are conceived, developed or made by the Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other Person) while employed by the Company (including those conceived, developed or made prior to the date of this Agreement) together with all patent applications, letters patent, trademark, tradename and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing. SECTION 15. GENERAL PROVISIONS. (a) Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be -12- 13 more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (b) Notices. All notices, requests, demands, claims and other communications hereunder shall be in writing and sufficient if (i) delivered personally, (ii) delivered by certified United States Post Office mail, return receipt requested, (iii) telecopied or (iv) sent to the recipient by a nationally-recognized overnight courier service (charges prepaid) and addressed to the intended recipient as set forth below: (i) if to the Executive, to him at: [ ] [ ] Telecopier: Telephone: with a copy to: [ ] [ ] Telecopier: Telephone: (ii) if to the Company, to: Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, Utah 84108 Attention: Ronald G. Moffitt, General Counsel Telecopier: 801-584-5783 Telephone: 801-532-5200 with copies to: Chase Domestic Investments, L.L.C. c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020 Telephone: 212-899-3400 Telecopier: 212-899-3401 Attention: Timothy Walsh; and -13- 14 O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza, 41st Floor New York, New York 10112 Telephone: 212-408-2400 Telecopier: 212-408-2420 Attention: Ilan S. Nissan, Esq.; or such other address as the recipient party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. Any such communication shall deemed to have been delivered and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of delivery by mail, on the date received, (iii) if telecopied, on the date telecopied as evidenced by confirmed receipt, and (iv) in the case of delivery by nationally-recognized, overnight courier, on the Business Day following dispatch. (c) Entire Agreement. This Agreement and the documents expressly referred to herein embody the complete agreement and understanding among the parties and, with respect to the subject matter of this Agreement, supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (d) Counterparts and Facsimile Execution. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other party, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature to this Agreement that is delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement. (e) Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Executive and the Company and their respective successors, assigns, heirs, representatives and estate, as the case may be; provided, however, that the obligations of the Executive under this Agreement shall not be assigned without the prior written consent of the Company. (f) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and the Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement or any provision hereof. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Utah(1) without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Utah.(10) (h) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, - ------------------ (1)In Jack E. Knort's case, substitute "Illinois." -14- 15 PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. (i) Mutual Contribution. The parties to this Agreement and their counsel have mutually contributed to its drafting. Consequently, no provision of this Agreement shall be construed against any party on the ground that one party drafted the provision or caused it to be drafted. (j) Descriptive Headings; Nouns and Pronouns. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice-versa. (k) Effectiveness. This Agreement shall not be deemed effective until the Closing Date. (l) Effect on Recapitalization Agreement. Notwithstanding any other provision of this Agreement, the Parties agree that if either of them breaches this Agreement, the breach will not be deemed or construed to be a breach of the Recapitalization Agreement, or to be any other type of event that would trigger the payment of damages under the Recapitalization Agreement, or would entitle any party to the Recapitalization Agreement to refuse to pay, any amounts otherwise owed under the Recapitalization Agreement. * * * * * -15- 16 IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above. HUNTSMAN PACKAGING CORPORATION By:/s/ RICHARD P. DURHAM -------------------------------- Name: Richard P. Durham Title: Chief Executive Officer EXECUTIVE: /s/ JACK E. KNOTT ----------------------------------- Name: Jack E. Knott EX-10.14 21 ex10-14.txt EMPLOYMENT AGREEMENT 1 EXHIBIT 10.14 EMPLOYMENT AGREEMENT dated as of May 31, 2000, between HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), and SCOTT K. SORENSEN (the "Executive"). Reference is made to the Recapitalization Agreement dated as of March 31, 2000 (as the same may be amended from time to time, the "Recapitalization Agreement") among the Company, Chase Domestic Investments, L.L.C., a Delaware limited liability company (the "Investor"), and the other Persons signatory thereto. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Recapitalization Agreement. Each of the Company and its Subsidiaries is engaged in the business (the "Business") of producing and distributing polymer-based, value-added films and flexible packaging products for food, personal care, medical, agricultural, industrial and other applications. The Executive is, and prior to the date hereof has been, an employee, officer and stockholder of the Company and as such has substantial experience that is valuable to the Business and the Company. As an inducement to the Investor to enter into the Recapitalization Agreement, the Company desires to employ the Executive, and the Executive desires to accept such employment, on the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants contained herein and in the Recapitalization Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as set forth below. SECTION 1. EMPLOYMENT. The Company hereby employs the Executive, and the Executive accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Closing Date and ending on the Termination Date determined pursuant to Section 4(a) (the "Employment Period"). SECTION 2. BASE SALARY AND BENEFITS. (a) During the Employment Period, the Executive's base salary shall be $250,000 per annum (the "Base Salary"), which salary shall be payable in such installments as is customary for senior executives of the Company. In addition, during the Employment Period, the Executive shall be entitled to participate in all employee benefit programs for which other senior executives of the Company are generally eligible, and the Executive shall be eligible to participate in all insurance plans available generally to other senior executives of the Company. The Executive shall be entitled to take four weeks of paid vacation annually, or any greater amount of paid vacation to which he is entitled under the Company's vacation policy as in effect 2 during the Employment Period. The Board shall conduct a review of the Executive's Base Salary on an annual or more frequent basis. (b) The Executive shall be entitled to participate in the Company's stock option program. The Executive understands that the stock option program is a discretionary program that may or may not result in additional compensation to the Executive in any particular year, and that the Company may modify or revoke the stock option program at any time (although the Executive would be entitled to participate in any program adopted to replace the stock option program). (c) On the Closing Date, the Company will grant the Executive 6,750 restricted shares of the Company's Common Stock, under the Restricted Stock Purchase Agreement entered into by the parties on the same date as this Agreement. (d) The Executive shall be entitled to participate in the Company's Management Incentive Plan, as amended, revised or replaced from time to time. The Executive understands that the Management Incentive Plan is a discretionary program that may or may not result in additional compensation to the Executive in any particular year, and that the Company may modify or revoke the Management Incentive Plan at any time (although the Executive would be entitled to participate in any program adopted to replace the Management Incentive Plan). Notwithstanding the foregoing, the parties agree that the Executive's minimum bonus target for calendar 2000 will be 50% of Base Salary, and that the Executive will receive a minimum bonus of 50% of the bonus target for calendar 2000. (e) The Executive will continue to be covered under the terms of the Company's leased car program, which covers the cost of his annual lease, car insurance, gasoline and maintenance. The Company will pay the cost of first class business travel for the Executive. The Executive will continue to be eligible for benefits under the Company's relocation program, should he experience an eligible relocation. The Executive will be entitled to participate in all other perquisite programs offered by the Company to senior executives of the Company. (f) The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses. (g) The Company shall deduct from any payments to be made by it to the Executive under this Agreement any amounts required to be withheld in respect of any federal, state or local income or other Taxes. SECTION 3. POSITION AND DUTIES. (a) The Company employs the Executive as Executive Vice President, Chief Financial Officer and Treasurer. His responsibilities and duties will be commensurate with the title of his position, and will include those duties and responsibilities normally performed by the Chief Financial Officer of a private corporation in the Business. The Executive will report -2- 3 directly to the Chief Executive Officer. The Executive will perform his duties from the Salt Lake City, Utah location. (b) The Executive acknowledges and agrees to discharge his duties and otherwise act in a manner consistent with the best interests of the Company and its Subsidiaries. During the Employment Period, the Executive shall devote his best efforts, on a full-time basis, to the performance of his duties and responsibilities under this Agreement (except for vacations to which he is entitled pursuant to Section 2(a), illness or incapacity or other personal or personal investment activities that do not interfere with his full and timely performance of his duties and responsibilities under this Agreement). During the Employment Period, the Executive shall not engage in any business activity which, in the reasonable judgment of the Board (excluding the Executive if he should be a member of the Board at the time of such determination), materially conflicts with his duties under this Agreement, whether or not such activity is pursued for gain, profit or other pecuniary advantage. SECTION 4. TERMINATION. (a) Termination Date. The Executive's employment under this Agreement shall terminate upon the earliest to occur (the date of such occurrence being the "Termination Date") of (i) the fifth anniversary of the Closing Date (an "Expiration"), (ii) the effective date of the Executive's resignation (a "Resignation"), (iii) the effective date of the Executive's Resignation for Good Reason, (iv) the Executive's death, (v) the Executive's Disability (as later defined), (vi) the Executive's Retirement (as later defined), (vii) the effective date of a termination of the Executive's employment for Cause by the Board (a "Termination for Cause"), and (viii) the effective date of a termination of the Executive's employment by the Board for reasons that do not constitute Cause (a "Termination Without Cause"). The effective date of the Executive's Resignation or the Executive's Retirement shall be as determined under Section 4(b); the effective date of a Resignation for Good Reason shall be as determined under Section 4(c); the effective date of the Executive's Disability shall be the date specified in a notice delivered to the Executive by the Company; and the effective date of a Termination for Cause or a Termination Without Cause shall be the date specified in a notice delivered to the Executive by the Company of such termination. (b) Resignation or Retirement. The Executive shall give the Company and the Board at least ninety (90) days' prior written notice of a Resignation or Retirement, with the effective date of such Resignation or Retirement specified therein. The Board may, in its discretion, accelerate the effective date of the Resignation, but not of a Retirement. (c) Resignation for Good Reason. The Executive will give the Company and the Board at least thirty (30) days' prior written notice of a Resignation for Good Reason. SECTION 5. EFFECT OF TERMINATION; SEVERANCE. (a) In the event of a Termination Without Cause or a Resignation for Good Reason, the Executive or his beneficiaries or estate shall receive the following: (i) the unpaid portion of the Base Salary, computed on a pro rata basis to the Termination Date; -3- 4 (ii) the unpaid portion of the Base Salary for the period beginning on the Termination Date and ending on the first anniversary of the Termination Date, payable in the same amounts and at the same intervals as the Base Salary was paid immediately prior to the Termination Date; provided, however, that in the event of a breach by the Executive of Sections 7, 8, 9, or 10 on or after the Termination Date, the provisions of Section 12 shall apply; (iii) the quarterly bonus payment(s) that would have been payable to the Executive under the quarterly portion of the Company's Management Incentive Plan, as amended, revised or replaced from time to time for all senior executives of the Company, plus an amount equal to the annual portion of the bonus that was paid or is payable to the Executive for the year preceding the calendar year in which the Termination Date occurs, multiplied by a fraction, the numerator of which is the number of days of the then-current calendar year that elapse before the Termination Date, and the denominator of which is 365; (iv) reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(f); and (v) continued participation in the Company's comprehensive medical and dental plan for the period beginning on the Termination Date and ending on the first anniversary of the Termination Date, with the COBRA continuation coverage qualifying event, connected with the Executive's termination occurring when he loses coverage at the end of that one-year period. If it is unable to obtain the consent of its medical and/or dental plan insurer to provide coverage under this clause (v), the Company may instead pay the full premium cost of other medical and dental insurance that provides comparable coverage for the required one-year period, and require the Executive to pay an amount equal to the then-current COBRA continuation premium for the period after the one-year period during which the Executive would be entitled to COBRA continuation coverage (with the Executive and his dependents being treated for all notice, election, coverage entitlement and other administrative purposes the same as other COBRA qualified beneficiaries under the Company's medical and dental plan). The parties agree that the Executive's entitlement to medical and dental coverage during the first year after the Termination Date will end on the date he becomes eligible for comprehensive medical and dental coverage under a plan of his successor employer, if he becomes so eligible before the first anniversary of the Termination Date. (b) In the event of the Executive's death, Disability, Retirement, or Resignation, or an Expiration, the Executive or his beneficiaries or estate shall have the right to receive the following: (i) the unpaid portion of the Base Salary, computed on a pro rata basis to the Termination Date; (ii) the quarterly bonus payment(s) that would have been payable to the Executive under the quarterly portion of the Company's Management Incentive Plan, as amended, revised or replaced from time to time for all senior executives of the -4- 5 Company, plus an amount equal to the annual portion of the bonus that was paid or is payable to the Executive for the year preceding the calendar year in which the Termination Date occurred, multiplied by a fraction, the numerator of which is the number of days of the then-current calendar year that elapse before the Termination Date, and the denominator of which is 365; (iii) reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(f); and (iv) in the event of a termination due to Disability, such Executive's Base Salary will continue until such time as the Executive first receives benefits under the Company's then-effective long-term disability plan. (c) In the event of a Termination for Cause, the Executive or his beneficiaries or estate shall have the right to receive the following: (i) the unpaid portion of the Base Salary, computed on a pro rata basis to the Termination Date; and (ii) reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(f); and (d) Notwithstanding any other term of this Agreement to the contrary, upon termination of the Executive's employment for any reason, the Executive will in all events receive, when they would otherwise be then due and owing, any amounts he will have accrued and vested in under the Company's qualified and nonqualified retirement plans, all statutory rights to receive or purchase welfare benefits, reimbursement for unreimbursed expenses in accordance with the policies of the Company in effect as of the Termination Date, accrued vacation pay, and any other employee benefits owing to him, all as determined in accordance with the applicable terms of the plans themselves and the laws applicable to them. No provision of this Agreement will be deemed to curtail or reduce the Executive's rights under any Company employee benefit plan, program or arrangement. SECTION 6. REPURCHASE OF SHARES. (a) In the event that the Executive's employment with the Company or any of its Subsidiaries is terminated for whatever reason, the Company or its designee shall have the right (but not the obligation) to repurchase from (i) the Executive, (ii) each member of his Family Group, (iii) his Permitted Transferees (as defined in the Stockholders' Agreement) and (iv) Sorensen Capital, LLC, or any other investment vehicle owning shares attributable to the Executive or through which the Executive otherwise owns, or has a beneficial interest in, Shares (all of the persons referred to in the foregoing clauses (i), (ii) (iii) and (iv) hereinafter collectively referred to as the "Executive Group") all or any part of the Shares owned by the Executive Group. (b) The repurchase right of the Company or its designee under this Section 6 may be exercised by written notice on one occasion (the "Repurchase Notice"), specifying the number of Shares to be repurchased, and given to the Executive within 120 days of the Termination Date -5- 6 (or, if the Company shall not have assigned its rights under this Section 6 and shall be legally prevented (whether by contract or statutorily) from making such repurchase during the foregoing 120-day period, then the Repurchase Notice may be delivered by the Company within forty-five (45) days after the date on which it shall be legally permitted to make such repurchase), but in no event shall the Company be permitted to make such election after the third anniversary of the Termination Date. Upon the delivery of a Repurchase Notice to the Executive, each member of the Executive Group shall be obligated to sell or cause to be sold to the Company or its designee the Shares specified in such Repurchase Notice. (c) In the event of the Executive's (w) Resignation for Good Reason, (x) death, (y) Disability or (z) Retirement, the Executive, or his estate, as applicable shall have the right (but not the obligation) to cause the Company to repurchase all (but not less than all) of the Shares owned by the Executive Group; provided, however, that the Executive, or his estate, as applicable, provides the Company with prior written notice (the "Put Notice") of an intent to exercise the rights hereunder and such notice is delivered to the Company not later than 120 days after the Termination Date, or, in the event of the Executive's death or the Executive's Disability resulting in legal incapacity, not later than 120 days after an executor or other legally empowered representative has been appointed to administer the Executive's estate or affairs. The Company's obligation to repurchase Shares under this Section 6(c) shall be subject to any financing or other restrictive covenants to which the Company is subject at the time of the proposed repurchase. (d) The price per Share to be paid under this Section 6 shall be the Fair Market Value of as of the last day of the calendar month ending on or immediately before the Termination Date. The purchase price to be paid for any repurchase of Shares pursuant to this Section 6 shall be paid in cash. (e) The purchasers of any Shares pursuant to this Section 6 will be entitled to require all of the sellers of Shares to provide representations and warranties from each such seller regarding (i) such seller's power, authority and legal capacity to enter into such sale and to transfer valid right, title and interest in such Shares, (ii) such seller's ownership of such Shares and the absence of any liens, pledges, and other encumbrances on such Shares and (iii) the absence of any violation, default, or acceleration of any agreement or instrument pursuant to which such seller or the assets of such seller are bound as the result of such sale. (f) Should the Company or any of its designees elect to exercise the repurchase rights pursuant to this Section 6 and any seller fails to deliver such Shares in accordance with the terms hereof, the purchaser of such Shares hereunder may, at its option, in addition to all other remedies it may have, deposit the repurchase price in an escrow account administered by an independent third party (to be held for the benefit of and payment over to such seller in accordance herewith), whereupon the Company shall by written notice to such seller (i) cancel on its books the certificates(s) representing such Shares registered in the name of such seller and (ii) issue to the purchaser, in lieu thereof, new certificate(s) representing such Shares registered in the purchaser's name, and all of the seller's right, title, and interest in and to such Shares shall terminate in all respects. (g) Notwithstanding anything to the contrary contained herein, as used in this Section 6 only, "Shares" shall not include any Shares ("Excluded Shares") which have been -6- 7 issued pursuant to the terms of the Restricted Stock Agreement and which have not been released from the Repurchase Option (as defined in the Restricted Stock Agreement). The Company's right to purchase the Excluded Shares shall be governed by the Restricted Stock Agreement. SECTION 7. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. The Executive will not disclose or use at any time, either during the Employment Period or thereafter, any Confidential Information (as later defined) of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive by the Company. SECTION 8. INVENTIONS AND PATENTS. The Executive agrees that all Work Product (as later defined) belongs to the Company. The Executive will perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm such ownership (including, without limitation, the execution and delivery of assignments, consents, powers of attorney and other instruments) and to provide reasonable assistance to the Company in connection with the prosecution of any applications for patents, trademarks, trade names, service marks or reissues thereof or in the prosecution or defense of interferences relating to any Work Product. SECTION 9. NON-COMPETE, NON-SOLICITATION, NON-DISPARAGEMENT. The Executive acknowledges and agrees that during the course of such Executive's association with the Company or any of its Subsidiaries, the Executive has had the opportunity to develop relationships with existing employees, customers and other business associates of the Company and its Subsidiaries which relationships constitute goodwill of the Company and its Subsidiaries, and the Company and its Subsidiaries would be irreparably damaged if the Executive were to take actions that would damage or misappropriate such goodwill. Accordingly, from and after the Closing Date, the Executive covenants and agrees to comply with the terms and provisions set forth in this Section 9. (a) The Executive acknowledges that the Company and its Subsidiaries currently conduct the Business throughout the world (the "Territory"). Accordingly, during the period (the "Non-Compete Period") commencing on the Closing Date and ending on (x) in the case of a termination for any reason except Expiration, the first anniversary of the Termination Date, or (y) in the case of an Expiration, the Termination Date, the Executive shall not, directly or indirectly, enter into, engage in, assist, give or lend funds to or otherwise finance, be employed by or consult with, or have a financial or other interest in, any business which competes with the Business, whether for or by himself or as an independent contractor, agent, stockholder, partner or joint venturer for any other Person. To the extent that the covenant provided for in this Section 9(a) may later be deemed by a court to be too broad to be enforced with respect to its duration or with respect to any particular activity or geographic area, the court making such determination shall have the power to reduce the duration or scope of this Section 9(a), and to add or delete specific words or phrases. This Section 9(a) as modified shall then be enforced. -7- 8 (b) The Executive covenants and agrees that during the Non-Compete Period, the Executive will not, directly or indirectly, either for himself or for any other Person (i) solicit any employee of the Company or any of its Subsidiaries to terminate his or her employment with the Company or any of its Subsidiaries, (ii) solicit any customer of the Company or any of its Subsidiaries to purchase products or services of or on behalf of the Executive or such other Person that are competitive with the products or services provided by the Company or any of its Subsidiaries or (iii) take any action intended to cause injury to the relationships between the Company or any of its Subsidiaries or any of their employees and any lessor, lessee, vendor, supplier, customer, distributor, employee, consultant or other business associate of the Company or any of its Subsidiaries as such relationship relates to the Company's or any of its Subsidiaries' conduct of their business. (c) The Executive understands that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the business of the Company and any of its Subsidiaries, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits under this Agreement and the Recapitalization Agreement to clearly justify such restrictions which, in any event, he does not believe would prevent him from otherwise earning a living. SECTION 10. DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT. The Executive shall deliver to the Company at the termination of the Employment Period or at any time the Company may request all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or Work Product which he may then possess or have under his control regardless of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that all such materials have been delivered to the Company. SECTION 11. INSURANCE. The Company may, for its own benefit, maintain "keyman" life and disability insurance policies covering the Executive. The Executive will cooperate with the Company and provide such information or other assistance as the Company may reasonably request in connection with the Company's obtaining and maintaining such policies. SECTION 12. ENFORCEMENT. Because the Executive's services are unique and because the Executive has access to Confidential Information and Work Product, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). In addition to the foregoing, and not in any way in limitation thereof, or in limitation of any right or remedy otherwise available to the Company, if the Executive violates any provision of the -8- 9 foregoing Sections 7, 8, 9 or 10, any payments then or thereafter due from the Company to the Executive pursuant to Section 5(a)(ii) shall be terminated forthwith and the Company's obligation to pay and the Executive's right to receive such payments shall terminate and be of no further force or effect, in each case without limiting or affecting the Executive's obligations under such Sections 7, 8, 9 and 10 or the Company's other rights and remedies available at law or equity. SECTION 13. REPRESENTATIONS. Each party hereby represents and warrants to the other party that the execution, delivery and performance of this Agreement by such party does not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which such party is a party or any judgment, order or decree to which such party is subject. In addition, the Executive represents and warrants to the Company that the Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, confidentiality agreement or similar agreement with any Person other than the Company or one of its affiliates. The Company and the Executive hereby terminate all existing employment or consulting agreements between them, if any, to the extent such agreements may be in effect after the date hereof. SECTION 14. DEFINITIONS. "Board" shall mean the board of directors of the Company. "Business Day" shall mean any day that is not (a) Pioneer Day in the State of Utah, (b) a Saturday, Sunday or legal holiday or (c) a day in which banks are not required to be open in New York, New York. "Cause" shall mean: (a) the conviction of the Executive of a crime involving his fraud, theft or dishonesty; (b) the material and willful breach by the Executive of his responsibilities under this Agreement or willful failure to comply with reasonable directives or policies of the Board, but only if the Company has given Executive written notice specifying the breach or failure to comply, demanding that the Executive remedy the breach or failure to comply and giving the Executive an opportunity to be heard in connection with the breach or failure to comply, and the Executive either (i) failed to remedy the alleged breach or failed to comply within thirty days after receipt of the written notice or (ii) failed to take all reasonable steps to that end during the thirty days after he received the notice; (c) the continued use of alcohol or drugs by the Executive to an extent that, in the good faith determination of the Board, such use interferes with the performance of the Executive's duties and responsibilities; or (d) the conviction of the Executive for violating any Law constituting a felony (including the Foreign Corrupt Practices Act of 1977). -9- 10 "Common Stock" means the common stock of the Company. "Confidential Information" means information that is not known to the public, that is used, developed or obtained by the Company or any of its Subsidiaries in connection with the Business, and that the Executive learns in the course of performing services for the Company or any of its Subsidiaries, including, but not limited to, (a) information, observations, procedures and data obtained by the Executive while employed by the Company (including those obtained prior to the date of this Agreement) concerning the business or affairs of the Company or any of its Subsidiaries, (b) products or services of the Company or any of its Subsidiaries, (c) costs and pricing structures of the Company or any of its Subsidiaries, (d) analyses of the Company or any of its Subsidiaries, (e) drawings, photographs and reports of the Company or any of its Subsidiaries, (f) computer software, including operating systems, applications and program listings of the Company or any of its Subsidiaries, (g) flow charts, manuals and documentation of the Company or any of its Subsidiaries, (h) data bases of the Company or any of its Subsidiaries, (i) accounting and business methods of the Company or any of its Subsidiaries, (j) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice of the Company or any of its Subsidiaries, (k) customers and customer lists of the Company or any of its Subsidiaries, (l) other copyrightable works of the Company or any of its Subsidiaries, (m) all production methods, processes, technology and trade secrets of the Company or any of its Subsidiaries, and (n) all similar and related information of the Company or any of its Subsidiaries in whatever form. Confidential Information will not include any information that is now or later becomes part of the public domain, without breach of this Agreement by the Executive. Confidential Information will not be deemed to be in the public domain merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination. "Disability" shall means a condition or disease of the Executive that would cause him to be considered "disabled" within the meaning of the Company's long-term disability plan as in effect at the relevant time, as determined by the Company's long-term disability insurance carrier. "Fair Market Value" shall mean, with respect to any Share, as of any date of determination, the fair value of each Share (or, with respect to a warrant or option, the fair value of each Share obtainable upon exercise thereof net of the exercise price), determined in accordance with the terms hereof. At any time that the Fair Market Value shall be required to be determined hereunder, the Board shall make a good faith determination (the "Board's Determination") of the fair market value of each Share within thirty (30) days of the delivery (i) by the Company of the Repurchase Notice or (ii) by the Executive of the Put Notice (in each case, without taking into account that the Shares may be "restricted securities" and without any discount for the minority position represented by the Shares) and shall provide within such 30-day period to each member of the Executive Group with respect to whose Shares such determination is being made, a written notice thereof which notice shall set forth supporting data in respect of such calculation (the "Determination Notice"). Each member of the Executive Group shall have thirty (30) days following receipt of the Determination Notice within which to deliver to the Company a written notice (the "Objection Notice") of an objection, if any, to the Board's Determination, which Objection Notice shall set forth such member of the Executive -10- 11 Group's good faith determination (the "Shareholder's Determination") of the fair value of each Share. The failure by such member of the Executive Group to deliver the Objection Notice within such 30-day period shall constitute such Person's acceptance of the Board's Determination as conclusive. In the event of the timely delivery of an Objection Notice, the Company and applicable members of the Executive Group shall attempt in good faith to arrive at an agreement with respect to the Fair Market Value, which agreement shall be set forth in writing within fifteen (15) days following delivery of the Objection Notice. If the Company and the applicable members of the Executive Group are unable to reach an agreement within such 15-day period, the matter shall be promptly referred for determination to a regionally or nationally recognized investment banking or valuation firm (the "Valuer") reasonably acceptable to the Company and the applicable members of the Executive Group. The Company and the applicable members of the Executive Group will cooperate with each other in good faith to select such Valuer. The Valuer may select the Board's Determination or the Shareholder's Determination as the Fair Market Value or may select any other number or value (determined without taking into account that the Shares may be "restricted securities" and without any discount for the minority position represented by such Shares). The Valuer's selection will be furnished to the Company and the applicable members of the Executive Group in writing and will be conclusive and binding upon the Company and the applicable members of the Executive Group. The fees and expenses of the Valuer shall be borne equally by the Company, on the one hand, and the applicable members of the Executive Group (on a pro rata basis based on the number of Shares being purchased), on the other. "Family Group" means (a) the Executive's spouse and descendants (whether natural or adopted) and (b) any trust solely for the benefit of such individual and/or the individual's spouse or descendants. "Resignation for Good Reason" occurs if the Executive terminates his employment with the Company and the Subsidiaries because, without Executive's express written consent, any of the events described below occurs during the Employment Period. (a) The Company significantly diminishes the Executive's assigned duties and responsibilities from the level or extent at which they existed before the Closing Date, including, without limitation, if the Company removes Executive's title or materially diminishes the powers associated with the Executive's title. The Executive must deliver written notice to the Company specifying the diminution in assigned duties and responsibilities that he believes constitutes Good Reason, and the Company must fail to reverse the same or to take all reasonable steps to that end within thirty days after receiving the notice. (b) The Company reduces the Executive's Base Salary below that in effect as of the Closing Date. (c) The Company requires the Executive to, or assigns duties to the Executive which would reasonably require him to, relocate his principal business office more than fifty (50) miles from where it is located on the Closing Date. -11- 12 (d) The Company fails to continue in effect any cash or stock-based incentive or bonus plan, retirement plan, welfare benefit plan, or other benefit plan, program or arrangement that applied to the Executive on the Closing Date, unless the aggregate value (as computed by an independent employee benefits consultant selected by the Company) of all such compensation, retirement and benefit plans, programs and arrangements provided to the Executive is not materially less than their aggregate value as of the Closing Date. "Restricted Stock Agreement" means the Restricted Stock Purchase Agreement dated as of the date hereof between the Company and the Executive and any other restricted stock agreement entered into between such Persons after the date hereof, as each such agreement is amended, supplemented or modified from time to time. "Retirement" means a separation from the service of the Company that would be treated as a normal retirement or early retirement under the Huntsman Packaging Corporation Defined Benefit Pension Plan. "Shares" means (a) shares of any Common Stock purchased or otherwise acquired by the Executive (including, without limitation, any shares of Common Stock purchased upon exercise of an option to acquire Common Stock or acquired upon the consummation of a merger), (b) shares of any equity securities issued or issuable directly or indirectly with respect to the Common Stock referred to in clause (a) above by way of stock dividend or stock split or in connection with a combination of shares, exchange of capital stock, recapitalization, merger, consolidation or other reorganization and (c) any other shares of capital stock of the Company purchased or otherwise acquired by the Executive. "Stockholders' Agreement" means the Stockholders' Agreement dated as of the date hereof among the Company and the stockholders of the Company from time to time, as amended, modified or supplemented from time to time. "Work Product" shall mean all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, tradenames, logos and all similar or related information (whether patentable or unpatentable) which relates to the Company's or any of its Subsidiaries' business, research and development or existing or future products or services and which are conceived, developed or made by the Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other Person) while employed by the Company (including those conceived, developed or made prior to the date of this Agreement) together with all patent applications, letters patent, trademark, tradename and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing. SECTION 15. GENERAL PROVISIONS. (a) Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall -12- 13 be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (b) Notices. All notices, requests, demands, claims and other communications hereunder shall be in writing and sufficient if (i) delivered personally, (ii) delivered by certified United States Post Office mail, return receipt requested, (iii) telecopied or (iv) sent to the recipient by a nationally-recognized overnight courier service (charges prepaid) and addressed to the intended recipient as set forth below: (i) if to the Executive, to him at: Scott K. Sorensen 3276 E. Walker Oaks Court Salt Lake City, Utah 84121 Telecopier: (801) 943-3472 Telephone: (801) 943-4707 with a copy to: J. Keith Adams, Esq. Stoel Rives 201 S. Main Street, Suite 1100 Salt Lake City, Utah 84111 Telecopier: (801) 578-6999 Telephone: (801) 328-3131 (ii) if to the Company, to: Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, Utah 84108 Attention: Ronald G. Moffitt, General Counsel Telecopier: (801) 584-5783 Telephone: (801) 584-5700 -13- 14 with copies to: Chase Domestic Investments, L.L.C. c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020 Telephone: (212) 899-3400 Telecopier: (212) 899-3401 Attention: Timothy Walsh; and O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza, 41st Floor New York, New York 10112 Telephone: (212) 408-2400 Telecopier: (212) 408-2420 Attention: Ilan S. Nissan, Esq.; or such other address as the recipient party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. Any such communication shall deemed to have been delivered and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of delivery by mail, on the date received, (iii) if telecopied, on the date telecopied as evidenced by confirmed receipt, and (iv) in the case of delivery by nationally-recognized, overnight courier, on the Business Day following dispatch. (c) Entire Agreement. This Agreement and the documents expressly referred to herein embody the complete agreement and understanding among the parties and, with respect to the subject matter of this Agreement, supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (d) Counterparts and Facsimile Execution. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other party, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature to this Agreement that is delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement. (e) Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Executive and the Company and their respective successors, assigns, heirs, representatives and estate, as the case may be; provided, however, that the obligations of the Executive under this Agreement shall not be assigned without the prior written consent of the Company. -14- 15 (f) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and the Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement or any provision hereof. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Utah without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Utah. (h) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. (i) Mutual Contribution. The parties to this Agreement and their counsel have mutually contributed to its drafting. Consequently, no provision of this Agreement shall be construed against any party on the ground that one party drafted the provision or caused it to be drafted. (j) Descriptive Headings; Nouns and Pronouns. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice-versa. (k) Effectiveness. This Agreement shall not be deemed effective until the Closing Date. (l) Effect on Recapitalization Agreement. Notwithstanding any other provision of this Agreement, the Parties agree that if either of them breaches this Agreement, the breach will not be deemed or construed to be a breach of the Recapitalization Agreement, or to be any other type of event that would trigger the payment of damages under the Recapitalization Agreement, or would entitle any party to the Recapitalization Agreement to refuse to pay, any amounts otherwise owed under the Recapitalization Agreement. * * * * * -15- 16 IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above. HUNTSMAN PACKAGING CORPORATION By:/s/ RICHARD P. DURHAM -------------------------------- Name: Richard P. Durham Title: Chief Executive Officer EXECUTIVE: /s/ SCOTT K. SORENSEN ----------------------------------- Name: Scott K. Sorensen EX-10.15 22 ex10-15.txt EMPLOYMENT AGREEMENT 1 Exhibit 10.15 EMPLOYMENT AGREEMENT dated as of May 31, 2000, between HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), and RONALD G. MOFFITT (the "Executive"). Reference is made to the Recapitalization Agreement dated as of March 31, 2000 (as the same may be amended from time to time, the "Recapitalization Agreement") among the Company, Chase Domestic Investments, L.L.C., a Delaware limited liability company (the "Investor"), and the other Persons signatory thereto. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Recapitalization Agreement. Each of the Company and its Subsidiaries is engaged in the business (the "Business") of producing and distributing polymer-based, value-added films and flexible packaging products for food, personal care, medical, agricultural, industrial and other applications. The Executive is, and prior to the date hereof has been, an employee, officer and indirect stockholder of the Company and as such has substantial experience that is valuable to the Business and the Company. As an inducement to the Investor to enter into the Recapitalization Agreement, the Company desires to employ the Executive, and the Executive desires to accept such employment, on the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants contained herein and in the Recapitalization Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as set forth below. SECTION 1. EMPLOYMENT. The Company hereby employs the Executive, and the Executive accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Closing Date and ending on the Termination Date determined pursuant to Section 4(a) (the "Employment Period"). SECTION 2. BASE SALARY AND BENEFITS. (a) During the Employment Period, the Executive's base salary shall be $190,000 per annum (the "Base Salary"), which salary shall be payable in such installments as is customary for senior executives of the Company. In addition, during the Employment Period, the Executive shall be entitled to participate in all employee benefit programs for which other senior executives of the Company are generally eligible, and the Executive shall be eligible to participate in all insurance plans available generally to other senior executives of the Company. The Executive shall be entitled to take four weeks of paid vacation annually, or any greater amount of paid vacation to which he is entitled under the Company's vacation policy as in effect 2 during the Employment Period. The Board shall conduct a review of the Executive's Base Salary on an annual or more frequent basis. (b) The Executive shall be entitled to participate in the Company's stock option program. The Executive understands that the stock option program is a discretionary program that may or may not result in additional compensation to the Executive in any particular year, and that the Company may modify or revoke the stock option program at any time (although the Executive would be entitled to participate in any program adopted to replace the stock option program). (c) On the Closing Date, the Company will grant the Executive 3,750 restricted shares of the Company's Common Stock, under the Restricted Stock Purchase Agreement entered into by the parties on the same date as this Agreement. (d) The Executive shall be entitled to participate in the Company's Management Incentive Plan, as amended, revised or replaced from time to time. The Executive understands that the Management Incentive Plan is a discretionary program that may or may not result in additional compensation to the Executive in any particular year, and that the Company may modify or revoke the Management Incentive Plan at any time (although the Executive would be entitled to participate in any program adopted to replace the Management Incentive Plan). Notwithstanding the foregoing, the parties agree that the Executive's minimum bonus target for calendar 2000 will be 35% of Base Salary, and that the Executive will receive a minimum bonus of 50% of the bonus target for calendar 2000. (e) The Executive will continue to be covered under the terms of the Company's leased car program, which covers the cost of his annual lease, car insurance, gasoline and maintenance. The Company will pay the cost of first class business travel for the Executive. The Executive will continue to be eligible for benefits under the Company's relocation program, should he experience an eligible relocation. The Executive will be entitled to participate in all other perquisite programs offered by the Company to senior executives of the Company. (f) The Company shall reimburse the Executive for all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses. (g) The Company shall deduct from any payments to be made by it to the Executive under this Agreement any amounts required to be withheld in respect of any federal, state or local income or other Taxes. SECTION 3. POSITION AND DUTIES. (a) The Company employs the Executive as Executive Vice President and General Counsel. His responsibilities and duties will be commensurate with the title of his position, and will include those duties and responsibilities normally performed by the General Counsel of a private corporation in the Business. The Executive will report directly to the Chief Executive Officer. The Executive will perform his duties from the Salt Lake City, Utah location. -2- 3 (b) The Executive acknowledges and agrees to discharge his duties and otherwise act in a manner consistent with the best interests of the Company and its Subsidiaries. During the Employment Period, the Executive shall devote his best efforts, on a full-time basis, to the performance of his duties and responsibilities under this Agreement (except for vacations to which he is entitled pursuant to Section 2(a), illness or incapacity or other personal or personal investment activities that do not interfere with his full and timely performance of his duties and responsibilities under this Agreement). During the Employment Period, the Executive shall not engage in any business activity which, in the reasonable judgment of the Board (excluding the Executive if he should be a member of the Board at the time of such determination), materially conflicts with his duties under this Agreement, whether or not such activity is pursued for gain, profit or other pecuniary advantage. SECTION 4. TERMINATION. (a) Termination Date. The Executive's employment under this Agreement shall terminate upon the earliest to occur (the date of such occurrence being the "Termination Date") of (i) the fifth anniversary of the Closing Date (an "Expiration"), (ii) the effective date of the Executive's resignation (a "Resignation"), (iii) the effective date of the Executive's Resignation for Good Reason, (iv) the Executive's death, (v) the Executive's Disability (as later defined), (vi) the Executive's Retirement (as later defined), (vii) the effective date of a termination of the Executive's employment for Cause by the Board (a "Termination for Cause"), and (viii) the effective date of a termination of the Executive's employment by the Board for reasons that do not constitute Cause (a "Termination Without Cause"). The effective date of the Executive's Resignation or the Executive's Retirement shall be as determined under Section 4(b); the effective date of a Resignation for Good Reason shall be as determined under Section 4(c); the effective date of the Executive's Disability shall be the date specified in a notice delivered to the Executive by the Company; and the effective date of a Termination for Cause or a Termination Without Cause shall be the date specified in a notice delivered to the Executive by the Company of such termination. (b) Resignation or Retirement. The Executive shall give the Company and the Board at least ninety (90) days' prior written notice of a Resignation or Retirement, with the effective date of such Resignation or Retirement specified therein. The Board may, in its discretion, accelerate the effective date of the Resignation, but not of a Retirement. (c) Resignation for Good Reason. The Executive will give the Company and the Board at least thirty (30) days' prior written notice of a Resignation for Good Reason. SECTION 5. EFFECT OF TERMINATION; SEVERANCE. (a) In the event of a Termination Without Cause or a Resignation for Good Reason, the Executive or his beneficiaries or estate shall receive the following: (i) the unpaid portion of the Base Salary, computed on a pro rata basis to the Termination Date; (ii) the unpaid portion of the Base Salary for the period beginning on the Termination Date and ending on the first anniversary of the Termination Date, -3- 4 payable in the same amounts and at the same intervals as the Base Salary was paid immediately prior to the Termination Date; provided, however, that in the event of a breach by the Executive of Sections 7, 8, 9, or 10 on or after the Termination Date, the provisions of Section 12 shall apply; (iii) the quarterly bonus payment(s) that would have been payable to the Executive under the quarterly portion of the Company's Management Incentive Plan, as amended, revised or replaced from time to time for all senior executives of the Company, plus an amount equal to the annual portion of the bonus that was paid or is payable to the Executive for the year preceding the calendar year in which the Termination Date occurs, multiplied by a fraction, the numerator of which is the number of days of the then-current calendar year that elapse before the Termination Date, and the denominator of which is 365; (iv) reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(f); and (v) continued participation in the Company's comprehensive medical and dental plan for the period beginning on the Termination Date and ending on the first anniversary of the Termination Date, with the COBRA continuation coverage qualifying event, connected with the Executive's termination occurring when he loses coverage at the end of that one-year period. If it is unable to obtain the consent of its medical and/or dental plan insurer to provide coverage under this clause (v), the Company may instead pay the full premium cost of other medical and dental insurance that provides comparable coverage for the required one-year period, and require the Executive to pay an amount equal to the then-current COBRA continuation premium for the period after the one-year period during which the Executive would be entitled to COBRA continuation coverage (with the Executive and his dependents being treated for all notice, election, coverage entitlement and other administrative purposes the same as other COBRA qualified beneficiaries under the Company's medical and dental plan). The parties agree that the Executive's entitlement to medical and dental coverage during the first year after the Termination Date will end on the date he becomes eligible for comprehensive medical and dental coverage under a plan of his successor employer, if he becomes so eligible before the first anniversary of the Termination Date. (b) In the event of the Executive's death, Disability, Retirement, or Resignation, or an Expiration, the Executive or his beneficiaries or estate shall have the right to receive the following: (i) the unpaid portion of the Base Salary, computed on a pro rata basis to the Termination Date; (ii) the quarterly bonus payment(s) that would have been payable to the Executive under the quarterly portion of the Company's Management Incentive Plan, as amended, revised or replaced from time to time for all senior executives of the Company, plus an amount equal to the annual portion of the bonus that was paid or is payable to the Executive for the year preceding the calendar year in which the -4- 5 Termination Date occurred, multiplied by a fraction, the numerator of which is the number of days of the then-current calendar year that elapse before the Termination Date, and the denominator of which is 365; (iii) reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(f); and (iv) in the event of a termination due to Disability, such Executive's Base Salary will continue until such time as the Executive first receives benefits under the Company's then-effective long-term disability plan. (c) In the event of a Termination for Cause, the Executive or his beneficiaries or estate shall have the right to receive the following: (i) the unpaid portion of the Base Salary, computed on a pro rata basis to the Termination Date; and (ii) reimbursement for any expenses for which the Executive shall not have been previously reimbursed, as provided in Section 2(f); and (d) Notwithstanding any other term of this Agreement to the contrary, upon termination of the Executive's employment for any reason, the Executive will in all events receive, when they would otherwise be then due and owing, any amounts he will have accrued and vested in under the Company's qualified and nonqualified retirement plans, all statutory rights to receive or purchase welfare benefits, reimbursement for unreimbursed expenses in accordance with the policies of the Company in effect as of the Termination Date, accrued vacation pay, and any other employee benefits owing to him, all as determined in accordance with the applicable terms of the plans themselves and the laws applicable to them. No provision of this Agreement will be deemed to curtail or reduce the Executive's rights under any Company employee benefit plan, program or arrangement. SECTION 6. REPURCHASE OF SHARES. (a) In the event that the Executive's employment with the Company or any of its Subsidiaries is terminated for whatever reason, the Company or its designee shall have the right (but not the obligation) to repurchase from (i) the Executive, (ii) each member of his Family Group, (iii) his Permitted Transferees (as defined in the Stockholders' Agreement) and (iv) Ronald G. Moffitt IRA (DLJ Securities Corp. Custodian), Moffitt Capital, LLC, or any other investment vehicle owning shares attributable to the Executive or through which the Executive otherwise owns, or has a beneficial interest in, Shares (all of the persons referred to in the foregoing clauses (i), (ii) (iii) and (iv) hereinafter collectively referred to as the "Executive Group") all or any part of the Shares owned by the Executive Group. (b) The repurchase right of the Company or its designee under this Section 6 may be exercised by written notice on one occasion (the "Repurchase Notice"), specifying the number of Shares to be repurchased, and given to the Executive within 120 days of the Termination Date (or, if the Company shall not have assigned its rights under this Section 6 and shall be legally prevented (whether by contract or statutorily) from making such repurchase during the foregoing -5- 6 120-day period, then the Repurchase Notice may be delivered by the Company within forty-five (45) days after the date on which it shall be legally permitted to make such repurchase), but in no event shall the Company be permitted to make such election after the third anniversary of the Termination Date. Upon the delivery of a Repurchase Notice to the Executive, each member of the Executive Group shall be obligated to sell or cause to be sold to the Company or its designee the Shares specified in such Repurchase Notice. (c) In the event of the Executive's (w) Resignation for Good Reason, (x) death, (y) Disability or (z) Retirement, the Executive, or his estate, as applicable shall have the right (but not the obligation) to cause the Company to repurchase all (but not less than all) of the Shares owned by the Executive Group; provided, however, that the Executive, or his estate, as applicable, provides the Company with prior written notice (the "Put Notice") of an intent to exercise the rights hereunder and such notice is delivered to the Company not later than 120 days after the Termination Date, or, in the event of the Executive's death or the Executive's Disability resulting in legal incapacity, not later than 120 days after an executor or other legally empowered representative has been appointed to administer the Executive's estate or affairs. The Company's obligation to repurchase Shares under this Section 6(c) shall be subject to any financing or other restrictive covenants to which the Company is subject at the time of the proposed repurchase. (d) The price per Share to be paid under this Section 6 shall be the Fair Market Value of as of the last day of the calendar month ending on or immediately before the Termination Date. The purchase price to be paid for any repurchase of Shares pursuant to this Section 6 shall be paid in cash. (e) The purchasers of any Shares pursuant to this Section 6 will be entitled to require all of the sellers of Shares to provide representations and warranties from each such seller regarding (i) such seller's power, authority and legal capacity to enter into such sale and to transfer valid right, title and interest in such Shares, (ii) such seller's ownership of such Shares and the absence of any liens, pledges, and other encumbrances on such Shares and (iii) the absence of any violation, default, or acceleration of any agreement or instrument pursuant to which such seller or the assets of such seller are bound as the result of such sale. (f) Should the Company or any of its designees elect to exercise the repurchase rights pursuant to this Section 6 and any seller fails to deliver such Shares in accordance with the terms hereof, the purchaser of such Shares hereunder may, at its option, in addition to all other remedies it may have, deposit the repurchase price in an escrow account administered by an independent third party (to be held for the benefit of and payment over to such seller in accordance herewith), whereupon the Company shall by written notice to such seller (i) cancel on its books the certificates(s) representing such Shares registered in the name of such seller and (ii) issue to the purchaser, in lieu thereof, new certificate(s) representing such Shares registered in the purchaser's name, and all of the seller's right, title, and interest in and to such Shares shall terminate in all respects. (g) Notwithstanding anything to the contrary contained herein, as used in this Section 6 only, "Shares" shall not include any Shares ("Excluded Shares") which have been issued pursuant to the terms of the Restricted Stock Agreement and which have not been released -6- 7 from the Repurchase Option (as defined in the Restricted Stock Agreement). The Company's right to purchase the Excluded Shares shall be governed by the Restricted Stock Agreement. SECTION 7. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. The Executive will not disclose or use at any time, either during the Employment Period or thereafter, any Confidential Information (as later defined) of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive by the Company. SECTION 8. INVENTIONS AND PATENTS. The Executive agrees that all Work Product (as later defined) belongs to the Company. The Executive will perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm such ownership (including, without limitation, the execution and delivery of assignments, consents, powers of attorney and other instruments) and to provide reasonable assistance to the Company in connection with the prosecution of any applications for patents, trademarks, trade names, service marks or reissues thereof or in the prosecution or defense of interferences relating to any Work Product. SECTION 9 NON-COMPETE, NON-SOLICITATION, NON-DISPARAGEMENT. The Executive acknowledges and agrees that during the course of such Executive's association with the Company or any of its Subsidiaries, the Executive has had the opportunity to develop relationships with existing employees, customers and other business associates of the Company and its Subsidiaries which relationships constitute goodwill of the Company and its Subsidiaries, and the Company and its Subsidiaries would be irreparably damaged if the Executive were to take actions that would damage or misappropriate such goodwill. Accordingly, from and after the Closing Date, the Executive covenants and agrees to comply with the terms and provisions set forth in this Section 9. (a) The Executive acknowledges that the Company and its Subsidiaries currently conduct the Business throughout the world (the "Territory"). Accordingly, during the period (the "Non-Compete Period") commencing on the Closing Date and ending on (x) in the case of a termination for any reason except Expiration, the first anniversary of the Termination Date, or (y) in the case of an Expiration, the Termination Date, the Executive shall not, directly or indirectly, enter into, engage in, assist, give or lend funds to or otherwise finance, be employed by or consult with, or have a financial or other interest in, any business which competes with the Business, whether for or by himself or as an independent contractor, agent, stockholder, partner or joint venturer for any other Person. To the extent that the covenant provided for in this Section 9(a) may later be deemed by a court to be too broad to be enforced with respect to its duration or with respect to any particular activity or geographic area, the court making such determination shall have the power to reduce the duration or scope of this Section 9(a), and to add or delete specific words or phrases. This Section 9(a) as modified shall then be enforced. (b) The Executive covenants and agrees that during the Non-Compete Period, the Executive will not, directly or indirectly, either for himself or for any other Person (i) solicit any -7- 8 employee of the Company or any of its Subsidiaries to terminate his or her employment with the Company or any of its Subsidiaries, (ii) solicit any customer of the Company or any of its Subsidiaries to purchase products or services of or on behalf of the Executive or such other Person that are competitive with the products or services provided by the Company or any of its Subsidiaries or (iii) take any action intended to cause injury to the relationships between the Company or any of its Subsidiaries or any of their employees and any lessor, lessee, vendor, supplier, customer, distributor, employee, consultant or other business associate of the Company or any of its Subsidiaries as such relationship relates to the Company's or any of its Subsidiaries' conduct of their business. (c) The Executive understands that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the business of the Company and any of its Subsidiaries, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits under this Agreement and the Recapitalization Agreement to clearly justify such restrictions which, in any event, he does not believe would prevent him from otherwise earning a living. SECTION 10. DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT. The Executive shall deliver to the Company at the termination of the Employment Period or at any time the Company may request all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or Work Product which he may then possess or have under his control regardless of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that all such materials have been delivered to the Company. SECTION 11. INSURANCE. The Company may, for its own benefit, maintain "keyman" life and disability insurance policies covering the Executive. The Executive will cooperate with the Company and provide such information or other assistance as the Company may reasonably request in connection with the Company's obtaining and maintaining such policies. SECTION 12. ENFORCEMENT. Because the Executive's services are unique and because the Executive has access to Confidential Information and Work Product, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). In addition to the foregoing, and not in any way in limitation thereof, or in limitation of any right or remedy otherwise available to the Company, if the Executive violates any provision of the foregoing Sections 7, 8, 9 or 10, any payments then or thereafter due from the Company to the Executive pursuant to Section 5(a)(ii) shall be terminated forthwith and the Company's -8- 9 obligation to pay and the Executive's right to receive such payments shall terminate and be of no further force or effect, in each case without limiting or affecting the Executive's obligations under such Sections 7, 8, 9 and 10 or the Company's other rights and remedies available at law or equity. SECTION 13. REPRESENTATIONS. Each party hereby represents and warrants to the other party that the execution, delivery and performance of this Agreement by such party does not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which such party is a party or any judgment, order or decree to which such party is subject. In addition, the Executive represents and warrants to the Company that the Executive is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement, confidentiality agreement or similar agreement with any Person other than the Company or one of its affiliates. The Company and the Executive hereby terminate all existing employment or consulting agreements between them, if any, to the extent such agreements may be in effect after the date hereof. SECTION 14. DEFINITIONS. "Board" shall mean the board of directors of the Company. "Business Day" shall mean any day that is not (a) Pioneer Day in the State of Utah, (b) a Saturday, Sunday or legal holiday or (c) a day in which banks are not required to be open in New York, New York. "Cause" shall mean: (a) the conviction of the Executive of a crime involving his fraud, theft or dishonesty; (b) the material and willful breach by the Executive of his responsibilities under this Agreement or willful failure to comply with reasonable directives or policies of the Board, but only if the Company has given Executive written notice specifying the breach or failure to comply, demanding that the Executive remedy the breach or failure to comply and giving the Executive an opportunity to be heard in connection with the breach or failure to comply, and the Executive either (i) failed to remedy the alleged breach or failed to comply within thirty days after receipt of the written notice or (ii) failed to take all reasonable steps to that end during the thirty days after he received the notice; (c) the continued use of alcohol or drugs by the Executive to an extent that, in the good faith determination of the Board, such use interferes with the performance of the Executive's duties and responsibilities; or (d) the conviction of the Executive for violating any Law constituting a felony (including the Foreign Corrupt Practices Act of 1977). "Common Stock" means the common stock of the Company. -9- 10 "Confidential Information" means information that is not known to the public, that is used, developed or obtained by the Company or any of its Subsidiaries in connection with the Business, and that the Executive learns in the course of performing services for the Company or any of its Subsidiaries, including, but not limited to, (a) information, observations, procedures and data obtained by the Executive while employed by the Company (including those obtained prior to the date of this Agreement) concerning the business or affairs of the Company or any of its Subsidiaries, (b) products or services of the Company or any of its Subsidiaries, (c) costs and pricing structures of the Company or any of its Subsidiaries, (d) analyses of the Company or any of its Subsidiaries, (e) drawings, photographs and reports of the Company or any of its Subsidiaries, (f) computer software, including operating systems, applications and program listings of the Company or any of its Subsidiaries, (g) flow charts, manuals and documentation of the Company or any of its Subsidiaries, (h) data bases of the Company or any of its Subsidiaries, (i) accounting and business methods of the Company or any of its Subsidiaries, (j) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice of the Company or any of its Subsidiaries, (k) customers and customer lists of the Company or any of its Subsidiaries, (l) other copyrightable works of the Company or any of its Subsidiaries, (m) all production methods, processes, technology and trade secrets of the Company or any of its Subsidiaries, and (n) all similar and related information of the Company or any of its Subsidiaries in whatever form. Confidential Information will not include any information that is now or later becomes part of the public domain, without breach of this Agreement by the Executive. Confidential Information will not be deemed to be in the public domain merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination. "Disability" shall means a condition or disease of the Executive that would cause him to be considered "disabled" within the meaning of the Company's long-term disability plan as in effect at the relevant time, as determined by the Company's long-term disability insurance carrier. "Fair Market Value" shall mean, with respect to any Share, as of any date of determination, the fair value of each Share (or, with respect to a warrant or option, the fair value of each Share obtainable upon exercise thereof net of the exercise price), determined in accordance with the terms hereof. At any time that the Fair Market Value shall be required to be determined hereunder, the Board shall make a good faith determination (the "Board's Determination") of the fair market value of each Share within thirty (30) days of the delivery (i) by the Company of the Repurchase Notice or (ii) by the Executive of the Put Notice (in each case, without taking into account that the Shares may be "restricted securities" and without any discount for the minority position represented by the Shares) and shall provide within such 30-day period to each member of the Executive Group with respect to whose Shares such determination is being made, a written notice thereof which notice shall set forth supporting data in respect of such calculation (the "Determination Notice"). Each member of the Executive Group shall have thirty (30) days following receipt of the Determination Notice within which to deliver to the Company a written notice (the "Objection Notice") of an objection, if any, to the Board's Determination, which Objection Notice shall set forth such member of the Executive Group's good faith determination (the "Shareholder's Determination") of the fair value of each Share. The failure by such member of the Executive Group to deliver the Objection Notice -10- 11 within such 30-day period shall constitute such Person's acceptance of the Board's Determination as conclusive. In the event of the timely delivery of an Objection Notice, the Company and applicable members of the Executive Group shall attempt in good faith to arrive at an agreement with respect to the Fair Market Value, which agreement shall be set forth in writing within fifteen (15) days following delivery of the Objection Notice. If the Company and the applicable members of the Executive Group are unable to reach an agreement within such 15-day period, the matter shall be promptly referred for determination to a regionally or nationally recognized investment banking or valuation firm (the "Valuer") reasonably acceptable to the Company and the applicable members of the Executive Group. The Company and the applicable members of the Executive Group will cooperate with each other in good faith to select such Valuer. The Valuer may select the Board's Determination or the Shareholder's Determination as the Fair Market Value or may select any other number or value (determined without taking into account that the Shares may be "restricted securities" and without any discount for the minority position represented by such Shares). The Valuer's selection will be furnished to the Company and the applicable members of the Executive Group in writing and will be conclusive and binding upon the Company and the applicable members of the Executive Group. The fees and expenses of the Valuer shall be borne equally by the Company, on the one hand, and the applicable members of the Executive Group (on a pro rata basis based on the number of Shares being purchased), on the other. "Family Group" means (a) the Executive's spouse and descendants (whether natural or adopted) and (b) any trust solely for the benefit of such individual and/or the individual's spouse or descendants. "Resignation for Good Reason" occurs if the Executive terminates his employment with the Company and the Subsidiaries because, without Executive's express written consent, any of the events described below occurs during the Employment Period. (a) The Company significantly diminishes the Executive's assigned duties and responsibilities from the level or extent at which they existed before the Closing Date, including, without limitation, if the Company removes Executive's title or materially diminishes the powers associated with the Executive's title. The Executive must deliver written notice to the Company specifying the diminution in assigned duties and responsibilities that he believes constitutes Good Reason, and the Company must fail to reverse the same or to take all reasonable steps to that end within thirty days after receiving the notice. (b) The Company reduces the Executive's Base Salary below that in effect as of the Closing Date. (c) The Company requires the Executive to, or assigns duties to the Executive which would reasonably require him to, relocate his principal business office more than fifty (50) miles from where it is located on the Closing Date. (d) The Company fails to continue in effect any cash or stock-based incentive or bonus plan, retirement plan, welfare benefit plan, or other benefit plan, program or arrangement that applied to the Executive on the Closing Date, unless the aggregate value (as -11- 12 computed by an independent employee benefits consultant selected by the Company of all such compensation, retirement and benefit plans, programs and arrangements provided to the Executive is not materially less than their aggregate value as of the Closing Date. "Restricted Stock Agreement" means the Restricted Stock Purchase Agreement dated as of the date hereof between the Company and the Executive and any other restricted stock agreement entered into between such Persons after the date hereof, as each such agreement is amended, supplemented or modified from time to time. "Retirement" means a separation from the service of the Company that would be treated as a normal retirement or early retirement under the Huntsman Packaging Corporation Defined Benefit Pension Plan. "Shares" means (a) shares of any Common Stock purchased or otherwise acquired by the Executive (including, without limitation, any shares of Common Stock purchased upon exercise of an option to acquire Common Stock or acquired upon the consummation of a merger), (b) shares of any equity securities issued or issuable directly or indirectly with respect to the Common Stock referred to in clause (a) above by way of stock dividend or stock split or in connection with a combination of shares, exchange of capital stock, recapitalization, merger, consolidation or other reorganization and (c) any other shares of capital stock of the Company purchased or otherwise acquired by the Executive. "Stockholders' Agreement" means the Stockholders' Agreement dated as of the date hereof among the Company and the stockholders of the Company from time to time, as amended, modified or supplemented from time to time. "Work Product" shall mean all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, tradenames, logos and all similar or related information (whether patentable or unpatentable) which relates to the Company's or any of its Subsidiaries' business, research and development or existing or future products or services and which are conceived, developed or made by the Executive (whether or not during usual business hours and whether or not alone or in conjunction with any other Person) while employed by the Company (including those conceived, developed or made prior to the date of this Agreement) together with all patent applications, letters patent, trademark, tradename and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing. SECTION 15. GENERAL PROVISIONS. (a) Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be -12- 13 more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (b) Notices. All notices, requests, demands, claims and other communications hereunder shall be in writing and sufficient if (i) delivered personally, (ii) delivered by certified United States Post Office mail, return receipt requested, (iii) telecopied or (iv) sent to the recipient by a nationally-recognized overnight courier service (charges prepaid) and addressed to the intended recipient as set forth below: (i) if to the Executive, to him at: Ronald G. Moffitt 6758 S. Vista Grande Drive Salt Lake City, Utah 84121 Telephone: (801) 942-2443 with a copy to: J. Keith Adams, Esq. Stoel Rives 201 S. Main Street, Suite 1100 Salt Lake City, Utah 84111 Telecopier: (801) 578-6999 Telephone: (801) 328-3131 (ii) if to the Company, to: Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, Utah 84108 Attention: Richard P. Durham, Chief Executive Officer Telecopier: (801) 584-5783 Telephone: (801) 584-5700 with copies to: Chase Domestic Investments, L.L.C. c/o Chase Capital Partners 1221 Avenue of the Americas, 40th Floor New York, New York 10020 Telephone: (212) 899-3400 Telecopier: (212) 899-3401 Attention: Timothy Walsh; -13- 14 and O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza, 41st Floor New York, New York 10112 Telephone: (212) 408-2400 Telecopier: (212) 408-2420 Attention: Ilan S. Nissan, Esq.; or such other address as the recipient party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. Any such communication shall deemed to have been delivered and received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of delivery by mail, on the date received, (iii) if telecopied, on the date telecopied as evidenced by confirmed receipt, and (iv) in the case of delivery by nationally-recognized, overnight courier, on the Business Day following dispatch. (c) Entire Agreement. This Agreement and the documents expressly referred to herein embody the complete agreement and understanding among the parties and, with respect to the subject matter of this Agreement, supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (d) Counterparts and Facsimile Execution. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other party, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature to this Agreement that is delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement. (e) Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Executive and the Company and their respective successors, assigns, heirs, representatives and estate, as the case may be; provided, however, that the obligations of the Executive under this Agreement shall not be assigned without the prior written consent of the Company. (f) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and the Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement or any provision hereof. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Utah without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Utah. -14- 15 (h) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. (i) Mutual Contribution. The parties to this Agreement and their counsel have mutually contributed to its drafting. Consequently, no provision of this Agreement shall be construed against any party on the ground that one party drafted the provision or caused it to be drafted. (j) Descriptive Headings; Nouns and Pronouns. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice-versa. (k) Effectiveness. This Agreement shall not be deemed effective until the Closing Date. (l) Effect on Recapitalization Agreement. Notwithstanding any other provision of this Agreement, the Parties agree that if either of them breaches this Agreement, the breach will not be deemed or construed to be a breach of the Recapitalization Agreement, or to be any other type of event that would trigger the payment of damages under the Recapitalization Agreement, or would entitle any party to the Recapitalization Agreement to refuse to pay, any amounts otherwise owed under the Recapitalization Agreement. * * * * * -15- 16 IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above. HUNTSMAN PACKAGING CORPORATION By:/s/ RICHARD P. DURHAM -------------------------------- Name: Richard P. Durham Title:Chief Executive Officer EXECUTIVE: /s/ RONALD G. MOFFITT ----------------------------------- Name: Ronald G. Moffitt EX-10.16 23 ex10-16.txt RESTRICTED STOCK AGREEMENT 1 Exhibit 10.16 RESTRICTED STOCK PURCHASE AGREEMENT dated as of May 31, 2000 (this "Agreement"), between Huntsman Packaging Corporation, a Utah corporation (the "Company"), and RICHARD P. DURHAM (the "Purchaser"). WHEREAS, the Purchaser is an employee of the Company; WHEREAS, the Company desires to issue to the Purchaser, and the Purchaser desires to purchase from the Company, shares of common stock of the Company (the "Common Stock") in accordance with the terms and conditions set forth below; NOW, THEREFORE, in consideration of the agreements, covenants and promises contained in this Agreement, intending to be legally bound, the Company and the Purchaser agree as set forth below. SECTION 1. ISSUANCE AND SALE. (a) The Company hereby issues to the Purchaser, and the Purchaser hereby purchases and accepts from the Company, 14,500 shares of Common Stock (the "Shares") at a purchase price of $483.00 per Share, for an aggregate purchase price of $7,005,389 (the "Purchase Price"). The Purchase Price is payable by delivery of a promissory note in the form attached as Exhibit A hereto (the "Promissory Note"). The Company acknowledges receipt from the Purchaser of the executed Promissory Note. To secure the Company's rights under the Repurchase Option described in Section 2 and to secure the Purchaser's obligations under the Promissory Note, the Company will retain possession of the certificate or certificates representing the Shares. SECTION 2. REPURCHASE OPTION. (a) Type of Shares. 2,417 of the Shares shall be "Time Vested Shares" and 12,083 of the Shares shall be "Performance Vested Shares." (b) Repurchase Option on Termination of Employment. If the Purchaser ceases to be an employee of the Company for any reason, with or without cause, including death, Disability or Retirement, (a "Termination"), the Company or its designees shall have an irrevocable, exclusive option (the "Repurchase Option") for a period of 180 days from the date of Termination to repurchase, at the original price per Share set forth in Section 1, all or any portion of the Shares held by the Purchaser or any of his transferees on the date of the Termination that have not been released from the Repurchase Option as provided in Section 3; provided that if the Company shall be legally prevented (whether by contract or statutorily) from making such repurchase during the foregoing 180-day period, then such Repurchase Option may be exercised within forty-five (45) days after the date on which it shall be legally permitted to make such repurchase, but in no event shall the Company be permitted to make such election after the third anniversary of the date of Termination. In the event that the Company exercises the Repurchase 2 Option at any time after the 180th day after the date of Termination, the repurchase price per Share shall be equal to the sum of (x) the original price per Share set forth in Section 1 plus (y) interest on the unpaid amount of the original price per Share set forth in Section 1 compounded annually, at a rate equal to seven percent (7.0%) for the period commencing on the 181st day after the date of Termination through the date on which the Shares are actually repurchased. As used herein "Disability" and "Retirement" shall have the meanings given to such terms in the Employment Agreement dated as of the date hereof (the "Employment Agreement"), between the Company and the Purchaser. (c) Exercise of Repurchase Option. The Repurchase Option shall be exercised by the Company, or its designee, by delivering to the Purchaser a written notice of exercise and either (i) a check in the amount of the purchase price, (ii) if there is an outstanding balance on the Promissory Note, a notice stating that the repurchase price shall be applied to reduce the outstanding principal and interest (or a portion thereof) on a dollar-for-dollar basis or (iii) a combination of (i) and (ii). Upon delivery of such notice and payment of the purchase price in any of the ways described above, the Company, or its designee, shall become the legal and beneficial owner of the Shares being repurchased and all rights and interest therein or related thereto, and the Company, or its designee, shall have the right to transfer to its own name the number of Shares being repurchased without further action by the Purchaser or any of his transferees. If the Company or its designee elect to exercise the repurchase rights pursuant to this Section 2 and the Purchaser or his transferee fails to deliver the Shares in accordance with the terms hereof, the Company, or its designee, may, at its option, in addition to all other remedies it may have, deposit the purchase price in an escrow account administered by an independent third party (to be held for the benefit of and payment over to the Purchaser or his transferee in accordance herewith), whereupon the Company shall by written notice to the Purchaser cancel on its books the certificates(s) representing such Shares registered in the name of the Purchaser and all of the Purchaser's or his transferee's right, title, and interest in and to such Shares shall terminate in all respects. SECTION 3. RELEASE FROM REPURCHASE OPTION. (a) If the Purchaser is employed by the Company at the time of the Purchaser's death, Disability or Retirement, all of the Performance Vested Shares shall be automatically released from the Repurchase Option on the effective date of such Termination. (b) If the Purchaser is employed by the Company continuously from the date hereof through January 1, 2001, and the Purchaser has not experienced a Termination on or prior to such date, all of the Time Vested Shares shall be automatically released from the Repurchase Option on such date. (c) The Performance Vested Shares shall be automatically released from the Repurchase Option in installments as follows: (i) if the "Market Value Per Share of Equity" or MVPSE (as defined in Section 3(d)) is at least $603.75 (such amount, and each such amount specified in subsections (ii) through (vi) below, the "Target MVPSE") on December 31, 2000 (such date, and each such date specified in subsections (ii) through (vi) below, a "Target Date"), 2 3 one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2000; (ii) if the MVPSE is at least $754.70 on December 31, 2001, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2001; (iii) if the MVPSE is at least $943.40 on December 31, 2002, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2002; (iv) if the MVPSE is at least $1,179.25 on December 31, 2003, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2003; (v) if the MVPSE is at least $1,474.10 on December 31, 2004, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2004; and (vi) if the MVPSE is at least $1,842.65 on December 31, 2005, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2005. (d) Market Value Per Share of Equity. The "Market Value Per Share of Equity" ("MVPSE") on any given date shall equal (I) other than in connection with an Acceleration Event, the quotient obtained by dividing (x) the difference between (A) the product of (1) Adjusted EBITDA and (2) 8.0 and (B) Adjusted Net Debt by (y) the number of outstanding Common Stock Equivalents or (II) in connection with an Acceleration Event, the price (whether payable in cash or property) per Common Stock Equivalent paid to stockholders or other securityholders of the Company in connection with such Acceleration Event, where, in each case of (I) and (II): "Common Stock Equivalent" means, at any time, one share of Common Stock or the right to acquire, whether or not such right is immediately exercisable, one share of Common Stock, whether evidenced by an option, warrant or convertible security; "EBITDA" equals earnings from operations before interest expense, taxes, depreciation and amortization on the applicable date, determined in accordance with generally accepted accounting principles, consistently applied ("GAAP"), calculated on a trailing twelve (12) month basis; "Adjusted EBITDA" equals the Company's EBITDA, as adjusted below, on the applicable date; "Net Debt" equals the Company's total indebtedness on the applicable date plus the Preferred Value minus balance sheet "Cash and Cash Equivalents" as of such date, determined in accordance with GAAP; 3 4 "Preferred Value" equals, at the time of determination, the sum of (x) with respect to the Company's Series A Preferred Stock, the Series A Liquidation Amount and (y) with respect to any other series of the Company's preferred stock, the amount to be paid by the Company to the holders of such series of preferred stock upon a liquidation of the Company or similar event in accordance with the terms of the Restated Charter. "Restated Charter" means the amended and restated certificate or articles of incorporation of the Company, as in effect at the time of determination, including any certificates of designation or articles of amendment. "Series A Liquidation Amount" has the meaning set forth in the Restated Charter. "Adjusted Net Debt" equals Net Debt, as adjusted below, on the applicable date. Adjusted EBITDA and Adjusted Net Debt shall be determined by making the following adjustments to the Company's EBITDA and to Net Debt: (i) if the Company completes a material acquisition (an "Acquisition") during any of the first three quarters of a calendar year, the EBITDA of the acquired entity or business for the portion of the calendar year prior to the Acquisition shall be included in Adjusted EBITDA; (ii) if the Company completes a material divestiture (a "Divestiture") during any of the first three quarters of a calendar year, the EBITDA of the divested assets or business for the portion of the calendar year prior to the Divestiture shall be excluded from Adjusted EBITDA; (iii) if the Company engages in an Acquisition during the fourth quarter of a calendar year, an amount equal to the total of (x) all debt incurred with respect to the Acquisition and (y) all transaction costs associated with the Acquisition shall be excluded from Adjusted Net Debt; and (iv) if the Company engages in a Divestiture during the fourth quarter of a calendar year, (x) the total amount of the proceeds received by the Company with respect to the Divestiture shall be included in Adjusted Net Debt, and (y) the total amount of the budgeted EBITDA for the divested assets or business for all periods of the calendar year subsequent to the Divestiture shall be included in Adjusted EBITDA. For purposes of this Agreement only, the MVPSE shall be determined within ninety (90) days after the end of each calendar year or at such other date as may be necessary to calculate MVPSE for purposes of this Agreement. (e) Percentage Release from Repurchase Option. If the MVPSE is, as of a Target Date, less than the applicable Target MVPSE, but is greater than ninety percent (90%) of the applicable Target MVPSE as of such Target Date, a percentage of the Performance Vested Shares available for release from the Repurchase Option as of such Target Date shall be released from the Repurchase Option according to the following proportionate release schedule: 4 5
Actual MVPSE as a Percentage of Performance Percentage of Target MVPSE Vested Shares Released -------------------------- ---------------------- 90.0% 0% 92.5% 25% 95.0% 50% 97.5% 75% 100% 100%.
The percentage of Performance Vested Shares released shall be prorated for one-half percentage increases between the MVPSE percentages shown (e.g., if the MVPSE is at least 90.5%, but less than 91.0%, of Target MVPSE, 5% of the Performance Vested Shares available for release from the Repurchase Option as of the Target Date would be released from the Repurchase Option). (f) "Clawback" Rights. Notwithstanding any other provision of this Section 3, if the MVPSE is less than the applicable Target MVPSE on any Target Date (a "Prior Unsatisfied Target"), but thereafter the MVPSE equals or exceeds the applicable Target MVPSE on any subsequent Target Date prior to December 31, 2005, all Performance Vested Shares which have not been previously released from the Repurchase Option with respect to all Prior Unsatisfied Targets occurring prior to such subsequent Target Date shall thereupon be released from the Repurchase Option. As an example, if the Purchaser had earned release of 0% and 0% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and the MVPSE was equal to $950.00 on December 31, 2002, then (A) 100% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option; and (B) 100% of the Performance Vested Shares scheduled for release as of December 31, 2000 and 2001, would be released from the Repurchase Option. As a further example, if the Purchaser had earned release of 0% and 0% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and the MVPSE was equal to $872.00 on December 31, 2002, then (A) 25% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option and (B) no additional Performance Vested Shares scheduled for release as of December 31, 2000 or 2001, would be released from the Repurchase Option. (g) Termination of Repurchase Option. Any Performance Vested Shares that are not released from the Repurchase Option according to the foregoing provisions of this Section 3 shall be released from the Repurchase Option on December 31, 2009, so long as the Purchaser is an employee of the Company on such date. (h) Acceleration Event. (i) An "Acceleration Event" shall occur in the event of a Change of Control of the Company, as such term is defined in the Indenture dated as of the date hereof between the Company and The Bank of New York, as trustee, as amended, modified or supplemented from time to time. 5 6 (ii) If an Acceleration Event occurs on or before January 1, 2001, all Time Vested Shares shall be released from the Repurchase Option immediately prior to the Acceleration Event. (iii) If an Acceleration Event occurs on or before December 31, 2005, some or all of the Performance Vested Shares that have not been released from the Repurchase Option (because the Target Dates and/or Target MVPSE have not yet been reached) shall be released from the Repurchase Option immediately prior to the Acceleration Event in an amount equal to the average percentage of Performance Vested Shares that have been released from the Repurchase Option up to the date of the Acceleration Event multiplied by the total number of Performance Vested Shares then subject to the Repurchase Option, taking into account the effect of Section 3(f). Further, for purposes of calculating the MVPSE in connection with an Acceleration Event, Target MVPSE shall be prorated to the end of the calendar month immediately prior to the Acceleration Event. For example, if the Purchaser had earned release of 0% and 80% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and an Acceleration Event occurred in July, 2002, and the actual MVPSE was equal to $807.00, then (A) the Target MVPSE would be prorated to June 30, 2002, pursuant to this Section 3(h) ($754.70 + [.50 x ($943.40 - $754.70)] = $849.05); (B) the June 30, 2002, actual MVPSE as a percentage of the prorated Target MVPSE as of December 31, 2002, would be 95%; (C) therefore, 50% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option, pursuant to Section 3(e), immediately prior to the Acceleration Event; and (D) immediately prior to the Acceleration Event, 43.33% [(0 + 80 + 50) / 3 = 43.33] of the Performance Vested Shares scheduled for release from the Repurchase Option based on the MVPSE as of December 31, 2003, 2004 and 2005, would be released from the Repurchase Option, all for the immediate benefit of the Purchaser. As a further example, if the Purchaser had earned release of 0% and 0% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and an Acceleration Event occurs in July, 2002, and if the actual MVPSE is $875.00, then (A) the Target MVPSE as of June 30, 2002 would be prorated to June 30, 2002, pursuant to this Section 3(h) ($849.05) (B) the June 30, 2002, actual MVPSE as a percentage of the prorated Target MVPSE as of December 31, 2002, would be 103%; (C) 100% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option pursuant to Section 3(e), immediately prior to the Acceleration Event; and (D) taking into account the effect of Section 3(f), and immediately prior to the Acceleration Event, 100% of the Performance Vested Shares scheduled for release from the Repurchase Option based on the MVPSE as of December 31, 2003, 2004 and 2005, would be released from the Repurchase Option, all for the immediate benefit of the Purchaser. If an Acceleration Event occurs after December 31, 2005, no additional Performance Vested Shares shall be released from the Repurchase Option pursuant to this Section 3(h). The Company may exercise the Repurchase Option effective as of the time of an Acceleration Event with respect to any Performance Vested Shares that are not released from the Repurchase Option, regardless of whether or not a termination of employment occurs. 6 7 (i) Fractional Shares. Notwithstanding any other provisions of this Agreement, no fractional shares shall be released from the Repurchase Option until a number of such fractional shares accumulate to equal one share. (j) No Share which is released from a Repurchase Option hereunder shall thereafter be subject to the Repurchase Option without the prior written consent of the Purchaser. SECTION 4. STOCKHOLDERS' AGREEMENT; RESTRICTIONS ON TRANSFER. (a) The Company and the Purchaser acknowledge and agree that the Shares are subject to and restricted by the Stockholders' Agreement dated as of the date hereof, among the Company and the stockholders of the Company signatory thereto, as amended, modified or supplemented from time to time (as amended, the "Stockholders' Agreement"), and with respect to such Shares, the Purchaser shall be a "Management Stockholder" as such term is used in the Stockholders' Agreement. (b) Notwithstanding anything to the contrary contained in the Stockholders' Agreement, the Purchaser may not sell, assign, encumber, dispose of or otherwise transfer (including any transfer by operation of law) any interest in any Shares that have not been released from the Repurchase Option other than a transfer to Durham Capital, Ltd., provided that Durham Capital, Ltd. agrees to be bound by all of the terms and provisions of this Agreement, the Promissory Note and the Pledge Agreement dated as of the date hereof between the Company and the Purchaser (the "Pledge Agreement"). SECTION 5. EMPLOYMENT AGREEMENT. The parties agree that the option provided to the Purchaser under Section 6(c) of the Employment Agreement may not be exercised with respect to any of the Shares purchased under this Agreement until January 1, 2006. SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Purchaser, as of the date hereof, as set forth below. (a) The Company is a duly organized and validly existing corporation under the laws of the State of Utah and has the corporate power and the corporate authority to execute and deliver this Agreement and to perform its obligations as specified in this Agreement. (b) The Shares have been duly authorized by the Company and, upon receipt of the Purchase Price, will be validly issued, fully paid and nonassessable. (c) This Agreement has been duly authorized by the Board of Directors of the Company and has been executed and delivered by the Company. (d) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement do not contravene any provision the Restated Charter or By-laws of the Company or any agreement or other instrument binding upon the 7 8 Company that is material to the Company, or any judgment, order or decree of any court or governmental authority having jurisdiction over the Company, and no material consent, approval, authorization or order of, or qualification with, any governmental authority is required for the performance by the Company of its obligations under this Agreement, except such approvals as have been obtained and are in full force and effect. (e) Assuming that the representations and warranties of the Purchaser contained in this Agreement are true and correct, the offer, sale and delivery of the Shares in the manner contemplated by this Agreement is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents and warrants to the Company, as of the date hereof, as set forth below. (a) The execution and delivery by the Purchaser of, and the performance by the Purchaser of its obligations under, this Agreement, the Promissory Note, the Pledge Agreement and the other documents delivered in connection therewith, do not contravene any provision of applicable law or any agreement or other instrument binding upon the Purchaser that is material to the Purchaser, or any judgment, order or decree of any court or governmental authority having jurisdiction over the Purchaser, and no material consent, approval, authorization or order of, or qualification with, any governmental authority is required for the performance by the Purchaser of its obligations under this Agreement, except such approvals as have been obtained and are in full force and effect. (b) The Purchaser is an executive officer of the Company and has received all of the information concerning the Company, the Common Stock and any other matters relevant to his decision to purchase the Shares that he has requested. (c) The Purchaser, as a result of his position as an executive officer of the Company, is an "accredited investor" within the meaning of Rule 501 of Regulation D under the Securities Act. (d) The Purchaser is experienced in evaluating and making speculative investments, and has the capacity to protect his interest in connection with the acquisition of the Shares. In addition, the Purchaser has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of this investment. (e) The Purchaser is purchasing the Shares for his own account, for investment purposes only and not with a view to any public sale or distribution thereof. (f) The Purchaser understands that (i) the Shares have not been and will not be registered by the Company under the Securities Act, the Utah Uniform Securities Act or the securities laws of any other jurisdiction and will be considered "restricted securities" under the Securities Act, (ii) the Shares will bear the legends set forth in Section 9, (iii) the Company has no obligation to register the Shares under the Securities Act or any state securities law, and (iv) the Purchaser will not sell, transfer, hypothecate or otherwise dispose of any Shares other than in 8 9 accordance with (A) the provisions, or exemptions therefrom, of the Securities Act and the rules and regulations promulgated thereunder and the securities laws of all other applicable jurisdictions and (B) the Stockholders' Agreement and (C) this Agreement. (g) The Purchaser understands that the Company will rely upon the accuracy and truth of the representations and warranties of the Purchaser set forth in this Section 7, and the Purchaser hereby consents to such reliance. SECTION 8. TAX ELECTION. THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO DECIDE IF AN ELECTION UNDER SECTION 83(B) OF THE INTERNAL REVENUE CODE SHOULD BE MADE AND TO FILE TIMELY SUCH ELECTION, EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS BEHALF. SECTION 9. STOCK LEGENDS. In addition to any legend required by the Stockholders' Agreement, certificates representing the Shares shall bear the following additional legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF, AND RESTRICTIONS ON TRANSFER SET FORTH IN, A RESTRICTED STOCK PURCHASE AGREEMENT, DATED AS OF MAY 31, 2000, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY, AND SUCH SHARES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, ENCUMBERED, OTHERWISE GRANTED AS SECURITY, OR OTHERWISE DISPOSED OF, OTHER THAN IN ACCORDANCE THEREWITH." SECTION 10. FURTHER AGREEMENTS. The Company and the Purchaser hereby agree to execute, deliver and record or cause to be executed, delivered and recorded such further instruments, and take such other actions, as may be reasonably required to effectuate the transactions contemplated by this Agreement. SECTION 11. SURVIVAL. The respective representations, warranties, covenants and agreements made by the Company and the Purchaser in this Agreement shall survive the payment of the Purchase Price and the delivery of the Shares (notwithstanding any investigation made by or on behalf of any party to this Agreement). 9 10 SECTION 12. SUCCESSORS AND ASSIGNS. Subject to Section 4 hereof, this Agreement shall inure to the benefit of and be binding upon the Company, the Purchaser and their respective successors and permitted assigns. Nothing expressed in this Agreement is intended or shall be construed to give any person other than the persons referred to in the preceding sentence any legal or equitable right, remedy or claim under or in respect of this Agreement. Except as specified in Section 4, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by any party hereto without the prior written consent of the other party. SECTION 13. SEVERABILITY. Any covenant, provision, agreement or term of this Agreement that is prohibited or is held to be void or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement. SECTION 14. MODIFICATIONS, AMENDMENTS AND WAIVERS. At any time subsequent to the date hereof, (a) the parties hereto may, by written agreement, modify, amend or supplement any term or provision of this Agreement and (b) any term or provision of this Agreement may be waived by the party which is entitled to the benefits thereof. No course of dealing among the parties or delay in exercising rights and remedies shall operate as a waiver of such rights and remedies. SECTION 15. GENERAL MATTERS. (a) This Agreement constitutes the entire agreement and understanding of the parties to this Agreement with respect to the matters and transactions contemplated by this Agreement and supersedes all prior agreements and understandings whatsoever relating to such matters and transactions. The headings in this Agreement are for the purpose of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall together constitute one instrument. (b) The Option Cancellation and Restricted Stock Purchase Agreement dated as of February 22, 1999, between the Purchaser and the Company, as amended, modified or supplemented from time to time, is hereby terminated in its entirety with no further force or effect. SECTION 16. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with the laws of the State of Utah. 10 11 SECTION 17. NOTICES. All notices, requests, demands, claims and other communications hereunder shall be in writing and sufficient if delivered in accordance with the provisions set forth in the Stockholders' Agreement. SECTION 18. COUNTERPARTS AND FACSIMILE EXECUTION. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other party, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature to this Agreement that is delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement. SECTION 19. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. SECTION 20. MUTUAL CONTRIBUTION. The parties to this Agreement and their counsel have mutually contributed to its drafting. Consequently, no provision of this Agreement shall be construed against any party on the ground that one party drafted the provision or caused it to be drafted. ******** 11 12 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Stock Purchase Agreement as of the date first written above. HUNTSMAN PACKAGING CORPORATION By:/s/ SCOTT K. SORENSEN ------------------------------ Name: Scott K. Sorensen Title: Chief Financial Officer PURCHASER /s/ RICHARD P. DURHAM --------------------------------- Richard P. Durham 13 EXHIBIT A SECURED PROMISSORY NOTE (FULL RECOURSE) $7,005,389 May 31, 2000 Salt Lake City, Utah FOR VALUE RECEIVED, the undersigned, RICHARD P. DURHAM (the "Maker"), promises and agrees to pay to the order of HUNTSMAN PACKAGING CORPORATION ("HPC"), at 500 Huntsman Way, Salt Lake City, Utah 84108, or at such other place as the holder hereof may designate in writing, the principal sum of SEVEN MILLION FIVE THOUSAND THREE HUNDRED AND EIGHTY-NINE ($7,005,389), together with interest, compounded annually, on the unpaid balance thereof at the rate of seven percent (7.0%) per annum from the date hereof until paid in cash. For the period prior to May 31, 2006, interest may, at the option of the Maker, not be paid in cash but be added to the principal hereof on each anniversary of the date of the original issuance hereof (the "PIK Option"). Principal and accrued interest outstanding under this Promissory Note (this "Note") as of May 31, 2006 (including through the exercise of the PIK Option), shall be paid in cash in three equal annual installments on each of (1) May 31, 2006, (2) May 31, 2007, and (3) May 31, 2008. Interest accruing on the unpaid principal of this Note (including through the exercise of the PIK Option) for the period commencing June 1, 2006, through final maturity, shall be paid on May 31, 2007, and at final maturity in cash. Prepayments shall be applied first toward the payment and satisfaction of accrued and unpaid interest, and the remainder shall be applied toward the reduction of principal. Principal and interest (except pursuant to the PIK Option) shall be payable only in lawful money of the United States of America. This Note has been made in accordance with that certain Restricted Stock Purchase Agreement, dated as of the date hereof (the "Restricted Stock Agreement"), between HPC and the Maker. For so long as any amounts of principal or interest under this Note shall remain unpaid, upon the transfer of any of the Shares except for a transfer of Shares to any Permitted Transferee (as defined in the Stockholders' Agreement) or upon the exercise of any party of the rights set forth in Section 6 of the Employment Agreement dated as of the date hereof between the Maker and HPC, the lesser of (a) the total amount of any cash paid in consideration of the transfer of the Shares, net of any expenses reasonably incurred in connection with such transfer (the "Net Proceeds") or (b) the total amount of all unpaid principal and interest under this Note (as of the applicable payment date), shall be paid to the holder of this Note within three (3) business days of the date the Net Proceeds are received by or on behalf of the Maker. Any payments made in accordance with this paragraph shall be prepayments and shall be treated as specified in the following paragraph. The Maker may prepay at any time the obligations hereunder, in whole or in part, without penalty. The Maker, at his option, may pay amounts in excess of the annual payments called for herein. Such excess amounts shall be applied either to reduction of the principal balance hereof or in prepayment of designated future annual payments, at the election of the Maker, which election must be made in writing at the time the excess amount is paid. If the election is to apply to the excess amount against future annual payment(s), the Maker must designate the particular annual payment(s) which are being paid in advance. If the Maker makes no timely election, excess amounts shall be applied in reduction of the principal balance hereof in inverse order of maturity. If the excess amount is applied in reduction of the principal balance hereof (whether by reason of election or otherwise), the payment shall not postpone or suspend the obligation of the Maker to make the annual payments called for herein. 14 The occurrence of any of the following constitutes an "Event of Default": (a) The Maker fails to make any payment hereunder when due or within fifteen (15) days thereafter; (b) the Maker defaults in the performance of any covenant or agreement contained herein, in the Restricted Stock Agreement (other than a covenant or agreement to make payments hereunder) or in the Pledge Agreement dated as of the date hereof between the Maker and HPC; (c) a petition is filed seeking that the Maker be adjudged bankrupt; (d) the Maker makes a general assignment for the benefit of creditors; (e) the Maker suffers the appointment of a receiver; or (f) the Maker becomes insolvent. Upon the occurrence of an Event of Default, the entire remaining unpaid balance of both principal and interest owing hereunder shall, at the option of the holder hereof and without notice or demand, become immediately due and payable. Thereafter said unpaid principal balance and interest shall, until paid and both before and after judgment, earn interest at the rate of ten percent (10%) per annum. The acceptance of any installment or payment after the occurrence of an Event of Default shall not constitute a waiver of the holder's right of acceleration with respect to such Event of Default or any subsequent Event of Default. In the event any payment under this Note is not made at the time and in the manner required, the Maker agrees to pay all costs and expenses (regardless of the particular nature thereof and whether incurred with or without suit or before or after judgment) which may be incurred by the holder hereof in connection with the enforcement of any of its rights under this Note, including court costs and attorneys' fees. The Maker hereby acknowledges the security interests granted by the Maker to HPC pursuant to the terms of the Pledge Agreement dated as of the date hereof between the Maker and HPC. Any notice or demand hereunder shall be made in accordance with the provisions set forth in the Restricted Stock Agreement. The Maker expressly agrees that this Note, or any payment hereunder, may be extended without notice from time to time by the holder hereof without in any way affecting the liability of the Maker. This Note is a full recourse promissory note and shall be the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon their respective heirs, personal representatives, successors and assigns. This Note shall be governed by and construed in accordance with the laws of the State of Utah. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Restricted Stock Agreement. ******** IN WITNESS WHEREOF, the undersigned Maker has executed this Note as of the date first written above. ------------------------------ Richard P. Durham EX-10.17 24 ex10-17.txt RESTRICTED STOCK AGREEMENT 1 EXHIBIT 10.17 RESTRICTED STOCK PURCHASE AGREEMENT dated as of May 31, 2000 (this "Agreement"), between Huntsman Packaging Corporation, a Utah corporation (the "Company"), and JACK E. KNOTT (the "Purchaser"). WHEREAS, the Purchaser is an employee of the Company; WHEREAS, the Company desires to issue to the Purchaser, and the Purchaser desires to purchase from the Company, shares of common stock of the Company (the "Common Stock") in accordance with the terms and conditions set forth below; NOW, THEREFORE, in consideration of the agreements, covenants and promises contained in this Agreement, intending to be legally bound, the Company and the Purchaser agree as set forth below. SECTION 1. ISSUANCE AND SALE. (a) The Company hereby issues to the Purchaser, and the Purchaser hereby purchases and accepts from the Company, 7,750 shares of Common Stock (the "Shares") at a purchase price of $483.00 per Share, for an aggregate purchase price of $3,744,260 (the "Purchase Price"). The Purchase Price is payable by delivery of a promissory note in the form attached as Exhibit A hereto (the "Promissory Note"). The Company acknowledges receipt from the Purchaser of the executed Promissory Note. To secure the Company's rights under the Repurchase Option described in Section 2 and to secure the Purchaser's obligations under the Promissory Note, the Company will retain possession of the certificate or certificates representing the Shares. SECTION 2. REPURCHASE OPTION. (a) Type of Shares. 1,292 of the Shares shall be "Time Vested Shares" and 6,458 of the Shares shall be "Performance Vested Shares." (b) Repurchase Option on Termination of Employment. If the Purchaser ceases to be an employee of the Company for any reason, with or without cause, including death, Disability or Retirement, (a "Termination"), the Company or its designees shall have an irrevocable, exclusive option (the "Repurchase Option") for a period of 180 days from the date of Termination to repurchase, at the original price per Share set forth in Section 1, all or any portion of the Shares held by the Purchaser or any of his transferees on the date of the Termination that have not been released from the Repurchase Option as provided in Section 3; provided that if the Company shall be legally prevented (whether by contract or statutorily) from making such repurchase during the foregoing 180-day period, then such Repurchase Option may be exercised within forty-five (45) days after the date on which it shall be legally permitted to make such repurchase, but in no event shall the Company be permitted to make such election after the third anniversary of the date of Termination. In the event that the Company exercises the Repurchase Option at any time after the 180th day after the date of Termination, the repurchase price per 2 Share shall be equal to the sum of (x) the original price per Share set forth in Section 1 plus (y) interest on the unpaid amount of the original price per Share set forth in Section 1 compounded annually, at a rate equal to seven percent (7.0%) for the period commencing on the 181st day after the date of Termination through the date on which the Shares are actually repurchased. As used herein "Disability" and "Retirement" shall have the meanings given to such terms in the Employment Agreement dated as of the date hereof (the "Employment Agreement"), between the Company and the Purchaser. (c) Exercise of Repurchase Option. The Repurchase Option shall be exercised by the Company, or its designee, by delivering to the Purchaser a written notice of exercise and either (i) a check in the amount of the purchase price, (ii) if there is an outstanding balance on the Promissory Note, a notice stating that the repurchase price shall be applied to reduce the outstanding principal and interest (or a portion thereof) on a dollar-for-dollar basis or (iii) a combination of (i) and (ii). Upon delivery of such notice and payment of the purchase price in any of the ways described above, the Company, or its designee, shall become the legal and beneficial owner of the Shares being repurchased and all rights and interest therein or related thereto, and the Company, or its designee, shall have the right to transfer to its own name the number of Shares being repurchased without further action by the Purchaser or any of his transferees. If the Company or its designee elect to exercise the repurchase rights pursuant to this Section 2 and the Purchaser or his transferee fails to deliver the Shares in accordance with the terms hereof, the Company, or its designee, may, at its option, in addition to all other remedies it may have, deposit the purchase price in an escrow account administered by an independent third party (to be held for the benefit of and payment over to the Purchaser or his transferee in accordance herewith), whereupon the Company shall by written notice to the Purchaser cancel on its books the certificates(s) representing such Shares registered in the name of the Purchaser and all of the Purchaser's or his transferee's right, title, and interest in and to such Shares shall terminate in all respects. SECTION 3. RELEASE FROM REPURCHASE OPTION. (a) If the Purchaser is employed by the Company at the time of the Purchaser's death, Disability or Retirement, all of the Performance Vested Shares shall be automatically released from the Repurchase Option on the effective date of such Termination. (b) If the Purchaser is employed by the Company continuously from the date hereof through January 1, 2001, and the Purchaser has not experienced a Termination on or prior to such date, all of the Time Vested Shares shall be automatically released from the Repurchase Option on such date. (c) The Performance Vested Shares shall be automatically released from the Repurchase Option in installments as follows: (i) if the "Market Value Per Share of Equity" or MVPSE (as defined in Section 3(d)) is at least $603.75 (such amount, and each such amount specified in subsections (ii) through (vi) below, the "Target MVPSE") on December 31, 2000 (such date, and each such date specified in subsections (ii) through (vi) below, a "Target Date"), 2 3 one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2000; (ii) if the MVPSE is at least $754.70 on December 31, 2001, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2001; (iii) if the MVPSE is at least $943.40 on December 31, 2002, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2002; (iv) if the MVPSE is at least $1,179.25 on December 31, 2003, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2003; (v) if the MVPSE is at least $1,474.10 on December 31, 2004, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2004; and (vi) if the MVPSE is at least $1,842.65 on December 31, 2005, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2005. (d) Market Value Per Share of Equity. The "Market Value Per Share of Equity" ("MVPSE") on any given date shall equal (I) other than in connection with an Acceleration Event, the quotient obtained by dividing (x) the difference between (A) the product of (1) Adjusted EBITDA and (2) 8.0 and (B) Adjusted Net Debt by (y) the number of outstanding Common Stock Equivalents or (II) in connection with an Acceleration Event, the price (whether payable in cash or property) per Common Stock Equivalent paid to stockholders or other securityholders of the Company in connection with such Acceleration Event, where, in each case of (I) and (II): "Common Stock Equivalent" means, at any time, one share of Common Stock or the right to acquire, whether or not such right is immediately exercisable, one share of Common Stock, whether evidenced by an option, warrant or convertible security; "EBITDA" equals earnings from operations before interest expense, taxes, depreciation and amortization on the applicable date, determined in accordance with generally accepted accounting principles, consistently applied ("GAAP"), calculated on a trailing twelve (12) month basis; "Adjusted EBITDA" equals the Company's EBITDA, as adjusted below, on the applicable date; "Net Debt" equals the Company's total indebtedness on the applicable date plus the Preferred Value minus balance sheet "Cash and Cash Equivalents" as of such date, determined in accordance with GAAP; 3 4 "Preferred Value" equals, at the time of determination, the sum of (x) with respect to the Company's Series A Preferred Stock, the Series A Liquidation Amount and (y) with respect to any other series of the Company's preferred stock, the amount to be paid by the Company to the holders of such series of preferred stock upon a liquidation of the Company or similar event in accordance with the terms of the Restated Charter. "Restated Charter" means the amended and restated certificate or articles of incorporation of the Company, as in effect at the time of determination, including any certificates of designation or articles of amendment. "Series A Liquidation Amount" has the meaning set forth in the Restated Charter. "Adjusted Net Debt" equals Net Debt, as adjusted below, on the applicable date. Adjusted EBITDA and Adjusted Net Debt shall be determined by making the following adjustments to the Company's EBITDA and to Net Debt: (i) if the Company completes a material acquisition (an "Acquisition") during any of the first three quarters of a calendar year, the EBITDA of the acquired entity or business for the portion of the calendar year prior to the Acquisition shall be included in Adjusted EBITDA; (ii) if the Company completes a material divestiture (a "Divestiture") during any of the first three quarters of a calendar year, the EBITDA of the divested assets or business for the portion of the calendar year prior to the Divestiture shall be excluded from Adjusted EBITDA; (iii) if the Company engages in an Acquisition during the fourth quarter of a calendar year, an amount equal to the total of (x) all debt incurred with respect to the Acquisition and (y) all transaction costs associated with the Acquisition shall be excluded from Adjusted Net Debt; and (iv) if the Company engages in a Divestiture during the fourth quarter of a calendar year, (x) the total amount of the proceeds received by the Company with respect to the Divestiture shall be included in Adjusted Net Debt, and (y) the total amount of the budgeted EBITDA for the divested assets or business for all periods of the calendar year subsequent to the Divestiture shall be included in Adjusted EBITDA. For purposes of this Agreement only, the MVPSE shall be determined within ninety (90) days after the end of each calendar year or at such other date as may be necessary to calculate MVPSE for purposes of this Agreement. (e) Percentage Release from Repurchase Option. If the MVPSE is, as of a Target Date, less than the applicable Target MVPSE, but is greater than ninety percent (90%) of the applicable Target MVPSE as of such Target Date, a percentage of the Performance Vested Shares available for release from the Repurchase Option as of such Target Date shall be released from the Repurchase Option according to the following proportionate release schedule: 4 5
Actual MVPSE as a Percentage of Performance Percentage of Target MVPSE Vested Shares Released -------------------------- ---------------------- 90.0% 0% 92.5% 25% 95.0% 50% 97.5% 75% 100% 100%.
The percentage of Performance Vested Shares released shall be prorated for one-half percentage increases between the MVPSE percentages shown (e.g., if the MVPSE is at least 90.5%, but less than 91.0%, of Target MVPSE, 5% of the Performance Vested Shares available for release from the Repurchase Option as of the Target Date would be released from the Repurchase Option). (f) "Clawback" Rights. Notwithstanding any other provision of this Section 3, if the MVPSE is less than the applicable Target MVPSE on any Target Date (a "Prior Unsatisfied Target"), but thereafter the MVPSE equals or exceeds the applicable Target MVPSE on any subsequent Target Date prior to December 31, 2005, all Performance Vested Shares which have not been previously released from the Repurchase Option with respect to all Prior Unsatisfied Targets occurring prior to such subsequent Target Date shall thereupon be released from the Repurchase Option. As an example, if the Purchaser had earned release of 0% and 0% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and the MVPSE was equal to $950.00 on December 31, 2002, then (A) 100% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option; and (B) 100% of the Performance Vested Shares scheduled for release as of December 31, 2000 and 2001, would be released from the Repurchase Option. As a further example, if the Purchaser had earned release of 0% and 0% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and the MVPSE was equal to $872.00 on December 31, 2002, then (A) 25% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option and (B) no additional Performance Vested Shares scheduled for release as of December 31, 2000 or 2001, would be released from the Repurchase Option. (g) Termination of Repurchase Option. Any Performance Vested Shares that are not released from the Repurchase Option according to the foregoing provisions of this Section 3 shall be released from the Repurchase Option on December 31, 2009, so long as the Purchaser is an employee of the Company on such date. (h) Acceleration Event. (i) An "Acceleration Event" shall occur in the event of a Change of Control of the Company, as such term is defined in the Indenture dated as of the date hereof between the Company and The Bank of New York, as trustee, as amended, modified or supplemented from time to time. 5 6 (ii) If an Acceleration Event occurs on or before January 1, 2001, all Time Vested Shares shall be released from the Repurchase Option immediately prior to the Acceleration Event. (iii) If an Acceleration Event occurs on or before December 31, 2005, some or all of the Performance Vested Shares that have not been released from the Repurchase Option (because the Target Dates and/or Target MVPSE have not yet been reached) shall be released from the Repurchase Option immediately prior to the Acceleration Event in an amount equal to the average percentage of Performance Vested Shares that have been released from the Repurchase Option up to the date of the Acceleration Event multiplied by the total number of Performance Vested Shares then subject to the Repurchase Option, taking into account the effect of Section 3(f). Further, for purposes of calculating the MVPSE in connection with an Acceleration Event, Target MVPSE shall be prorated to the end of the calendar month immediately prior to the Acceleration Event. For example, if the Purchaser had earned release of 0% and 80% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and an Acceleration Event occurred in July, 2002, and the actual MVPSE was equal to $807.00, then (A) the Target MVPSE would be prorated to June 30, 2002, pursuant to this Section 3(h) ($754.70 + [.50 x ($943.40 - $754.70)] = $849.05); (B) the June 30, 2002, actual MVPSE as a percentage of the prorated Target MVPSE as of December 31, 2002, would be 95%; (C) therefore, 50% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option, pursuant to Section 3(e), immediately prior to the Acceleration Event; and (D) immediately prior to the Acceleration Event, 43.33% [(0 + 80 + 50) / 3 = 43.33] of the Performance Vested Shares scheduled for release from the Repurchase Option based on the MVPSE as of December 31, 2003, 2004 and 2005, would be released from the Repurchase Option, all for the immediate benefit of the Purchaser. As a further example, if the Purchaser had earned release of 0% and 0% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and an Acceleration Event occurs in July, 2002, and if the actual MVPSE is $875.00, then (A) the Target MVPSE as of June 30, 2002 would be prorated to June 30, 2002, pursuant to this Section 3(h) ($849.05) (B) the June 30, 2002, actual MVPSE as a percentage of the prorated Target MVPSE as of December 31, 2002, would be 103%; (C) 100% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option pursuant to Section 3(e), immediately prior to the Acceleration Event; and (D) taking into account the effect of Section 3(f), and immediately prior to the Acceleration Event, 100% of the Performance Vested Shares scheduled for release from the Repurchase Option based on the MVPSE as of December 31, 2003, 2004 and 2005, would be released from the Repurchase Option, all for the immediate benefit of the Purchaser. If an Acceleration Event occurs after December 31, 2005, no additional Performance Vested Shares shall be released from the Repurchase Option pursuant to this Section 3(h). The Company may exercise the Repurchase Option effective as of the time of an Acceleration Event with respect to any Performance Vested Shares that are not released from the Repurchase Option, regardless of whether or not a termination of employment occurs. 6 7 (i) Fractional Shares. Notwithstanding any other provisions of this Agreement, no fractional shares shall be released from the Repurchase Option until a number of such fractional shares accumulate to equal one share. (j) No Share which is released from a Repurchase Option hereunder shall thereafter be subject to the Repurchase Option without the prior written consent of the Purchaser. SECTION 4. STOCKHOLDERS' AGREEMENT; RESTRICTIONS ON TRANSFER. (a) The Company and the Purchaser acknowledge and agree that the Shares are subject to and restricted by the Stockholders' Agreement dated as of the date hereof, among the Company and the stockholders of the Company signatory thereto, as amended, modified or supplemented from time to time (as amended, the "Stockholders' Agreement"), and with respect to such Shares, the Purchaser shall be a "Management Stockholder" as such term is used in the Stockholders' Agreement. (b) Notwithstanding anything to the contrary contained in the Stockholders' Agreement, the Purchaser may not sell, assign, encumber, dispose of or otherwise transfer (including any transfer by operation of law) any interest in any Shares that have not been released from the Repurchase Option. SECTION 5. EMPLOYMENT AGREEMENT. The parties agree that the option provided to the Purchaser under Section 6(c) of the Employment Agreement may not be exercised with respect to any of the Shares purchased under this Agreement until January 1, 2006. SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Purchaser, as of the date hereof, as set forth below. (a) The Company is a duly organized and validly existing corporation under the laws of the State of Utah and has the corporate power and the corporate authority to execute and deliver this Agreement and to perform its obligations as specified in this Agreement. (b) The Shares have been duly authorized by the Company and, upon receipt of the Purchase Price, will be validly issued, fully paid and nonassessable. (c) This Agreement has been duly authorized by the Board of Directors of the Company and has been executed and delivered by the Company. (d) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement do not contravene any provision the Restated Charter or By-laws of the Company or any agreement or other instrument binding upon the Company that is material to the Company, or any judgment, order or decree of any court or governmental authority having jurisdiction over the Company, and no material consent, approval, authorization or order of, or qualification with, any governmental authority is required 7 8 for the performance by the Company of its obligations under this Agreement, except such approvals as have been obtained and are in full force and effect. (e) Assuming that the representations and warranties of the Purchaser contained in this Agreement are true and correct, the offer, sale and delivery of the Shares in the manner contemplated by this Agreement is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents and warrants to the Company, as of the date hereof, as set forth below. (a) The execution and delivery by the Purchaser of, and the performance by the Purchaser of its obligations under, this Agreement, the Promissory Note, the Pledge Agreement dated as of the date hereof between the Company and the Purchaser and the other documents delivered in connection therewith, do not contravene any provision of applicable law or any agreement or other instrument binding upon the Purchaser that is material to the Purchaser, or any judgment, order or decree of any court or governmental authority having jurisdiction over the Purchaser, and no material consent, approval, authorization or order of, or qualification with, any governmental authority is required for the performance by the Purchaser of its obligations under this Agreement, except such approvals as have been obtained and are in full force and effect. (b) The Purchaser is an executive officer of the Company and has received all of the information concerning the Company, the Common Stock and any other matters relevant to his decision to purchase the Shares that he has requested. (c) The Purchaser, as a result of his position as an executive officer of the Company, is an "accredited investor" within the meaning of Rule 501 of Regulation D under the Securities Act. (d) The Purchaser is experienced in evaluating and making speculative investments, and has the capacity to protect his interest in connection with the acquisition of the Shares. In addition, the Purchaser has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of this investment. (e) The Purchaser is purchasing the Shares for his own account, for investment purposes only and not with a view to any public sale or distribution thereof. (f) The Purchaser understands that (i) the Shares have not been and will not be registered by the Company under the Securities Act, the Utah Uniform Securities Act or the securities laws of any other jurisdiction and will be considered "restricted securities" under the Securities Act, (ii) the Shares will bear the legends set forth in Section 9, (iii) the Company has no obligation to register the Shares under the Securities Act or any state securities law, and (iv) the Purchaser will not sell, transfer, hypothecate or otherwise dispose of any Shares other than in accordance with (A) the provisions, or exemptions therefrom, of the Securities Act and the rules 8 9 and regulations promulgated thereunder and the securities laws of all other applicable jurisdictions and (B) the Stockholders' Agreement and (C) this Agreement. (g) The Purchaser understands that the Company will rely upon the accuracy and truth of the representations and warranties of the Purchaser set forth in this Section 7, and the Purchaser hereby consents to such reliance. SECTION 8. TAX ELECTION. THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO DECIDE IF AN ELECTION UNDER SECTION 83(B) OF THE INTERNAL REVENUE CODE SHOULD BE MADE AND TO FILE TIMELY SUCH ELECTION, EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS BEHALF. SECTION 9. STOCK LEGENDS. In addition to any legend required by the Stockholders' Agreement, certificates representing the Shares shall bear the following additional legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF, AND RESTRICTIONS ON TRANSFER SET FORTH IN, A RESTRICTED STOCK PURCHASE AGREEMENT, DATED AS OF MAY 31, 2000, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY, AND SUCH SHARES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, ENCUMBERED, OTHERWISE GRANTED AS SECURITY, OR OTHERWISE DISPOSED OF, OTHER THAN IN ACCORDANCE THEREWITH." SECTION 10. FURTHER AGREEMENTS. The Company and the Purchaser hereby agree to execute, deliver and record or cause to be executed, delivered and recorded such further instruments, and take such other actions, as may be reasonably required to effectuate the transactions contemplated by this Agreement. SECTION 11. SURVIVAL. The respective representations, warranties, covenants and agreements made by the Company and the Purchaser in this Agreement shall survive the payment of the Purchase Price and the delivery of the Shares (notwithstanding any investigation made by or on behalf of any party to this Agreement). 9 10 SECTION 12. SUCCESSORS AND ASSIGNS. Subject to Section 4 hereof, this Agreement shall inure to the benefit of and be binding upon the Company, the Purchaser and their respective successors and permitted assigns. Nothing expressed in this Agreement is intended or shall be construed to give any person other than the persons referred to in the preceding sentence any legal or equitable right, remedy or claim under or in respect of this Agreement. Except as specified in Section 4, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by any party hereto without the prior written consent of the other party. SECTION 13. SEVERABILITY. Any covenant, provision, agreement or term of this Agreement that is prohibited or is held to be void or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement. SECTION 14. MODIFICATIONS, AMENDMENTS AND WAIVERS. At any time subsequent to the date hereof, (a) the parties hereto may, by written agreement, modify, amend or supplement any term or provision of this Agreement and (b) any term or provision of this Agreement may be waived by the party which is entitled to the benefits thereof. No course of dealing among the parties or delay in exercising rights and remedies shall operate as a waiver of such rights and remedies. SECTION 15. GENERAL MATTERS. (a) This Agreement constitutes the entire agreement and understanding of the parties to this Agreement with respect to the matters and transactions contemplated by this Agreement and supersedes all prior agreements and understandings whatsoever relating to such matters and transactions. The headings in this Agreement are for the purpose of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall together constitute one instrument. (b) The Option Cancellation and Restricted Stock Purchase Agreement dated as of February 22, 1999, between the Purchaser and the Company, as amended, modified or supplemented from time to time, is hereby terminated in its entirety with no further force or effect. SECTION 16. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Utah. 10 11 SECTION 17. NOTICES. All notices, requests, demands, claims and other communications hereunder shall be in writing and sufficient if delivered in accordance with the provisions set forth in the Stockholders' Agreement. SECTION 18. COUNTERPARTS AND FACSIMILE EXECUTION. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other party, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature to this Agreement that is delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement. SECTION 19. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. SECTION 20. MUTUAL CONTRIBUTION. The parties to this Agreement and their counsel have mutually contributed to its drafting. Consequently, no provision of this Agreement shall be construed against any party on the ground that one party drafted the provision or caused it to be drafted. ******** 11 12 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Stock Purchase Agreement as of the date first written above. HUNTSMAN PACKAGING CORPORATION By: /s/ RICHARD P. DURHAM ------------------------------ Name: Richard P. Durham Title: Chief Executive Officer PURCHASER /s/ JACK E. KNOTT ---------------------------------- Jack E. Knott 13 EXHIBIT A SECURED PROMISSORY NOTE (FULL RECOURSE) $3,744,260 May 31, 2000 Salt Lake City, Utah FOR VALUE RECEIVED, the undersigned, JACK E. KNOTT (the "Maker"), promises and agrees to pay to the order of HUNTSMAN PACKAGING CORPORATION ("HPC"), at 500 Huntsman Way, Salt Lake City, Utah 84108, or at such other place as the holder hereof may designate in writing, the principal sum of THREE MILLION SEVEN HUNDRED FORTY-FOUR THOUSAND TWO HUNDRED AND SIXTY ($3,744,260), together with interest, compounded annually, on the unpaid balance thereof at the rate of seven percent (7.0%) per annum from the date hereof until paid in cash. For the period prior to May 31, 2006, interest may, at the option of the Maker, not be paid in cash but be added to the principal hereof on each anniversary of the date of the original issuance hereof (the "PIK Option"). Principal and accrued interest outstanding under this Promissory Note (this "Note") as of May 31, 2006 (including through the exercise of the PIK Option), shall be paid in cash in three equal annual installments on each of (1) May 31, 2006, (2) May 31, 2007, and (3) May 31, 2008. Interest accruing on the unpaid principal of this Note (including through the exercise of the PIK Option) for the period commencing June 1, 2006, through final maturity, shall be paid on May 31, 2007, and at final maturity in cash. Prepayments shall be applied first toward the payment and satisfaction of accrued and unpaid interest, and the remainder shall be applied toward the reduction of principal. Principal and interest (except pursuant to the PIK Option) shall be payable only in lawful money of the United States of America. This Note has been made in accordance with that certain Restricted Stock Purchase Agreement, dated as of the date hereof (the "Restricted Stock Agreement"), between HPC and the Maker. For so long as any amounts of principal or interest under this Note shall remain unpaid, upon the transfer of any of the Shares except for a transfer of Shares to any Permitted Transferee (as defined in the Stockholders' Agreement) or upon the exercise of any party of the rights set forth in Section 6 of the Employment Agreement dated as of the date hereof between the Maker and HPC, the lesser of (a) the total amount of any cash paid in consideration of the transfer of the Shares, net of any expenses reasonably incurred in connection with such transfer (the "Net Proceeds") or (b) the total amount of all unpaid principal and interest under this Note (as of the applicable payment date), shall be paid to the holder of this Note within three (3) business days of the date the Net Proceeds are received by or on behalf of the Maker. Any payments made in accordance with this paragraph shall be prepayments and shall be treated as specified in the following paragraph. The Maker may prepay at any time the obligations hereunder, in whole or in part, without penalty. The Maker, at his option, may pay amounts in excess of the annual payments called for herein. Such excess amounts shall be applied either to reduction of the principal balance hereof or in prepayment of designated future annual payments, at the election of the Maker, which election must be made in writing at the time the excess amount is paid. If the election is to apply to the excess amount against future annual payment(s), the Maker must designate the particular annual payment(s) which are being paid in advance. If the Maker makes no timely election, excess amounts shall be applied in reduction of the principal balance hereof in inverse order of maturity. If the excess amount is applied in reduction of the principal balance hereof (whether by reason of election or otherwise), the payment shall not postpone or suspend the obligation of the Maker to make the annual payments called for herein. 14 The occurrence of any of the following constitutes an "Event of Default": (a) The Maker fails to make any payment hereunder when due or within fifteen (15) days thereafter; (b) the Maker defaults in the performance of any covenant or agreement contained herein, in the Restricted Stock Agreement (other than a covenant or agreement to make payments hereunder) or in the Pledge Agreement dated as of the date hereof between the Maker and HPC; (c) a petition is filed seeking that the Maker be adjudged bankrupt; (d) the Maker makes a general assignment for the benefit of creditors; (e) the Maker suffers the appointment of a receiver; or (f) the Maker becomes insolvent. Upon the occurrence of an Event of Default, the entire remaining unpaid balance of both principal and interest owing hereunder shall, at the option of the holder hereof and without notice or demand, become immediately due and payable. Thereafter said unpaid principal balance and interest shall, until paid and both before and after judgment, earn interest at the rate of ten percent (10%) per annum. The acceptance of any installment or payment after the occurrence of an Event of Default shall not constitute a waiver of the holder's right of acceleration with respect to such Event of Default or any subsequent Event of Default. In the event any payment under this Note is not made at the time and in the manner required, the Maker agrees to pay all costs and expenses (regardless of the particular nature thereof and whether incurred with or without suit or before or after judgment) which may be incurred by the holder hereof in connection with the enforcement of any of its rights under this Note, including court costs and attorneys' fees. The Maker hereby acknowledges the security interests granted by the Maker to HPC pursuant to the terms of the Pledge Agreement dated as of the date hereof between the Maker and HPC. Any notice or demand hereunder shall be made in accordance with the provisions set forth in the Restricted Stock Agreement. The Maker expressly agrees that this Note, or any payment hereunder, may be extended without notice from time to time by the holder hereof without in any way affecting the liability of the Maker. This Note is a full recourse promissory note and shall be the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon their respective heirs, personal representatives, successors and assigns. This Note shall be governed by and construed in accordance with the laws of the State of Utah. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Restricted Stock Agreement. ******** IN WITNESS WHEREOF, the undersigned Maker has executed this Note as of the date first written above. ------------------------------ Jack E. Knott EX-10.18 25 ex10-18.txt RESTRICTED STOCK AGREEMENT 1 EXHIBIT 10.18 RESTRICTED STOCK PURCHASE AGREEMENT dated as of May 31, 2000 (this "Agreement"), between Huntsman Packaging Corporation, a Utah corporation (the "Company"), and SCOTT K. SORENSEN (the "Purchaser"). WHEREAS, the Purchaser is an employee of the Company; WHEREAS, the Company desires to issue to the Purchaser, and the Purchaser desires to purchase from the Company, shares of common stock of the Company (the "Common Stock") in accordance with the terms and conditions set forth below; NOW, THEREFORE, in consideration of the agreements, covenants and promises contained in this Agreement, intending to be legally bound, the Company and the Purchaser agree as set forth below. SECTION 1. ISSUANCE AND SALE. (a) The Company hereby issues to the Purchaser, and the Purchaser hereby purchases and accepts from the Company, 6,750 shares of Common Stock (the "Shares") at a purchase price of $483.00 per Share, for an aggregate purchase price of $3,261,129 (the "Purchase Price"). The Purchase Price is payable by delivery of a promissory note in the form attached as Exhibit A hereto (the "Promissory Note"). The Company acknowledges receipt from the Purchaser of the executed Promissory Note. To secure the Company's rights under the Repurchase Option described in Section 2 and to secure the Purchaser's obligations under the Promissory Note, the Company will retain possession of the certificate or certificates representing the Shares. SECTION 2. REPURCHASE OPTION. (a) Type of Shares. 1,125 of the Shares shall be "Time Vested Shares" and 5,625 of the Shares shall be "Performance Vested Shares." (b) Repurchase Option on Termination of Employment. If the Purchaser ceases to be an employee of the Company for any reason, with or without cause, including death, Disability or Retirement, (a "Termination"), the Company or its designees shall have an irrevocable, exclusive option (the "Repurchase Option") for a period of 180 days from the date of Termination to repurchase, at the original price per Share set forth in Section 1, all or any portion of the Shares held by the Purchaser or any of his transferees on the date of the Termination that have not been released from the Repurchase Option as provided in Section 3; provided that if the Company shall be legally prevented (whether by contract or statutorily) from making such repurchase during the foregoing 180-day period, then such Repurchase Option may be exercised within forty-five (45) days after the date on which it shall be legally permitted to make such repurchase, but in no event shall the Company be permitted to make such election after the third anniversary of the date of Termination. In the event that the Company exercises the Repurchase Option at any time after the 180th day after the date of Termination, the repurchase price per 2 Share shall be equal to the sum of (x) the original price per Share set forth in Section 1 plus (y) interest on the unpaid amount of the original price per Share set forth in Section 1 compounded annually, at a rate equal to seven percent (7.0%) for the period commencing on the 181st day after the date of Termination through the date on which the Shares are actually repurchased. As used herein "Disability" and "Retirement" shall have the meanings given to such terms in the Employment Agreement dated as of the date hereof (the "Employment Agreement"), between the Company and the Purchaser. (c) Exercise of Repurchase Option. The Repurchase Option shall be exercised by the Company, or its designee, by delivering to the Purchaser a written notice of exercise and either (i) a check in the amount of the purchase price, (ii) if there is an outstanding balance on the Promissory Note, a notice stating that the repurchase price shall be applied to reduce the outstanding principal and interest (or a portion thereof) on a dollar-for-dollar basis or (iii) a combination of (i) and (ii). Upon delivery of such notice and payment of the purchase price in any of the ways described above, the Company, or its designee, shall become the legal and beneficial owner of the Shares being repurchased and all rights and interest therein or related thereto, and the Company, or its designee, shall have the right to transfer to its own name the number of Shares being repurchased without further action by the Purchaser or any of his transferees. If the Company or its designee elect to exercise the repurchase rights pursuant to this Section 2 and the Purchaser or his transferee fails to deliver the Shares in accordance with the terms hereof, the Company, or its designee, may, at its option, in addition to all other remedies it may have, deposit the purchase price in an escrow account administered by an independent third party (to be held for the benefit of and payment over to the Purchaser or his transferee in accordance herewith), whereupon the Company shall by written notice to the Purchaser cancel on its books the certificates(s) representing such Shares registered in the name of the Purchaser and all of the Purchaser's or his transferee's right, title, and interest in and to such Shares shall terminate in all respects. SECTION 3. RELEASE FROM REPURCHASE OPTION. (a) If the Purchaser is employed by the Company at the time of the Purchaser's death, Disability or Retirement, all of the Performance Vested Shares shall be automatically released from the Repurchase Option on the effective date of such Termination. (b) If the Purchaser is employed by the Company continuously from the date hereof through January 1, 2001, and the Purchaser has not experienced a Termination on or prior to such date, all of the Time Vested Shares shall be automatically released from the Repurchase Option on such date. (c) The Performance Vested Shares shall be automatically released from the Repurchase Option in installments as follows: (i) if the "Market Value Per Share of Equity" or MVPSE (as defined in Section 3(d)) is at least $603.75 (such amount, and each such amount specified in subsections (ii) through (vi) below, the "Target MVPSE") on December 31, 2000 (such date, and each such date specified in subsections (ii) through (vi) below, a "Target Date"), 2 3 one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2000; (ii) if the MVPSE is at least $754.70 on December 31, 2001, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2001; (iii) if the MVPSE is at least $943.40 on December 31, 2002, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2002; (iv) if the MVPSE is at least $1,179.25 on December 31, 2003, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2003; (v) if the MVPSE is at least $1,474.10 on December 31, 2004, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2004; and (vi) if the MVPSE is at least $1,842.65 on December 31, 2005, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2005. (d) Market Value Per Share of Equity. The "Market Value Per Share of Equity" ("MVPSE") on any given date shall equal (I) other than in connection with an Acceleration Event, the quotient obtained by dividing (x) the difference between (A) the product of (1) Adjusted EBITDA and (2) 8.0 and (B) Adjusted Net Debt by (y) the number of outstanding Common Stock Equivalents or (II) in connection with an Acceleration Event, the price (whether payable in cash or property) per Common Stock Equivalent paid to stockholders or other securityholders of the Company in connection with such Acceleration Event, where, in each case of (I) and (II): "Common Stock Equivalent" means, at any time, one share of Common Stock or the right to acquire, whether or not such right is immediately exercisable, one share of Common Stock, whether evidenced by an option, warrant or convertible security; "EBITDA" equals earnings from operations before interest expense, taxes, depreciation and amortization on the applicable date, determined in accordance with generally accepted accounting principles, consistently applied ("GAAP"), calculated on a trailing twelve (12) month basis; "Adjusted EBITDA" equals the Company's EBITDA, as adjusted below, on the applicable date; "Net Debt" equals the Company's total indebtedness on the applicable date plus the Preferred Value minus balance sheet "Cash and Cash Equivalents" as of such date, determined in accordance with GAAP; 3 4 "Preferred Value" equals, at the time of determination, the sum of (x) with respect to the Company's Series A Preferred Stock, the Series A Liquidation Amount and (y) with respect to any other series of the Company's preferred stock, the amount to be paid by the Company to the holders of such series of preferred stock upon a liquidation of the Company or similar event in accordance with the terms of the Restated Charter. "Restated Charter" means the amended and restated certificate or articles of incorporation of the Company, as in effect at the time of determination, including any certificates of designation or articles of amendment. "Series A Liquidation Amount" has the meaning set forth in the Restated Charter. "Adjusted Net Debt" equals Net Debt, as adjusted below, on the applicable date. Adjusted EBITDA and Adjusted Net Debt shall be determined by making the following adjustments to the Company's EBITDA and to Net Debt: (i) if the Company completes a material acquisition (an "Acquisition") during any of the first three quarters of a calendar year, the EBITDA of the acquired entity or business for the portion of the calendar year prior to the Acquisition shall be included in Adjusted EBITDA; (ii) if the Company completes a material divestiture (a "Divestiture") during any of the first three quarters of a calendar year, the EBITDA of the divested assets or business for the portion of the calendar year prior to the Divestiture shall be excluded from Adjusted EBITDA; (iii) if the Company engages in an Acquisition during the fourth quarter of a calendar year, an amount equal to the total of (x) all debt incurred with respect to the Acquisition and (y) all transaction costs associated with the Acquisition shall be excluded from Adjusted Net Debt; and (iv) if the Company engages in a Divestiture during the fourth quarter of a calendar year, (x) the total amount of the proceeds received by the Company with respect to the Divestiture shall be included in Adjusted Net Debt, and (y) the total amount of the budgeted EBITDA for the divested assets or business for all periods of the calendar year subsequent to the Divestiture shall be included in Adjusted EBITDA. For purposes of this Agreement only, the MVPSE shall be determined within ninety (90) days after the end of each calendar year or at such other date as may be necessary to calculate MVPSE for purposes of this Agreement. (e) Percentage Release from Repurchase Option. If the MVPSE is, as of a Target Date, less than the applicable Target MVPSE, but is greater than ninety percent (90%) of the applicable Target MVPSE as of such Target Date, a percentage of the Performance Vested Shares available for release from the Repurchase Option as of such Target Date shall be released from the Repurchase Option according to the following proportionate release schedule: 4 5
Actual MVPSE as a Percentage of Performance Percentage of Target MVPSE Vested Shares Released -------------------------- ---------------------- 90.0% 0% 92.5% 25% 95.0% 50% 97.5% 75% 100% 100%.
The percentage of Performance Vested Shares released shall be prorated for one-half percentage increases between the MVPSE percentages shown (e.g., if the MVPSE is at least 90.5%, but less than 91.0%, of Target MVPSE, 5% of the Performance Vested Shares available for release from the Repurchase Option as of the Target Date would be released from the Repurchase Option). (f) "Clawback" Rights. Notwithstanding any other provision of this Section 3, if the MVPSE is less than the applicable Target MVPSE on any Target Date (a "Prior Unsatisfied Target"), but thereafter the MVPSE equals or exceeds the applicable Target MVPSE on any subsequent Target Date prior to December 31, 2005, all Performance Vested Shares which have not been previously released from the Repurchase Option with respect to all Prior Unsatisfied Targets occurring prior to such subsequent Target Date shall thereupon be released from the Repurchase Option. As an example, if the Purchaser had earned release of 0% and 0% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and the MVPSE was equal to $950.00 on December 31, 2002, then (A) 100% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option; and (B) 100% of the Performance Vested Shares scheduled for release as of December 31, 2000 and 2001, would be released from the Repurchase Option. As a further example, if the Purchaser had earned release of 0% and 0% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and the MVPSE was equal to $872.00 on December 31, 2002, then (A) 25% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option and (B) no additional Performance Vested Shares scheduled for release as of December 31, 2000 or 2001, would be released from the Repurchase Option. (g) Termination of Repurchase Option. Any Performance Vested Shares that are not released from the Repurchase Option according to the foregoing provisions of this Section 3 shall be released from the Repurchase Option on December 31, 2009, so long as the Purchaser is an employee of the Company on such date. (h) Acceleration Event. (i) An "Acceleration Event" shall occur in the event of a Change of Control of the Company, as such term is defined in the Indenture dated as of the date hereof between the Company and The Bank of New York, as trustee, as amended, modified or supplemented from time to time. 5 6 (ii) If an Acceleration Event occurs on or before January 1, 2001, all Time Vested Shares shall be released from the Repurchase Option immediately prior to the Acceleration Event. (iii) If an Acceleration Event occurs on or before December 31, 2005, some or all of the Performance Vested Shares that have not been released from the Repurchase Option (because the Target Dates and/or Target MVPSE have not yet been reached) shall be released from the Repurchase Option immediately prior to the Acceleration Event in an amount equal to the average percentage of Performance Vested Shares that have been released from the Repurchase Option up to the date of the Acceleration Event multiplied by the total number of Performance Vested Shares then subject to the Repurchase Option, taking into account the effect of Section 3(f). Further, for purposes of calculating the MVPSE in connection with an Acceleration Event, Target MVPSE shall be prorated to the end of the calendar month immediately prior to the Acceleration Event. For example, if the Purchaser had earned release of 0% and 80% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and an Acceleration Event occurred in July, 2002, and the actual MVPSE was equal to $807.00, then (A) the Target MVPSE would be prorated to June 30, 2002, pursuant to this Section 3(h) ($754.70 + [.50 x ($943.40 - $754.70)] = $849.05); (B) the June 30, 2002, actual MVPSE as a percentage of the prorated Target MVPSE as of December 31, 2002, would be 95%; (C) therefore, 50% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option, pursuant to Section 3(e), immediately prior to the Acceleration Event; and (D) immediately prior to the Acceleration Event, 43.33% [(0 + 80 + 50) / 3 = 43.33] of the Performance Vested Shares scheduled for release from the Repurchase Option based on the MVPSE as of December 31, 2003, 2004 and 2005, would be released from the Repurchase Option, all for the immediate benefit of the Purchaser. As a further example, if the Purchaser had earned release of 0% and 0% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and an Acceleration Event occurs in July, 2002, and if the actual MVPSE is $875.00, then (A) the Target MVPSE as of June 30, 2002 would be prorated to June 30, 2002, pursuant to this Section 3(h) ($849.05) (B) the June 30, 2002, actual MVPSE as a percentage of the prorated Target MVPSE as of December 31, 2002, would be 103%; (C) 100% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option pursuant to Section 3(e), immediately prior to the Acceleration Event; and (D) taking into account the effect of Section 3(f), and immediately prior to the Acceleration Event, 100% of the Performance Vested Shares scheduled for release from the Repurchase Option based on the MVPSE as of December 31, 2003, 2004 and 2005, would be released from the Repurchase Option, all for the immediate benefit of the Purchaser. If an Acceleration Event occurs after December 31, 2005, no additional Performance Vested Shares shall be released from the Repurchase Option pursuant to this Section 3(h). The Company may exercise the Repurchase Option effective as of the time of an Acceleration Event with respect to any Performance Vested Shares that are not released from the Repurchase Option, regardless of whether or not a termination of employment occurs. 6 7 (i) Fractional Shares. Notwithstanding any other provisions of this Agreement, no fractional shares shall be released from the Repurchase Option until a number of such fractional shares accumulate to equal one share. (j) No Share which is released from a Repurchase Option hereunder shall thereafter be subject to the Repurchase Option without the prior written consent of the Purchaser. SECTION 4. STOCKHOLDERS' AGREEMENT; RESTRICTIONS ON TRANSFER. (a) The Company and the Purchaser acknowledge and agree that the Shares are subject to and restricted by the Stockholders' Agreement dated as of the date hereof, among the Company and the stockholders of the Company signatory thereto, as amended, modified or supplemented from time to time (as amended, the "Stockholders' Agreement"), and with respect to such Shares, the Purchaser shall be a "Management Stockholder" as such term is used in the Stockholders' Agreement. (b) Notwithstanding anything to the contrary contained in the Stockholders' Agreement, the Purchaser may not sell, assign, encumber, dispose of or otherwise transfer (including any transfer by operation of law) any interest in any Shares that have not been released from the Repurchase Option other than a transfer to Sorensen Capital, LLC, provided that Sorensen Capital, LLC agrees to be bound by all of the terms and provisions of this Agreement, the Promissory Note and the Pledge Agreement dated as of the date hereof between the Company and the Purchaser (the "Pledge Agreement"). SECTION 5. EMPLOYMENT AGREEMENT. The parties agree that the option provided to the Purchaser under Section 6(c) of the Employment Agreement may not be exercised with respect to any of the Shares purchased under this Agreement until January 1, 2006. SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Purchaser, as of the date hereof, as set forth below. (a) The Company is a duly organized and validly existing corporation under the laws of the State of Utah and has the corporate power and the corporate authority to execute and deliver this Agreement and to perform its obligations as specified in this Agreement. (b) The Shares have been duly authorized by the Company and, upon receipt of the Purchase Price, will be validly issued, fully paid and nonassessable. (c) This Agreement has been duly authorized by the Board of Directors of the Company and has been executed and delivered by the Company. (d) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement do not contravene any provision the Restated Charter or By-laws of the Company or any agreement or other instrument binding upon the 7 8 Company that is material to the Company, or any judgment, order or decree of any court or governmental authority having jurisdiction over the Company, and no material consent, approval, authorization or order of, or qualification with, any governmental authority is required for the performance by the Company of its obligations under this Agreement, except such approvals as have been obtained and are in full force and effect. (e) Assuming that the representations and warranties of the Purchaser contained in this Agreement are true and correct, the offer, sale and delivery of the Shares in the manner contemplated by this Agreement is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents and warrants to the Company, as of the date hereof, as set forth below. (a) The execution and delivery by the Purchaser of, and the performance by the Purchaser of its obligations under, this Agreement, the Promissory Note, the Pledge Agreement and the other documents delivered in connection therewith, do not contravene any provision of applicable law or any agreement or other instrument binding upon the Purchaser that is material to the Purchaser, or any judgment, order or decree of any court or governmental authority having jurisdiction over the Purchaser, and no material consent, approval, authorization or order of, or qualification with, any governmental authority is required for the performance by the Purchaser of its obligations under this Agreement, except such approvals as have been obtained and are in full force and effect. (b) The Purchaser is an executive officer of the Company and has received all of the information concerning the Company, the Common Stock and any other matters relevant to his decision to purchase the Shares that he has requested. (c) The Purchaser, as a result of his position as an executive officer of the Company, is an "accredited investor" within the meaning of Rule 501 of Regulation D under the Securities Act. (d) The Purchaser is experienced in evaluating and making speculative investments, and has the capacity to protect his interest in connection with the acquisition of the Shares. In addition, the Purchaser has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of this investment. (e) The Purchaser is purchasing the Shares for his own account, for investment purposes only and not with a view to any public sale or distribution thereof. (f) The Purchaser understands that (i) the Shares have not been and will not be registered by the Company under the Securities Act, the Utah Uniform Securities Act or the securities laws of any other jurisdiction and will be considered "restricted securities" under the Securities Act, (ii) the Shares will bear the legends set forth in Section 9, (iii) the Company has no obligation to register the Shares under the Securities Act or any state securities law, and (iv) the Purchaser will not sell, transfer, hypothecate or otherwise dispose of any Shares other than in 8 9 accordance with (A) the provisions, or exemptions therefrom, of the Securities Act and the rules and regulations promulgated thereunder and the securities laws of all other applicable jurisdictions and (B) the Stockholders' Agreement and (C) this Agreement. (g) The Purchaser understands that the Company will rely upon the accuracy and truth of the representations and warranties of the Purchaser set forth in this Section 7, and the Purchaser hereby consents to such reliance. SECTION 8. TAX ELECTION. THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO DECIDE IF AN ELECTION UNDER SECTION 83(B) OF THE INTERNAL REVENUE CODE SHOULD BE MADE AND TO FILE TIMELY SUCH ELECTION, EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS BEHALF. SECTION 9. STOCK LEGENDS. In addition to any legend required by the Stockholders' Agreement, certificates representing the Shares shall bear the following additional legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF, AND RESTRICTIONS ON TRANSFER SET FORTH IN, A RESTRICTED STOCK PURCHASE AGREEMENT, DATED AS OF MAY 31, 2000, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY, AND SUCH SHARES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, ENCUMBERED, OTHERWISE GRANTED AS SECURITY, OR OTHERWISE DISPOSED OF, OTHER THAN IN ACCORDANCE THEREWITH." SECTION 10. FURTHER AGREEMENTS. The Company and the Purchaser hereby agree to execute, deliver and record or cause to be executed, delivered and recorded such further instruments, and take such other actions, as may be reasonably required to effectuate the transactions contemplated by this Agreement. SECTION 11. SURVIVAL. The respective representations, warranties, covenants and agreements made by the Company and the Purchaser in this Agreement shall survive the payment of the Purchase Price and the delivery of the Shares (notwithstanding any investigation made by or on behalf of any party to this Agreement). 9 10 SECTION 12. SUCCESSORS AND ASSIGNS. Subject to Section 4 hereof, this Agreement shall inure to the benefit of and be binding upon the Company, the Purchaser and their respective successors and permitted assigns. Nothing expressed in this Agreement is intended or shall be construed to give any person other than the persons referred to in the preceding sentence any legal or equitable right, remedy or claim under or in respect of this Agreement. Except as specified in Section 4, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by any party hereto without the prior written consent of the other party. SECTION 13. SEVERABILITY. Any covenant, provision, agreement or term of this Agreement that is prohibited or is held to be void or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement. SECTION 14. MODIFICATIONS, AMENDMENTS AND WAIVERS. At any time subsequent to the date hereof, (a) the parties hereto may, by written agreement, modify, amend or supplement any term or provision of this Agreement and (b) any term or provision of this Agreement may be waived by the party which is entitled to the benefits thereof. No course of dealing among the parties or delay in exercising rights and remedies shall operate as a waiver of such rights and remedies. SECTION 15. GENERAL MATTERS. (a) This Agreement constitutes the entire agreement and understanding of the parties to this Agreement with respect to the matters and transactions contemplated by this Agreement and supersedes all prior agreements and understandings whatsoever relating to such matters and transactions. The headings in this Agreement are for the purpose of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall together constitute one instrument. (b) The Option Cancellation and Restricted Stock Purchase Agreement dated as of February 22, 1999, between the Purchaser and the Company, as amended, modified or supplemented from time to time, is hereby terminated in its entirety with no further force or effect. SECTION 16. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Utah. 10 11 SECTION 17. NOTICES. All notices, requests, demands, claims and other communications hereunder shall be in writing and sufficient if delivered in accordance with the provisions set forth in the Stockholders' Agreement. SECTION 18. COUNTERPARTS AND FACSIMILE EXECUTION. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other party, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature to this Agreement that is delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement. SECTION 19. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. SECTION 20. MUTUAL CONTRIBUTION. The parties to this Agreement and their counsel have mutually contributed to its drafting. Consequently, no provision of this Agreement shall be construed against any party on the ground that one party drafted the provision or caused it to be drafted. ******** 11 12 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Stock Purchase Agreement as of the date first written above. HUNTSMAN PACKAGING CORPORATION By:/s/ RICHARD P. DURHAM ---------------------------------- Name: Richard P. Durham Title: Chief Executive Officer PURCHASER /s/ SCOTT K. SORENSEN ------------------------------------- Scott K. Sorensen 13 EXHIBIT A SECURED PROMISSORY NOTE (FULL RECOURSE) $3,261,129 May 31, 2000 Salt Lake City, Utah FOR VALUE RECEIVED, the undersigned, SCOTT K. SORENSEN (the "Maker"), promises and agrees to pay to the order of HUNTSMAN PACKAGING CORPORATION ("HPC"), at 500 Huntsman Way, Salt Lake City, Utah 84108, or at such other place as the holder hereof may designate in writing, the principal sum of THREE MILLION TWO HUNDRED SIXTY-ONE THOUSAND ONE HUNDRED AND TWENTY-NINE ($3,261,129), together with interest, compounded annually, on the unpaid balance thereof at the rate of seven percent (7.0%) per annum from the date hereof until paid in cash. For the period prior to May 31, 2006, interest may, at the option of the Maker, not be paid in cash but be added to the principal hereof on each anniversary of the date of the original issuance hereof (the "PIK Option"). Principal and accrued interest outstanding under this Promissory Note (this "Note") as of May 31, 2006 (including through the exercise of the PIK Option), shall be paid in cash in three equal annual installments on each of (1) May 31, 2006, (2) May 31, 2007, and (3) May 31, 2008. Interest accruing on the unpaid principal of this Note (including through the exercise of the PIK Option) for the period commencing June 1, 2006, through final maturity, shall be paid on May 31, 2007, and at final maturity in cash. Prepayments shall be applied first toward the payment and satisfaction of accrued and unpaid interest, and the remainder shall be applied toward the reduction of principal. Principal and interest (except pursuant to the PIK Option) shall be payable only in lawful money of the United States of America. This Note has been made in accordance with that certain Restricted Stock Purchase Agreement, dated as of the date hereof (the "Restricted Stock Agreement"), between HPC and the Maker. For so long as any amounts of principal or interest under this Note shall remain unpaid, upon the transfer of any of the Shares except for a transfer of Shares to any Permitted Transferee (as defined in the Stockholders' Agreement) or upon the exercise of any party of the rights set forth in Section 6 of the Employment Agreement dated as of the date hereof between the Maker and HPC, the lesser of (a) the total amount of any cash paid in consideration of the transfer of the Shares, net of any expenses reasonably incurred in connection with such transfer (the "Net Proceeds") or (b) the total amount of all unpaid principal and interest under this Note (as of the applicable payment date), shall be paid to the holder of this Note within three (3) business days of the date the Net Proceeds are received by or on behalf of the Maker. Any payments made in accordance with this paragraph shall be prepayments and shall be treated as specified in the following paragraph. The Maker may prepay at any time the obligations hereunder, in whole or in part, without penalty. The Maker, at his option, may pay amounts in excess of the annual payments called for herein. Such excess amounts shall be applied either to reduction of the principal balance hereof or in prepayment of designated future annual payments, at the election of the Maker, which election must be made in writing at the time the excess amount is paid. If the election is to apply to the excess amount against future annual payment(s), the Maker must designate the particular annual payment(s) which are being paid in advance. If the Maker makes no timely election, excess amounts shall be applied in reduction of the principal balance hereof in inverse order of maturity. If the excess amount is applied in reduction of the principal balance hereof (whether by reason of election or otherwise), the payment shall not postpone or suspend the obligation of the Maker to make the annual payments called for herein. 14 The occurrence of any of the following constitutes an "Event of Default": (a) The Maker fails to make any payment hereunder when due or within fifteen (15) days thereafter; (b) the Maker defaults in the performance of any covenant or agreement contained herein, in the Restricted Stock Agreement (other than a covenant or agreement to make payments hereunder) or in the Pledge Agreement dated as of the date hereof between the Maker and HPC; (c) a petition is filed seeking that the Maker be adjudged bankrupt; (d) the Maker makes a general assignment for the benefit of creditors; (e) the Maker suffers the appointment of a receiver; or (f) the Maker becomes insolvent. Upon the occurrence of an Event of Default, the entire remaining unpaid balance of both principal and interest owing hereunder shall, at the option of the holder hereof and without notice or demand, become immediately due and payable. Thereafter said unpaid principal balance and interest shall, until paid and both before and after judgment, earn interest at the rate of ten percent (10%) per annum. The acceptance of any installment or payment after the occurrence of an Event of Default shall not constitute a waiver of the holder's right of acceleration with respect to such Event of Default or any subsequent Event of Default. In the event any payment under this Note is not made at the time and in the manner required, the Maker agrees to pay all costs and expenses (regardless of the particular nature thereof and whether incurred with or without suit or before or after judgment) which may be incurred by the holder hereof in connection with the enforcement of any of its rights under this Note, including court costs and attorneys' fees. The Maker hereby acknowledges the security interests granted by the Maker to HPC pursuant to the terms of the Pledge Agreement dated as of the date hereof between the Maker and HPC. Any notice or demand hereunder shall be made in accordance with the provisions set forth in the Restricted Stock Agreement. The Maker expressly agrees that this Note, or any payment hereunder, may be extended without notice from time to time by the holder hereof without in any way affecting the liability of the Maker. This Note is a full recourse promissory note and shall be the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon their respective heirs, personal representatives, successors and assigns. This Note shall be governed by and construed in accordance with the laws of the State of Utah. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Restricted Stock Agreement. ******** IN WITNESS WHEREOF, the undersigned Maker has executed this Note as of the date first written above. ------------------------------ Scott K. Sorensen EX-10.19 26 ex10-19.txt RESTRICTED STOCK AGREEMENT 1 EXHIBIT 10.19 RESTRICTED STOCK PURCHASE AGREEMENT dated as of May 31, 2000 (this "Agreement"), between Huntsman Packaging Corporation, a Utah corporation (the "Company"), and RONALD G. MOFFITT (the "Purchaser"). WHEREAS, the Purchaser is an employee of the Company; WHEREAS, the Company desires to issue to the Purchaser, and the Purchaser desires to purchase from the Company, shares of common stock of the Company (the "Common Stock") in accordance with the terms and conditions set forth below; NOW, THEREFORE, in consideration of the agreements, covenants and promises contained in this Agreement, intending to be legally bound, the Company and the Purchaser agree as set forth below. SECTION 1. ISSUANCE AND SALE. (a) The Company hereby issues to the Purchaser, and the Purchaser hereby purchases and accepts from the Company, 3,750 shares of Common Stock (the "Shares") at a purchase price of $483.00 per Share, for an aggregate purchase price of $1,811,739 (the "Purchase Price"). The Purchase Price is payable by delivery of a promissory note in the form attached as Exhibit A hereto (the "Promissory Note"). The Company acknowledges receipt from the Purchaser of the executed Promissory Note. To secure the Company's rights under the Repurchase Option described in Section 2 and to secure the Purchaser's obligations under the Promissory Note, the Company will retain possession of the certificate or certificates representing the Shares. SECTION 2. REPURCHASE OPTION. (a) Type of Shares. 625 of the Shares shall be "Time Vested Shares" and 3,125 of the Shares shall be "Performance Vested Shares." (b) Repurchase Option on Termination of Employment. If the Purchaser ceases to be an employee of the Company for any reason, with or without cause, including death, Disability or Retirement, (a "Termination"), the Company or its designees shall have an irrevocable, exclusive option (the "Repurchase Option") for a period of 180 days from the date of Termination to repurchase, at the original price per Share set forth in Section 1, all or any portion of the Shares held by the Purchaser or any of his transferees on the date of the Termination that have not been released from the Repurchase Option as provided in Section 3; provided that if the Company shall be legally prevented (whether by contract or statutorily) from making such repurchase during the foregoing 180-day period, then such Repurchase Option may be exercised within forty-five (45) days after the date on which it shall be legally permitted to make such repurchase, but in no event shall the Company be permitted to make such election after the third anniversary of the date of Termination. In the event that the Company exercises the Repurchase Option at any time after the 180th day after the date of Termination, the repurchase price per 2 Share shall be equal to the sum of (x) the original price per Share set forth in Section 1 plus (y) interest on the unpaid amount of the original price per Share set forth in Section 1 compounded annually, at a rate equal to seven percent (7.0%) for the period commencing on the 181st day after the date of Termination through the date on which the Shares are actually repurchased. As used herein "Disability" and "Retirement" shall have the meanings given to such terms in the Employment Agreement dated as of the date hereof (the "Employment Agreement"), between the Company and the Purchaser. (c) Exercise of Repurchase Option. The Repurchase Option shall be exercised by the Company, or its designee, by delivering to the Purchaser a written notice of exercise and either (i) a check in the amount of the purchase price, (ii) if there is an outstanding balance on the Promissory Note, a notice stating that the repurchase price shall be applied to reduce the outstanding principal and interest (or a portion thereof) on a dollar-for-dollar basis or (iii) a combination of (i) and (ii). Upon delivery of such notice and payment of the purchase price in any of the ways described above, the Company, or its designee, shall become the legal and beneficial owner of the Shares being repurchased and all rights and interest therein or related thereto, and the Company, or its designee, shall have the right to transfer to its own name the number of Shares being repurchased without further action by the Purchaser or any of his transferees. If the Company or its designee elect to exercise the repurchase rights pursuant to this Section 2 and the Purchaser or his transferee fails to deliver the Shares in accordance with the terms hereof, the Company, or its designee, may, at its option, in addition to all other remedies it may have, deposit the purchase price in an escrow account administered by an independent third party (to be held for the benefit of and payment over to the Purchaser or his transferee in accordance herewith), whereupon the Company shall by written notice to the Purchaser cancel on its books the certificates(s) representing such Shares registered in the name of the Purchaser and all of the Purchaser's or his transferee's right, title, and interest in and to such Shares shall terminate in all respects. SECTION 3. RELEASE FROM REPURCHASE OPTION. (a) If the Purchaser is employed by the Company at the time of the Purchaser's death, Disability or Retirement, all of the Performance Vested Shares shall be automatically released from the Repurchase Option on the effective date of such Termination. (b) If the Purchaser is employed by the Company continuously from the date hereof through January 1, 2001, and the Purchaser has not experienced a Termination on or prior to such date, all of the Time Vested Shares shall be automatically released from the Repurchase Option on such date. (c) The Performance Vested Shares shall be automatically released from the Repurchase Option in installments as follows: (i) if the "Market Value Per Share of Equity" or MVPSE (as defined in Section 3(d)) is at least $603.75 (such amount, and each such amount specified in subsections (ii) through (vi) below, the "Target MVPSE") on December 31, 2000 (such date, and each such date specified in subsections (ii) through (vi) below, a "Target Date"), 2 3 one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2000; (ii) if the MVPSE is at least $754.70 on December 31, 2001, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2001; (iii) if the MVPSE is at least $943.40 on December 31, 2002, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2002; (iv) if the MVPSE is at least $1,179.25 on December 31, 2003, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2003; (v) if the MVPSE is at least $1,474.10 on December 31, 2004, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2004; and (vi) if the MVPSE is at least $1,842.65 on December 31, 2005, one-sixth of the Performance Vested Shares shall be released as soon as practicable after December 31, 2005. (d) Market Value Per Share of Equity. The "Market Value Per Share of Equity" ("MVPSE") on any given date shall equal (I) other than in connection with an Acceleration Event, the quotient obtained by dividing (x) the difference between (A) the product of (1) Adjusted EBITDA and (2) 8.0 and (B) Adjusted Net Debt by (y) the number of outstanding Common Stock Equivalents or (II) in connection with an Acceleration Event, the price (whether payable in cash or property) per Common Stock Equivalent paid to stockholders or other securityholders of the Company in connection with such Acceleration Event, where, in each case of (I) and (II): "Common Stock Equivalent" means, at any time, one share of Common Stock or the right to acquire, whether or not such right is immediately exercisable, one share of Common Stock, whether evidenced by an option, warrant or convertible security; "EBITDA" equals earnings from operations before interest expense, taxes, depreciation and amortization on the applicable date, determined in accordance with generally accepted accounting principles, consistently applied ("GAAP"), calculated on a trailing twelve (12) month basis; "Adjusted EBITDA" equals the Company's EBITDA, as adjusted below, on the applicable date; "Net Debt" equals the Company's total indebtedness on the applicable date plus the Preferred Value minus balance sheet "Cash and Cash Equivalents" as of such date, determined in accordance with GAAP; 3 4 "Preferred Value" equals, at the time of determination, the sum of (x) with respect to the Company's Series A Preferred Stock, the Series A Liquidation Amount and (y) with respect to any other series of the Company's preferred stock, the amount to be paid by the Company to the holders of such series of preferred stock upon a liquidation of the Company or similar event in accordance with the terms of the Restated Charter. "Restated Charter" means the amended and restated certificate or articles of incorporation of the Company, as in effect at the time of determination, including any certificates of designation or articles of amendment. "Series A Liquidation Amount" has the meaning set forth in the Restated Charter. "Adjusted Net Debt" equals Net Debt, as adjusted below, on the applicable date. Adjusted EBITDA and Adjusted Net Debt shall be determined by making the following adjustments to the Company's EBITDA and to Net Debt: (i) if the Company completes a material acquisition (an "Acquisition") during any of the first three quarters of a calendar year, the EBITDA of the acquired entity or business for the portion of the calendar year prior to the Acquisition shall be included in Adjusted EBITDA; (ii) if the Company completes a material divestiture (a "Divestiture") during any of the first three quarters of a calendar year, the EBITDA of the divested assets or business for the portion of the calendar year prior to the Divestiture shall be excluded from Adjusted EBITDA; (iii) if the Company engages in an Acquisition during the fourth quarter of a calendar year, an amount equal to the total of (x) all debt incurred with respect to the Acquisition and (y) all transaction costs associated with the Acquisition shall be excluded from Adjusted Net Debt; and (iv) if the Company engages in a Divestiture during the fourth quarter of a calendar year, (x) the total amount of the proceeds received by the Company with respect to the Divestiture shall be included in Adjusted Net Debt, and (y) the total amount of the budgeted EBITDA for the divested assets or business for all periods of the calendar year subsequent to the Divestiture shall be included in Adjusted EBITDA. For purposes of this Agreement only, the MVPSE shall be determined within ninety (90) days after the end of each calendar year or at such other date as may be necessary to calculate MVPSE for purposes of this Agreement. (e) Percentage Release from Repurchase Option. If the MVPSE is, as of a Target Date, less than the applicable Target MVPSE, but is greater than ninety percent (90%) of the applicable Target MVPSE as of such Target Date, a percentage of the Performance Vested Shares available for release from the Repurchase Option as of such Target Date shall be released from the Repurchase Option according to the following proportionate release schedule: 4 5
Actual MVPSE as a Percentage of Performance Percentage of Target MVPSE Vested Shares Released -------------------------- ---------------------- 90.0% 0% 92.5% 25% 95.0% 50% 97.5% 75% 100% 100%.
The percentage of Performance Vested Shares released shall be prorated for one-half percentage increases between the MVPSE percentages shown (e.g., if the MVPSE is at least 90.5%, but less than 91.0%, of Target MVPSE, 5% of the Performance Vested Shares available for release from the Repurchase Option as of the Target Date would be released from the Repurchase Option). (f) "Clawback" Rights. Notwithstanding any other provision of this Section 3, if the MVPSE is less than the applicable Target MVPSE on any Target Date (a "Prior Unsatisfied Target"), but thereafter the MVPSE equals or exceeds the applicable Target MVPSE on any subsequent Target Date prior to December 31, 2005, all Performance Vested Shares which have not been previously released from the Repurchase Option with respect to all Prior Unsatisfied Targets occurring prior to such subsequent Target Date shall thereupon be released from the Repurchase Option. As an example, if the Purchaser had earned release of 0% and 0% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and the MVPSE was equal to $950.00 on December 31, 2002, then (A) 100% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option; and (B) 100% of the Performance Vested Shares scheduled for release as of December 31, 2000 and 2001, would be released from the Repurchase Option. As a further example, if the Purchaser had earned release of 0% and 0% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and the MVPSE was equal to $872.00 on December 31, 2002, then (A) 25% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option and (B) no additional Performance Vested Shares scheduled for release as of December 31, 2000 or 2001, would be released from the Repurchase Option. (g) Termination of Repurchase Option. Any Performance Vested Shares that are not released from the Repurchase Option according to the foregoing provisions of this Section 3 shall be released from the Repurchase Option on December 31, 2009, so long as the Purchaser is an employee of the Company on such date. (h) Acceleration Event. (i) An "Acceleration Event" shall occur in the event of a Change of Control of the Company, as such term is defined in the Indenture dated as of the date hereof between the Company and The Bank of New York, as trustee, as amended, modified or supplemented from time to time. 5 6 (ii) If an Acceleration Event occurs on or before January 1, 2001, all Time Vested Shares shall be released from the Repurchase Option immediately prior to the Acceleration Event. (iii) If an Acceleration Event occurs on or before December 31, 2005, some or all of the Performance Vested Shares that have not been released from the Repurchase Option (because the Target Dates and/or Target MVPSE have not yet been reached) shall be released from the Repurchase Option immediately prior to the Acceleration Event in an amount equal to the average percentage of Performance Vested Shares that have been released from the Repurchase Option up to the date of the Acceleration Event multiplied by the total number of Performance Vested Shares then subject to the Repurchase Option, taking into account the effect of Section 3(f). Further, for purposes of calculating the MVPSE in connection with an Acceleration Event, Target MVPSE shall be prorated to the end of the calendar month immediately prior to the Acceleration Event. For example, if the Purchaser had earned release of 0% and 80% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and an Acceleration Event occurred in July, 2002, and the actual MVPSE was equal to $807.00, then (A) the Target MVPSE would be prorated to June 30, 2002, pursuant to this Section 3(h) ($754.70 + [.50 x ($943.40 - $754.70)] = $849.05); (B) the June 30, 2002, actual MVPSE as a percentage of the prorated Target MVPSE as of December 31, 2002, would be 95%; (C) therefore, 50% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option, pursuant to Section 3(e), immediately prior to the Acceleration Event; and (D) immediately prior to the Acceleration Event, 43.33% [(0 + 80 + 50) / 3 = 43.33] of the Performance Vested Shares scheduled for release from the Repurchase Option based on the MVPSE as of December 31, 2003, 2004 and 2005, would be released from the Repurchase Option, all for the immediate benefit of the Purchaser. As a further example, if the Purchaser had earned release of 0% and 0% of the Performance Vested Shares as of December 31, 2000 and 2001, respectively, and an Acceleration Event occurs in July, 2002, and if the actual MVPSE is $875.00, then (A) the Target MVPSE as of June 30, 2002 would be prorated to June 30, 2002, pursuant to this Section 3(h) ($849.05) (B) the June 30, 2002, actual MVPSE as a percentage of the prorated Target MVPSE as of December 31, 2002, would be 103%; (C) 100% of the Performance Vested Shares scheduled for release as of December 31, 2002, would be released from the Repurchase Option pursuant to Section 3(e), immediately prior to the Acceleration Event; and (D) taking into account the effect of Section 3(f), and immediately prior to the Acceleration Event, 100% of the Performance Vested Shares scheduled for release from the Repurchase Option based on the MVPSE as of December 31, 2003, 2004 and 2005, would be released from the Repurchase Option, all for the immediate benefit of the Purchaser. If an Acceleration Event occurs after December 31, 2005, no additional Performance Vested Shares shall be released from the Repurchase Option pursuant to this Section 3(h). The Company may exercise the Repurchase Option effective as of the time of an Acceleration Event with respect to any Performance Vested Shares that are not released from the Repurchase Option, regardless of whether or not a termination of employment occurs. 6 7 (i) Fractional Shares. Notwithstanding any other provisions of this Agreement, no fractional shares shall be released from the Repurchase Option until a number of such fractional shares accumulate to equal one share. (j) No Share which is released from a Repurchase Option hereunder shall thereafter be subject to the Repurchase Option without the prior written consent of the Purchaser. SECTION 4. STOCKHOLDERS' AGREEMENT; RESTRICTIONS ON TRANSFER. (a) The Company and the Purchaser acknowledge and agree that the Shares are subject to and restricted by the Stockholders' Agreement dated as of the date hereof, among the Company and the stockholders of the Company signatory thereto, as amended, modified or supplemented from time to time (as amended, the "Stockholders' Agreement"), and with respect to such Shares, the Purchaser shall be a "Management Stockholder" as such term is used in the Stockholders' Agreement. (b) Notwithstanding anything to the contrary contained in the Stockholders' Agreement, the Purchaser may not sell, assign, encumber, dispose of or otherwise transfer (including any transfer by operation of law) any interest in any Shares that have not been released from the Repurchase Option other than a transfer to (i) Ronald G. Moffitt IRA (DLJ Securities Corp. Custodian) or (ii) Moffitt Capital, LLC, provided that Ronald G. Moffitt IRA (DLJ Securities Corp. Custodian) and/or Moffitt Capital, LLC, as applicable, agrees to be bound by all of the terms and provisions of this Agreement, the Promissory Note and the Pledge Agreement dated as of the date hereof between the Company and the Purchaser (the "Pledge Agreement"). SECTION 5. EMPLOYMENT AGREEMENT. The parties agree that the option provided to the Purchaser under Section 6(c) of the Employment Agreement may not be exercised with respect to any of the Shares purchased under this Agreement until January 1, 2006. SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Purchaser, as of the date hereof, as set forth below. (a) The Company is a duly organized and validly existing corporation under the laws of the State of Utah and has the corporate power and the corporate authority to execute and deliver this Agreement and to perform its obligations as specified in this Agreement. (b) The Shares have been duly authorized by the Company and, upon receipt of the Purchase Price, will be validly issued, fully paid and nonassessable. (c) This Agreement has been duly authorized by the Board of Directors of the Company and has been executed and delivered by the Company. 7 8 (d) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement do not contravene any provision the Restated Charter or By-laws of the Company or any agreement or other instrument binding upon the Company that is material to the Company, or any judgment, order or decree of any court or governmental authority having jurisdiction over the Company, and no material consent, approval, authorization or order of, or qualification with, any governmental authority is required for the performance by the Company of its obligations under this Agreement, except such approvals as have been obtained and are in full force and effect. (e) Assuming that the representations and warranties of the Purchaser contained in this Agreement are true and correct, the offer, sale and delivery of the Shares in the manner contemplated by this Agreement is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents and warrants to the Company, as of the date hereof, as set forth below. (a) The execution and delivery by the Purchaser of, and the performance by the Purchaser of its obligations under, this Agreement, the Promissory Note, the Pledge Agreement and the other documents delivered in connection therewith, do not contravene any provision of applicable law or any agreement or other instrument binding upon the Purchaser that is material to the Purchaser, or any judgment, order or decree of any court or governmental authority having jurisdiction over the Purchaser, and no material consent, approval, authorization or order of, or qualification with, any governmental authority is required for the performance by the Purchaser of its obligations under this Agreement, except such approvals as have been obtained and are in full force and effect. (b) The Purchaser is an executive officer of the Company and has received all of the information concerning the Company, the Common Stock and any other matters relevant to his decision to purchase the Shares that he has requested. (c) The Purchaser, as a result of his position as an executive officer of the Company, is an "accredited investor" within the meaning of Rule 501 of Regulation D under the Securities Act. (d) The Purchaser is experienced in evaluating and making speculative investments, and has the capacity to protect his interest in connection with the acquisition of the Shares. In addition, the Purchaser has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of this investment. (e) The Purchaser is purchasing the Shares for his own account, for investment purposes only and not with a view to any public sale or distribution thereof. (f) The Purchaser understands that (i) the Shares have not been and will not be registered by the Company under the Securities Act, the Utah Uniform Securities Act or the securities laws of any other jurisdiction and will be considered "restricted securities" under the 8 9 Securities Act, (ii) the Shares will bear the legends set forth in Section 9, (iii) the Company has no obligation to register the Shares under the Securities Act or any state securities law, and (iv) the Purchaser will not sell, transfer, hypothecate or otherwise dispose of any Shares other than in accordance with (A) the provisions, or exemptions therefrom, of the Securities Act and the rules and regulations promulgated thereunder and the securities laws of all other applicable jurisdictions and (B) the Stockholders' Agreement and (C) this Agreement. (g) The Purchaser understands that the Company will rely upon the accuracy and truth of the representations and warranties of the Purchaser set forth in this Section 7, and the Purchaser hereby consents to such reliance. SECTION 8. Tax Election. THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO DECIDE IF AN ELECTION UNDER SECTION 83(B) OF THE INTERNAL REVENUE CODE SHOULD BE MADE AND TO FILE TIMELY SUCH ELECTION, EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS BEHALF. SECTION 9. STOCK LEGENDS. In addition to any legend required by the Stockholders' Agreement, certificates representing the Shares shall bear the following additional legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF, AND RESTRICTIONS ON TRANSFER SET FORTH IN, A RESTRICTED STOCK PURCHASE AGREEMENT, DATED AS OF MAY 31, 2000, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY, AND SUCH SHARES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, ENCUMBERED, OTHERWISE GRANTED AS SECURITY, OR OTHERWISE DISPOSED OF, OTHER THAN IN ACCORDANCE THEREWITH." SECTION 10. FURTHER AGREEMENTS. The Company and the Purchaser hereby agree to execute, deliver and record or cause to be executed, delivered and recorded such further instruments, and take such other actions, as may be reasonably required to effectuate the transactions contemplated by this Agreement. SECTION 11. SURVIVAL. The respective representations, warranties, covenants and agreements made by the Company and the Purchaser in this Agreement shall survive the payment of the Purchase Price 9 10 and the delivery of the Shares (notwithstanding any investigation made by or on behalf of any party to this Agreement). SECTION 12. SUCCESSORS AND ASSIGNS. Subject to Section 4 hereof, this Agreement shall inure to the benefit of and be binding upon the Company, the Purchaser and their respective successors and permitted assigns. Nothing expressed in this Agreement is intended or shall be construed to give any person other than the persons referred to in the preceding sentence any legal or equitable right, remedy or claim under or in respect of this Agreement. Except as specified in Section 4, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by any party hereto without the prior written consent of the other party. SECTION 13. SEVERABILITY. Any covenant, provision, agreement or term of this Agreement that is prohibited or is held to be void or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement. SECTION 14. MODIFICATIONS, AMENDMENTS AND WAIVERS. At any time subsequent to the date hereof, (a) the parties hereto may, by written agreement, modify, amend or supplement any term or provision of this Agreement and (b) any term or provision of this Agreement may be waived by the party which is entitled to the benefits thereof. No course of dealing among the parties or delay in exercising rights and remedies shall operate as a waiver of such rights and remedies. SECTION 15. GENERAL MATTERS. (a) This Agreement constitutes the entire agreement and understanding of the parties to this Agreement with respect to the matters and transactions contemplated by this Agreement and supersedes all prior agreements and understandings whatsoever relating to such matters and transactions. The headings in this Agreement are for the purpose of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which shall together constitute one instrument. (b) The Option Cancellation and Restricted Stock Purchase Agreement dated as of February 22, 1999, between the Purchaser and the Company, as amended, modified or supplemented from time to time, is hereby terminated in its entirety with no further force or effect. SECTION 16. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Utah. 10 11 SECTION 17. NOTICES. All notices, requests, demands, claims and other communications hereunder shall be in writing and sufficient if delivered in accordance with the provisions set forth in the Stockholders' Agreement. SECTION 18. COUNTERPARTS AND FACSIMILE EXECUTION. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other party, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature to this Agreement that is delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement. SECTION 19. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. SECTION 20. MUTUAL CONTRIBUTION. The parties to this Agreement and their counsel have mutually contributed to its drafting. Consequently, no provision of this Agreement shall be construed against any party on the ground that one party drafted the provision or caused it to be drafted. ******** 11 12 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Stock Purchase Agreement as of the date first written above. HUNTSMAN PACKAGING CORPORATION By:/s/ RICHARD P. DURHAM ----------------------------------- Name: Richard P. Durham Title: Chief Executive Officer PURCHASER /s/ RONALD G. MOFFITT -------------------------------------- Ronald G. Moffitt 13 EXHIBIT A SECURED PROMISSORY NOTE (FULL RECOURSE) $1,811,739 May 31, 2000 Salt Lake City, Utah FOR VALUE RECEIVED, the undersigned, RONALD G. MOFFITT (the "Maker"), promises and agrees to pay to the order of HUNTSMAN PACKAGING CORPORATION ("HPC"), at 500 Huntsman Way, Salt Lake City, Utah 84108, or at such other place as the holder hereof may designate in writing, the principal sum of ONE MILLION EIGHT HUNDRED ELEVEN THOUSAND SEVEN HUNDRED AND THIRTY-NINE ($1,811,739), together with interest, compounded annually, on the unpaid balance thereof at the rate of seven percent (7.0%) per annum from the date hereof until paid in cash. For the period prior to May 31, 2006, interest may, at the option of the Maker, not be paid in cash but be added to the principal hereof on each anniversary of the date of the original issuance hereof (the "PIK Option"). Principal and accrued interest outstanding under this Promissory Note (this "Note") as of May 31, 2006 (including through the exercise of the PIK Option), shall be paid in cash in three equal annual installments on each of (1) May 31, 2006, (2) May 31, 2007, and (3) May 31, 2008. Interest accruing on the unpaid principal of this Note (including through the exercise of the PIK Option) for the period commencing June 1, 2006, through final maturity, shall be paid on May 31, 2007, and at final maturity in cash. Prepayments shall be applied first toward the payment and satisfaction of accrued and unpaid interest, and the remainder shall be applied toward the reduction of principal. Principal and interest (except pursuant to the PIK Option) shall be payable only in lawful money of the United States of America. This Note has been made in accordance with that certain Restricted Stock Purchase Agreement, dated as of the date hereof (the "Restricted Stock Agreement"), between HPC and the Maker. For so long as any amounts of principal or interest under this Note shall remain unpaid, upon the transfer of any of the Shares except for a transfer of Shares to any Permitted Transferee (as defined in the Stockholders' Agreement) or upon the exercise of any party of the rights set forth in Section 6 of the Employment Agreement dated as of the date hereof between the Maker and HPC, the lesser of (a) the total amount of any cash paid in consideration of the transfer of the Shares, net of any expenses reasonably incurred in connection with such transfer (the "Net Proceeds") or (b) the total amount of all unpaid principal and interest under this Note (as of the applicable payment date), shall be paid to the holder of this Note within three (3) business days of the date the Net Proceeds are received by or on behalf of the Maker. Any payments made in accordance with this paragraph shall be prepayments and shall be treated as specified in the following paragraph. The Maker may prepay at any time the obligations hereunder, in whole or in part, without penalty. The Maker, at his option, may pay amounts in excess of the annual payments called for herein. Such excess amounts shall be applied either to reduction of the principal balance hereof or in prepayment of designated future annual payments, at the election of the Maker, which election must be made in writing at the time the excess amount is paid. If the election is to apply to the excess amount against future annual payment(s), the Maker must designate the particular annual payment(s) which are being paid in advance. If the Maker makes no timely election, excess amounts shall be applied in reduction of the principal balance hereof in inverse order of maturity. If the excess amount is applied in reduction of the principal balance hereof (whether by reason of election or otherwise), the payment shall not postpone or suspend the obligation of the Maker to make the annual payments called for herein. 14 The occurrence of any of the following constitutes an "Event of Default": (a) The Maker fails to make any payment hereunder when due or within fifteen (15) days thereafter; (b) the Maker defaults in the performance of any covenant or agreement contained herein, in the Restricted Stock Agreement (other than a covenant or agreement to make payments hereunder) or in the Pledge Agreement dated as of the date hereof between the Maker and HPC; (c) a petition is filed seeking that the Maker be adjudged bankrupt; (d) the Maker makes a general assignment for the benefit of creditors; (e) the Maker suffers the appointment of a receiver; or (f) the Maker becomes insolvent. Upon the occurrence of an Event of Default, the entire remaining unpaid balance of both principal and interest owing hereunder shall, at the option of the holder hereof and without notice or demand, become immediately due and payable. Thereafter said unpaid principal balance and interest shall, until paid and both before and after judgment, earn interest at the rate of ten percent (10%) per annum. The acceptance of any installment or payment after the occurrence of an Event of Default shall not constitute a waiver of the holder's right of acceleration with respect to such Event of Default or any subsequent Event of Default. In the event any payment under this Note is not made at the time and in the manner required, the Maker agrees to pay all costs and expenses (regardless of the particular nature thereof and whether incurred with or without suit or before or after judgment) which may be incurred by the holder hereof in connection with the enforcement of any of its rights under this Note, including court costs and attorneys' fees. The Maker hereby acknowledges the security interests granted by the Maker to HPC pursuant to the terms of the Pledge Agreement dated as of the date hereof between the Maker and HPC. Any notice or demand hereunder shall be made in accordance with the provisions set forth in the Restricted Stock Agreement. The Maker expressly agrees that this Note, or any payment hereunder, may be extended without notice from time to time by the holder hereof without in any way affecting the liability of the Maker. This Note is a full recourse promissory note and shall be the joint and several obligation of all makers, sureties, guarantors and endorsers, and shall be binding upon their respective heirs, personal representatives, successors and assigns. This Note shall be governed by and construed in accordance with the laws of the State of Utah. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Restricted Stock Agreement. ******** IN WITNESS WHEREOF, the undersigned Maker has executed this Note as of the date first written above. ------------------------ RONALD G. MOFFITT EX-10.20 27 ex10-20.txt PLEDGE AGREEMENT 1 EXHIBIT 10.20 PLEDGE AGREEMENT dated as of May 31, 2000 (this "Agreement"), between RICHARD P. DURHAM (the "Pledgor"), and HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"). In connection with a secured promissory note (the "Note") issued by the Pledgor to the Company on the date hereof, the Company loaned the Pledgor $7,005,389 to acquire 14,500 shares of common stock of the Company (the "Shares"). The Note is secured by a pledge to the Company of all of the Pledgor's right, title and interest in, to and under the following (collectively, the "Pledged Securities") (a) all of the Shares, (b) any cash or additional securities or other property at any time and from time to time receivable or otherwise distributable in respect of, in exchange for, or in substitution of the Shares, and (c) any and all products and proceeds of any of the foregoing, together with all other rights, titles, interests, powers, privileges and preferences pertaining to the Shares. NOW, THEREFORE, in consideration of the promises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note, the Pledgor and the Company hereby agree as set forth below. SECTION 1. PLEDGE. The Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Securities as security for the prompt and complete payment when due of the unpaid principal and interest on the Note. SECTION 2. DELIVERY OF PLEDGED SECURITIES. Upon the execution of this Pledge Agreement, the Pledgor shall deliver to the Company the certificate(s) representing the Pledged Securities, together with a duly executed form of assignment sufficient to transfer title thereto to the Company substantially in the form of Exhibit A attached hereto. SECTION 3. STOCK DIVIDENDS; DISTRIBUTIONS ETC. If, while this Pledge Agreement is in effect, the Pledgor becomes entitled to receive or receives any equity securities or other property of the Company in addition to, in substitution of, or in exchange for any of the Pledged Securities (whether as a distribution in connection with any recapitalization, reorganization or reclassification, or as a stock dividend or otherwise), the Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for the Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Securities hereunder. 2 SECTION 4. DEFAULT. If an Event of Default (as defined in the Note) has occurred, the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Securities (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Securities at any private sale or public auction, on not less than ten (10) days written notice to the Pledgor, at such price or prices and upon such terms as the Company may deem advisable. The Pledgor shall have no right to redeem the Pledged Securities after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Securities offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to the Pledgor and the Pledgor shall be entitled to the return of any of the Pledged Securities remaining in the hands of the Company. The Pledgor shall be jointly and severally liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. SECTION 5. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by the Pledgor or repaid from the proceeds of the sale of the Pledged Securities hereunder. SECTION 6. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SECURITIES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Securities to the Pledgor together with all forms of assignment. SECTION 7. FURTHER ASSURANCES. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. SECTION 8. AMENDMENTS. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective unless such modification, amendment or waiver is approved in writing by each of the parties hereto. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such -2- 3 provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. The waiver by any party of a breach of any provision shall not operate or be construed as a waiver of any subsequent breach by any party. SECTION 9. ENTIRE AGREEMENT. This Agreement and the Note constitute the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior and contemporaneous understandings, agreements or representations by or among the parties, written or oral, relating to the subject matter hereof. SECTION 10. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit of and be enforceable by the Company and the Pledgor and their respective successors and assigns; provided, however, that the Pledgor shall not assign its rights or obligations under this Agreement without the prior written consent of the Company. SECTION 11. NOTICES. All notices, claims, certificates, requests, demands and other communications hereunder shall be made in accordance with the terms of the Stockholders' Agreement (as defined in the Note). SECTION 12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Utah. ******* -3- 4 IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. HUNTSMAN PACKAGING CORPORATION By: /s/ SCOTT K. SORENSEN --------------------------- Name: Scott K. Sorensen Title: Chief Financial Officer PLEDGOR: /s/ RICHARD P. DURHAM ------------------------------ Richard P. Durham 5 EXHIBIT A STOCK POWER For value received, [ ] (the "Stockholder") hereby sells, assigns and transfers unto HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), [ ] [( )] shares of the Common Stock of the Company standing in his name on the books of the Company represented by Certificate No. ____ herewith and does hereby irrevocably constitute the Secretary of the Company as attorney to transfer the said stock on the books of the Company with full power of substitution in the premises in accordance with the terms of the Pledge Agreement dated as of May 31, 2000, between the Company and the Stockholder. Dated: ---------------- ------------------------------ [ ] Witnessed: - ---------------------------- Name: EX-10.21 28 ex10-21.txt PLEDGE AGREEMENT 1 EXHIBIT 10.21 PLEDGE AGREEMENT dated as of May 31, 2000 (this "Agreement"), between JACK E. KNOTT (the "Pledgor"), and HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"). In connection with a secured promissory note (the "Note") issued by the Pledgor to the Company on the date hereof, the Company loaned the Pledgor $3,744,260 to acquire 7,750 shares of common stock of the Company (the "Shares"). The Note is secured by a pledge to the Company of all of the Pledgor's right, title and interest in, to and under the following (collectively, the "Pledged Securities") (a) all of the Shares, (b) any cash or additional securities or other property at any time and from time to time receivable or otherwise distributable in respect of, in exchange for, or in substitution of the Shares, and (c) any and all products and proceeds of any of the foregoing, together with all other rights, titles, interests, powers, privileges and preferences pertaining to the Shares. NOW, THEREFORE, in consideration of the promises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note, the Pledgor and the Company hereby agree as set forth below. SECTION 1. PLEDGE. The Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Securities as security for the prompt and complete payment when due of the unpaid principal and interest on the Note. SECTION 2. DELIVERY OF PLEDGED SECURITIES. Upon the execution of this Pledge Agreement, the Pledgor shall deliver to the Company the certificate(s) representing the Pledged Securities, together with a duly executed form of assignment sufficient to transfer title thereto to the Company substantially in the form of Exhibit A attached hereto. SECTION 3. STOCK DIVIDENDS; DISTRIBUTIONS ETC. If, while this Pledge Agreement is in effect, the Pledgor becomes entitled to receive or receives any equity securities or other property of the Company in addition to, in substitution of, or in exchange for any of the Pledged Securities (whether as a distribution in connection with any recapitalization, reorganization or reclassification, or as a stock dividend or otherwise), the Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for the Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Securities hereunder. 2 SECTION 4. DEFAULT. If an Event of Default (as defined in the Note) has occurred, the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Securities (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Securities at any private sale or public auction, on not less than ten (10) days written notice to the Pledgor, at such price or prices and upon such terms as the Company may deem advisable. The Pledgor shall have no right to redeem the Pledged Securities after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Securities offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to the Pledgor and the Pledgor shall be entitled to the return of any of the Pledged Securities remaining in the hands of the Company. The Pledgor shall be jointly and severally liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. SECTION 5. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by the Pledgor or repaid from the proceeds of the sale of the Pledged Securities hereunder. SECTION 6. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SECURITIES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Securities to the Pledgor together with all forms of assignment. SECTION 7. FURTHER ASSURANCES. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. SECTION 8. AMENDMENTS. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective unless such modification, amendment or waiver is approved in writing by each of the parties hereto. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such -2- 3 provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. The waiver by any party of a breach of any provision shall not operate or be construed as a waiver of any subsequent breach by any party. SECTION 9. ENTIRE AGREEMENT. This Agreement and the Note constitute the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior and contemporaneous understandings, agreements or representations by or among the parties, written or oral, relating to the subject matter hereof. SECTION 10. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit of and be enforceable by the Company and the Pledgor and their respective successors and assigns; provided, however, that the Pledgor shall not assign its rights or obligations under this Agreement without the prior written consent of the Company. SECTION 11. NOTICES. All notices, claims, certificates, requests, demands and other communications hereunder shall be made in accordance with the terms of the Stockholders' Agreement (as defined in the Note). SECTION 12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Utah. ******* -3- 4 IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. HUNTSMAN PACKAGING CORPORATION By /s/ RICHARD P. DURHAM -------------------------------- Name: Richard P. Durham Title: Chief Executive Officer PLEDGOR: /s/ JACK E. KNOTT ----------------------------------- Jack E. Knott 5 EXHIBIT A STOCK POWER For value received, [ ] (the "Stockholder") hereby sells, assigns and transfers unto HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), [ ] [( )] shares of the Common Stock of the Company standing in his name on the books of the Company represented by Certificate No. ____ herewith and does hereby irrevocably constitute the Secretary of the Company as attorney to transfer the said stock on the books of the Company with full power of substitution in the premises in accordance with the terms of the Pledge Agreement dated as of May 31, 2000, between the Company and the Stockholder. Dated: ------------------- --------------------------------- [ ] Witnessed: - --------------------------------- Name: EX-10.22 29 ex10-22.txt PLEDGE AGREEMENT 1 EXHIBIT 10.22 PLEDGE AGREEMENT dated as of May 31, 2000 (this "Agreement"), between SCOTT K. SORENSEN (the "Pledgor"), and HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"). In connection with a secured promissory note (the "Note") issued by the Pledgor to the Company on the date hereof, the Company loaned the Pledgor $3,261,129 to acquire 6,750 shares of common stock of the Company (the "Shares"). The Note is secured by a pledge to the Company of all of the Pledgor's right, title and interest in, to and under the following (collectively, the "Pledged Securities") (a) all of the Shares, (b) any cash or additional securities or other property at any time and from time to time receivable or otherwise distributable in respect of, in exchange for, or in substitution of the Shares, and (c) any and all products and proceeds of any of the foregoing, together with all other rights, titles, interests, powers, privileges and preferences pertaining to the Shares. NOW, THEREFORE, in consideration of the promises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note, the Pledgor and the Company hereby agree as set forth below. SECTION 1. PLEDGE. The Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Securities as security for the prompt and complete payment when due of the unpaid principal and interest on the Note. SECTION 2. DELIVERY OF PLEDGED SECURITIES. Upon the execution of this Pledge Agreement, the Pledgor shall deliver to the Company the certificate(s) representing the Pledged Securities, together with a duly executed form of assignment sufficient to transfer title thereto to the Company substantially in the form of Exhibit A attached hereto. SECTION 3. STOCK DIVIDENDS; DISTRIBUTIONS ETC. If, while this Pledge Agreement is in effect, the Pledgor becomes entitled to receive or receives any equity securities or other property of the Company in addition to, in substitution of, or in exchange for any of the Pledged Securities (whether as a distribution in connection with any recapitalization, reorganization or reclassification, or as a stock dividend or otherwise), the Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for the Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Securities hereunder. 2 SECTION 4. DEFAULT. If an Event of Default (as defined in the Note) has occurred, the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Securities (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Securities at any private sale or public auction, on not less than ten (10) days written notice to the Pledgor, at such price or prices and upon such terms as the Company may deem advisable. The Pledgor shall have no right to redeem the Pledged Securities after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Securities offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to the Pledgor and the Pledgor shall be entitled to the return of any of the Pledged Securities remaining in the hands of the Company. The Pledgor shall be jointly and severally liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. SECTION 5. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by the Pledgor or repaid from the proceeds of the sale of the Pledged Securities hereunder. SECTION 6. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SECURITIES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Securities to the Pledgor together with all forms of assignment. SECTION 7. FURTHER ASSURANCES. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. SECTION 8. AMENDMENTS. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective unless such modification, amendment or waiver is approved in writing by each of the parties hereto. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such -2- 3 provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. The waiver by any party of a breach of any provision shall not operate or be construed as a waiver of any subsequent breach by any party. SECTION 9. ENTIRE AGREEMENT. This Agreement and the Note constitute the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior and contemporaneous understandings, agreements or representations by or among the parties, written or oral, relating to the subject matter hereof. SECTION 10. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit of and be enforceable by the Company and the Pledgor and their respective successors and assigns; provided, however, that the Pledgor shall not assign its rights or obligations under this Agreement without the prior written consent of the Company. SECTION 11. NOTICES. All notices, claims, certificates, requests, demands and other communications hereunder shall be made in accordance with the terms of the Stockholders' Agreement (as defined in the Note). SECTION 12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Utah. ******* -3- 4 IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. HUNTSMAN PACKAGING CORPORATION By:/s/ RICHARD P. DURHAM -------------------------------- Name: Richard P. Durham Title: Chief Executive Officer PLEDGOR: /s/ SCOTT K. SORENSEN ----------------------------------- Scott K. Sorensen 5 EXHIBIT A STOCK POWER For value received, [ ] (the "Stockholder") hereby sells, assigns and transfers unto HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), [ ] [( )] shares of the Common Stock of the Company standing in his name on the books of the Company represented by Certificate No. ____ herewith and does hereby irrevocably constitute the Secretary of the Company as attorney to transfer the said stock on the books of the Company with full power of substitution in the premises in accordance with the terms of the Pledge Agreement dated as of May 31, 2000, between the Company and the Stockholder. Dated: --------------- -------------------------------- [ ] Witnessed: - --------------------------------- Name: EX-10.23 30 ex10-23.txt PLEDGE AGREEMENT 1 EXHIBIT 10.23 PLEDGE AGREEMENT dated as of May 31, 2000 (this "Agreement"), between RONALD G. MOFFITT (the "Pledgor"), and HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"). In connection with a secured promissory note (the "Note") issued by the Pledgor to the Company on the date hereof, the Company loaned the Pledgor $1,811,739 to acquire 3,750 shares of common stock of the Company (the "Shares"). The Note is secured by a pledge to the Company of all of the Pledgor's right, title and interest in, to and under the following (collectively, the "Pledged Securities") (a) all of the Shares, (b) any cash or additional securities or other property at any time and from time to time receivable or otherwise distributable in respect of, in exchange for, or in substitution of the Shares, and (c) any and all products and proceeds of any of the foregoing, together with all other rights, titles, interests, powers, privileges and preferences pertaining to the Shares. NOW, THEREFORE, in consideration of the promises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note, the Pledgor and the Company hereby agree as set forth below. SECTION 1. PLEDGE. The Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Securities as security for the prompt and complete payment when due of the unpaid principal and interest on the Note. SECTION 2. DELIVERY OF PLEDGED SECURITIES. Upon the execution of this Pledge Agreement, the Pledgor shall deliver to the Company the certificate(s) representing the Pledged Securities, together with a duly executed form of assignment sufficient to transfer title thereto to the Company substantially in the form of Exhibit A attached hereto. SECTION 3. STOCK DIVIDENDS; DISTRIBUTIONS ETC. If, while this Pledge Agreement is in effect, the Pledgor becomes entitled to receive or receives any equity securities or other property of the Company in addition to, in substitution of, or in exchange for any of the Pledged Securities (whether as a distribution in connection with any recapitalization, reorganization or reclassification, or as a stock dividend or otherwise), the Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for the Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Securities hereunder. 2 SECTION 4. DEFAULT. If an Event of Default (as defined in the Note) has occurred, the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Securities (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Securities at any private sale or public auction, on not less than ten (10) days written notice to the Pledgor, at such price or prices and upon such terms as the Company may deem advisable. The Pledgor shall have no right to redeem the Pledged Securities after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Securities offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to the Pledgor and the Pledgor shall be entitled to the return of any of the Pledged Securities remaining in the hands of the Company. The Pledgor shall be jointly and severally liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. SECTION 5. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by the Pledgor or repaid from the proceeds of the sale of the Pledged Securities hereunder. SECTION 6. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SECURITIES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Securities to the Pledgor together with all forms of assignment. SECTION 7. FURTHER ASSURANCES. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the provisions of this Agreement and the consummation of the transactions contemplated hereby. SECTION 8. AMENDMENTS. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective unless such modification, amendment or waiver is approved in writing by each of the parties hereto. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such -2- 3 provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. The waiver by any party of a breach of any provision shall not operate or be construed as a waiver of any subsequent breach by any party. SECTION 9. ENTIRE AGREEMENT. This Agreement and the Note constitute the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersede and preempt any prior and contemporaneous understandings, agreements or representations by or among the parties, written or oral, relating to the subject matter hereof. SECTION 10. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit of and be enforceable by the Company and the Pledgor and their respective successors and assigns; provided, however, that the Pledgor shall not assign its rights or obligations under this Agreement without the prior written consent of the Company. SECTION 11. NOTICES. All notices, claims, certificates, requests, demands and other communications hereunder shall be made in accordance with the terms of the Stockholders' Agreement (as defined in the Note). SECTION 12. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Utah. ******* -3- 4 IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. HUNTSMAN PACKAGING CORPORATION By:/s/ RICHARD P. DURHAM ------------------------------ Name: Richard P. Durham Title: Chief Executive Officer PLEDGOR: /s/ RONALD G. MOFFITT ---------------------------------- Ronald G. Moffitt 5 EXHIBIT A STOCK POWER For value received, [ ] (the "Stockholder") hereby sells, assigns and transfers unto HUNTSMAN PACKAGING CORPORATION, a Utah corporation (the "Company"), [ ] [( )] shares of the Common Stock of the Company standing in his name on the books of the Company represented by Certificate No. ____ herewith and does hereby irrevocably constitute the Secretary of the Company as attorney to transfer the said stock on the books of the Company with full power of substitution in the premises in accordance with the terms of the Pledge Agreement dated as of May 31, 2000, between the Company and the Stockholder. Dated: --------------- ------------------------------- [ ] Witnessed: - ---------------------------- Name: EX-10.26 31 ex10-26.txt HUNTSMAN PACKAGING CORPORATION 2000 STOCK INCENT. 1 EXHIBIT 10.26 HUNTSMAN PACKAGING CORPORATION 2000 STOCK INCENTIVE PLAN SECTION 1. PURPOSE OF THE PLAN. (a) The purpose of the Huntsman Packaging Corporation 2000 Stock Incentive Plan (the "Plan") is (i) to further the growth and success of Huntsman Packaging Corporation, a Utah corporation (together with its successors and assigns, the "Corporation"), and its Subsidiaries, by enabling directors, officers, managers, employees and advisors of, the Corporation and its Subsidiaries to acquire shares of Common Stock of the Corporation (the "Common Stock"), thereby increasing their personal interest in such growth and success, and (ii) to provide a means of rewarding outstanding performance by such Persons. (b) The options granted under the Plan (the "Options") shall be non-qualified stock options. No Option shall be an "incentive stock option" under the provisions of Section 422 of the Code. In lieu of Options, certain senior managers of the Corporation designated by the Compensation Committee shall have the right to purchase restricted stock on terms substantially similar to the terms set forth in the Plan pursuant to agreements approved by the Board. (c) For purposes of the Plan, the terms set forth below shall have the respective meanings assigned thereto. (i) "Affiliate" means, with respect to any Person, a Person that directly, or indirectly through one or more intermediaries, Controls, or is Controlled by, or is under common Control with, such Person. (ii) "Board" has the meaning set forth in Section 2(a). (iii) "Code" means the Internal Revenue Code of 1986, as amended. (iv) "Committee" has the meaning set forth in Section 2(a). (v) "Common Stock" has the meaning set forth in Section 1(a). (vi) "Control" means, (including, with correlative meaning, the terms "controlling," "controlled by" and "under common control with") with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or investment decisions of such Person, whether through the ownership of voting securities, by contract or otherwise. (vii) "Corporation" has the meaning set forth in Section 1(a)(i). (viii) "Disability" means a condition or disease of the Participant that would cause the Participant to be considered "disabled" within the meaning of the Corporation's 2 long-term disability plan as in effect from time to time, as determined by the Company's long-term disability insurance carrier. (ix) "Effective Date" has the meaning set forth in Section 12. (x) "Expiration Date" has the meaning set forth in Section 13. (xi) "Fair Market Value" means (A) the fair value of Common Stock (consistent, as applicable, with Section 422(c)(7) of the Code) on the date of any determination as reasonably determined in good faith by the Committee after taking into consideration all factors which it deems appropriate, including, without limitation, in respect of the Common Stock, recent sale and offer prices of the Common Stock in private transactions negotiated at arm's length or (B) if the Common Stock is Publicly Traded, the Market Price. (xii) "Initial Public Offering" means the initial underwritten Public Offering of Common Stock for the account of the Corporation pursuant to a Registration Statement effective under the Securities Act. (xiii) "Market Price" means, as to any Security, the closing price of such Security's sales on all domestic securities exchanges on which such Security may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such Security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M. local time in New York City on such day, or, if on any day such Security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar or successor organization. (xiv) "Option Agreement" has the meaning set forth in Section 5(b). (xv) "Option Price" has the meaning set forth in Section 6(a). (xvi) "Options" has the meaning set forth in Section 1(b). (xvii) "Participants" has the meaning set forth in Section 5(a)(i). (xviii) "Person" shall be construed as broadly as possible and shall include an individual or natural Person, a partnership (including a limited liability partnership), a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental authority. (xix) "Plan" has the meaning set forth in Section 1(a). (xx) "Prospectus" means the prospectus included in a Registration Statement, including any amendment or prospectus subject to completion, and any such prospectus as amended or supplemented by any prospectus supplement with respect to -2- 3 the terms of the offering of any portion of Common Stock and, in each case, by all other amendments and supplements to such prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. (xxi) "Public Offering" means the closing of a public offering of Common Stock pursuant to a Registration Statement declared effective under the Securities Act, except that a Public Offering shall not include an offering of securities to be issued as consideration in connection with a business acquisition or an offering of securities issuable pursuant to an employee benefit plan. (xxii) "Publicly Traded" means, with respect to any Security, that such Security is (A) listed on any domestic securities exchange, (B) a price quoted in the NASDAQ System or (C) has a price quoted by the National Quotation Bureau, Incorporated. (xxiii) "Registration Statement" means any registration statement of the Corporation which covers an offering of any Common Stock, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. (xxiv) "Securities" means "securities" as defined in Section 2(1) of the Securities Act and includes, with respect to any Person, such Person's capital stock or other equity interests or any options, warrants or other securities that are directly or indirectly convertible into, or exercisable or exchangeable for, such Person's capital stock or other equity or equity-linked interests, including phantom stock and stock appreciation rights. Whenever a reference herein to Securities is referring to any derivative Securities, the rights of a Participant shall apply to such derivative Securities and all underlying Securities directly or indirectly issuable upon conversion, exchange or exercise of such derivative securities. (xxv) "Securities Act" means the Securities Act of 1933, as amended. (xxvi) "Stockholder" means any Person holding Common Stock. (xxvii) "Stockholders' Agreement" means the Stockholders' Agreement dated as of May 31, 2000, among the Corporation and the Stockholders signatory thereto, as amended, modified or supplemented from time to time. (xxviii) "Subsidiaries" shall mean "Subsidiary Corporation" as defined in Section 424(f) of the Code. (xxix) "Termination Date" means, with respect to a Participant who is an employee of the Corporation or its Subsidiaries, the date on which the Participant's employment with the Corporation or its Subsidiaries is terminated. (xxx) "Termination for Cause" means termination of the Participant's employment by the Corporation or any of its Subsidiaries, as applicable, resulting from -3- 4 (A) the conviction of the Participant of a crime involving his or her fraud, theft or dishonesty; (B) the material and willful breach by the Participant of his or her responsibilities or willful failure to comply with reasonable directives or policies of the Board, but only if the Corporation has given the Participant written notice specifying the breach or failure to comply, demanding that the Participant remedy the breach or failure to comply and giving the Participant an opportunity to be heard in connection with the breach or failure to comply, and the Participant either (1) failed to remedy the alleged breach or failed to comply within thirty days after receipt of the written notice or (2) failed to take all reasonable steps to that end during the thirty days after he or she received the notice; (C) the continued use of alcohol or drugs by the Participant to an extent that, in the good faith determination of the Board, such use interferes in any manner with the performance of the Participant's duties and responsibilities; or (D) the conviction of the Participant for violating any law constituting a felony (including the Foreign Corrupt Practices Act of 1977). (xxxi) "Unvested Option" has the meaning set forth in Section 7(b). (xxxii) "Vested Option" has the meaning set forth in Section 7(c). SECTION 2. ADMINISTRATION OF THE PLAN. (a) Option Committee. The Plan shall be administered by the Board of Directors of the Corporation (the "Board") or a committee appointed for that purpose from time to time by the Board (the "Committee"). Any reference in the Plan to action by the Corporation means action by or under the authority of the Board or the Committee. Any vacancy on the Committee, whether due to action of the Board or any other cause, shall be filled by the Board. The term "Committee" shall, for all purposes of the Plan other than this Section 2, be deemed to refer to the Board if the Board is administering the Plan. (b) Procedures. If the Plan is administered by a Committee, the Board shall from time to time select a Chairman from among the members of the Committee. The Committee shall adopt such rules and regulations as it shall deem appropriate concerning the holding of meetings and the administration of the Plan. A majority of the entire Committee shall constitute a quorum and the actions of a majority of the members of the Committee present at a meeting at which a quorum is present, or actions approved in writing by all of the members of the Committee, shall be the actions of the Committee. (c) Interpretation. Except as otherwise expressly provided in this Plan, the Committee shall have all powers with respect to the administration of the Plan, including, without limitation, full power and authority to interpret the provisions of the Plan and any Option Agreement and to resolve all questions arising under the Plan. All decisions of the Board or the Committee, as the case may be, shall be conclusive and binding on all participants in the Plan absent manifest error of the Board or the Committee, as applicable. SECTION 3. SHARES SUBJECT TO THE PLAN. (a) Maximum Number of Shares. Subject to the provisions of Section 9(a) (relating to adjustments upon changes in capital structure and other corporate transactions), the -4- 5 maximum number of shares of Common Stock subject at any one time to Options, plus the number of shares of Common Stock theretofore issued and delivered pursuant to the exercise of Options granted under the Plan, shall not exceed 47,704 shares of Common Stock. If and to the extent that Options terminate, expire or are canceled without having been fully exercised, any unissued shares of Common Stock which have been reserved to be issued upon the exercise of such Options shall become available to be issued upon the exercise of Options subsequently granted. (b) Reservation of Shares. The number of shares of Common Stock reserved for issuance under the Plan shall at no time be less than the maximum number of shares which may be purchased at any time pursuant to outstanding Options. SECTION 4. ELIGIBILITY. Options may be granted under the Plan only to (a) Persons who are employees of the Corporation or any of its Subsidiaries and (b) Persons who are directors, officers, managers or advisors of the Corporation or any of its Subsidiaries. SECTION 5. GRANT OF OPTIONS. (a) General. Options may be granted under the Plan at any time and from time to time on or prior to the tenth anniversary of the Effective Date. Subject to the provisions of the Plan, the Committee shall, in its discretion, determine: (i) the Persons (from among the class of Persons eligible to receive Options under the Plan) to whom Options shall be granted (the "Participants"); (ii) the time or times at which Options shall be granted; (iii) the number of shares of Common Stock subject to each Option; (iv) the Option Price of the Common Stock subject to each Option; and (v) the time or times when each Option shall become exercisable and the duration of the exercise period. (b) Option Agreements. Each Option granted under the Plan shall be evidenced by a written agreement (an "Option Agreement"), containing such terms and conditions and in such form, as the Committee shall, in its discretion, provide or otherwise in the form of Exhibit A attached hereto. Each Option Agreement shall be executed by the Corporation and the Participant. Option agreements need not be identical. Unless otherwise explicitly stated in the Option Agreement, in the event of any conflict or inconsistency between any provision of an Option Agreement and the Plan, the applicable provision of the Plan shall govern. (c) No Right of Employment or Service. Nothing contained in the Plan or in any Option Agreement shall confer upon any Participant any employment right with the Corporation or any of its Subsidiaries or interfere in any way with the right of the Corporation or any such Subsidiary (subject to the terms of any separate agreement to the contrary) at any time to -5- 6 terminate such employment or service or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an Option. (d) Date of Grant. Except as otherwise determined by the Committee, the date of grant of an Option under the Plan shall be the date as of which the Committee approves the grant; provided, however, that the grant shall in no event be earlier than the date as of which the Participant becomes an employee, director, officer or manager of the Corporation or one of its Subsidiaries. SECTION 6. OPTION PRICE. Subject to Section 9(a), the price (the "Option Price") at which each share of Common Stock subject to an Option granted under the Plan may be purchased shall be no less than Fair Market Value on the date of grant of such Option. SECTION 7. EXERCISABILITY OF OPTIONS. (a) Committee Determination. Each Option granted under the Plan shall be exercisable at such time or times, or upon the occurrence of such event or events, and for such number of shares of Common Stock subject to the Option, as shall be determined by the Committee and set forth in the Option Agreement evidencing such Option. If an Option is not at the time of grant immediately exercisable, the Committee may (i) in the Option Agreement evidencing such Option, provide for the acceleration of the exercise date or dates of the subject Option upon the occurrence of specified events and/or (ii) at any time prior to the complete termination of an Option, accelerate the exercise date or dates of such Option. (b) Automatic Termination of Unvested Options. Any Option which has not vested in accordance with the respective Participant's Option Agreement (an "Unvested Option") shall automatically terminate and shall become null and void and be of no further force or effect upon the first to occur of (x) the end of the stated term of the Option and (y) if the Participant is an employee, the Termination Date. (c) Automatic Termination of Vested Options. The unexercised portion of any Option which has vested in accordance with the respective Participant's Option Agreement (a "Vested Option") shall automatically terminate and shall become null and void and be of no further force or effect upon the first to occur of (x) the end of the stated term of the Option and (y) if the Participant is an employee, ninety (90) days after the Termination Date. (d) Non-Assignability of Option Rights. No Option granted under the Plan shall be Transferable by the Participant except by will or by the laws of descent or distribution upon death of the Participant. An Option may be exercised during the lifetime of the Participant only by the Participant or, if the Participant has become Disabled, that Participant's legal representative. If a Participant dies, his or her Option shall thereafter be exercisable, during the period specified in Section 7(c), by his or her executors or administrators to the full extent to which such Option was exercisable by the Participant at the time of his or her death. (e) Changes in Duties or Position of the Participant. Anything contained in the Plan to the contrary notwithstanding, unless otherwise provided in an Option Agreement, no -6- 7 Option granted under the Plan shall be affected by any change of duties or position of the Participant (including a transfer to or from the Corporation or one of its Subsidiaries), so long as such Participant continues to be an employee of the Corporation or one of its Subsidiaries. (f) Section 280G Limitation. Notwithstanding anything in the Plan to the contrary, in the event that the provisions of Section 280G of the Code, relating to "excess parachute payments" shall be applicable to any vesting of Options (including pursuant to the provisions of any Option Agreement), which determination shall be made by taking into account all payments to any Participant which are parachute payments under Section 280G of the Code, then the total number of the Options which would otherwise vest shall be reduced to the largest amount such that Section 280G of the Code relating to "excess parachute payments" shall no longer be applicable (or shall be applicable to the reduced amount of "excess parachute payments" still remaining after the reduction provided for in this sentence); provided, however, that if (i) the Corporation is eligible to exempt such payments from treatment as "parachute payments" by securing shareholder approval under Section 280G (b)(5)(A)(ii) of the Code, and (ii) such shareholder approval is obtained, then there shall be no reduction in the number of Options which vest. In the event of a disagreement between the Corporation and any Participant as to whether Section 280G of the Code is applicable or whether any other payment or benefit constitutes a "parachute payment," such determination shall be made by an accounting or law firm mutually acceptable to the Corporation and such Participant. All costs relating to such determination shall be borne equally by the Corporation and such Participant. Pending such determination, the number of Options whose vesting is not in dispute shall continue to vest at the time and in the manner provided for without reduction under this Section 7(f). SECTION 8. PROCEDURE FOR EXERCISE. (a) Payment. Payment upon exercise of an Option shall be made in cash or personal or certified check payable to the Corporation in an amount equal to the aggregate Option Price of the Common Stock with respect to which the Option is being exercised. (b) Notice. A Participant (or other Person, as provided in Section 7(d)) may exercise an Option granted under the Plan in whole or in part (but for the purchase of whole shares only), as provided in the Option Agreement evidencing his or her Option, by delivering written notice (the "Notice") to the Secretary of the Corporation, as provided in the Option Agreement, and making the requisite payment as specified in Section 8(a). The date on which the Corporation receives the Notice from the Participant shall be the exercise date of an Option. (c) Issuance of Certificates. The Corporation shall issue a certificate in the name of the Participant for the Common Stock as soon as practicable after receipt of the Notice and payment of the aggregate Option Price for such shares. The Participant shall not have any privileges as a holder of shares with respect to any shares subject to an Option granted under the Plan until the date the Corporation receives payment for such shares pursuant to the Option. -7- 8 SECTION 9. ADJUSTMENTS; APPROVED SALE. (a) Changes in Capital Structure. (i) Subject to Section 9(b), if the Common Stock is changed by reason of a split, reverse split or recapitalization, or converted into or exchanged for other securities as a result of a merger, consolidation or reorganization, the Committee shall make such adjustments in the number and class of the Common Stock with respect to which Options may be granted under the Plan as shall be equitable and appropriate in order to make such Options, as nearly as may be practicable, equivalent to such Options immediately prior to such change. A corresponding adjustment increasing or decreasing the number and, if applicable, changing the class, of the Common Stock allocated to, and the Option Price of, each Option or portion thereof outstanding at the time of such change shall likewise be made. (ii) No fractional shares shall be issued as a result of any adjustment, and any fractional shares resulting from the computations pursuant to Section 9(a)(i) shall be eliminated and the Participant shall receive cash consideration for such fractional share at the rate equal to the Fair Market Value for one share of Common Stock. (iii) No adjustment shall be made for cash dividends or the issuance to holders of rights to subscribe for additional shares or other securities. (iv) Any adjustments referred to in Section 9(a)(i) shall be made by the Board or Committee, as the case may be, in good faith and shall be conclusive and binding on all Persons holding Options granted under the Plan, absent the Board's or the Committee's, as applicable, manifest error. (b) Approved Sale. In the event of an Approved Sale (as defined in the Stockholders' Agreement), each Participant shall comply with the provisions of Section 2.5 of the Stockholders Agreement as if such Participant was a "Stockholder" thereunder and as if the Vested Options were Stockholder Shares (as defined in the Stockholders' Agreement). SECTION 10. RESTRICTIONS ON COMMON STOCK. (a) No Common Stock shall be issued to any Participant upon the exercise of any Vested Option unless and until such Participant has executed and delivered to the Corporation a Joinder Agreement (as defined in the Stockholders' Agreement) whereupon such Participant shall become a party to the Stockholders' Agreement as a Management Stockholder (as defined in the Stockholders' Agreement). (b) If the Corporation at any time shall register an offering and sale of shares of Common Stock under the Securities Act in an underwritten offering pursuant to any other registration under the Securities Act (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto), no Participant who has exercised Vested Options pursuant to the Plan shall sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any Common Stock (other than the Common Stock included for sale in such registration) without the prior written consent of the Corporation for a period as shall be -8- 9 determined by the managing underwriters, which period cannot begin more than seven (7) days prior to the effectiveness of such Registration Statement and cannot last more than ninety (90) days (180 days in the case of the Corporation's Initial Public Offering) after the effective date of such Registration Statement. SECTION 11. COMPLIANCE WITH SECURITIES LAWS. No Options shall be granted, and no Common Stock shall be issued and delivered upon the exercise of Vested Options, unless and until the Corporation and/or the Participant shall have complied with all applicable laws, rules and regulations of all public agencies and authorities applicable to the issuance and distribution of such Common Stock and, to the extent applicable, to the listing of such Common Stock on any stock exchange on which any of the Common Stock of the Corporation may be listed. As a condition of participating in the Plan, each Participant agrees to comply with all such laws, rules and regulations and agrees to furnish to the Corporation all information and undertakings as may be required to permit compliance with such laws, rules and regulations. The Committee in its discretion may, as a condition to the exercise of any Option granted under the Plan, require a Participant (a) to represent in writing that the shares received upon exercise of an Option are being acquired for investment and not with a view to distribution and (b) to make such other representations and warranties as are deemed appropriate by the Corporation. Certificates representing shares acquired upon the exercise of Options that have not been registered under the Securities Act shall bear such legends as are required by the Stockholders' Agreement and such additional legends as may be required by the Option Agreement evidencing a particular Option. SECTION 12. EFFECTIVE DATE OF PLAN. The Plan shall become effective on May 31, 2000 (the "Effective Date"). SECTION 13. EXPIRATION AND TERMINATION OF PLAN. Except with respect to Options then outstanding, the Plan shall expire on the first to occur of (a) the tenth anniversary of the Effective Date and (b) the date as of which the Board, in its sole discretion, determines that the Plan shall terminate (the "Expiration Date"). Any Options outstanding as of the Expiration Date shall remain in effect until they have been exercised in accordance with, or terminated or have expired by, their respective terms. No such termination of the Plan shall affect the terms or provisions of any Option granted by the Corporation prior to the effectiveness of such termination unless otherwise agreed to by the holder thereof. SECTION 14. AMENDMENT OF PLAN. The Board may at any time prior to the Expiration Date modify and amend the Plan in any respect. No such amendment to the Plan shall affect the terms or provisions of any Option granted by the Corporation prior to the effectiveness of such amendment unless (a) so permitted by the Option Agreement or (b) not reasonably likely to have an adverse effect (as determined by the Board in good faith) on the rights of the Participants holding Options immediately prior to the effectiveness of such modification or amendment. -9- 10 SECTION 15. CAPTIONS. The use of captions in the Plan is for convenience only. The captions are not intended to provide substantive rights. SECTION 16. ACCOUNTS AND STATEMENTS. The Corporation shall maintain records of the Common Stock held by each Participant and the details of each Option granted to the Participant, including the number of shares of Common Stock held and their Option Price; the number of shares of Common Stock subject to, and the Option Price of, each Option; the number of shares of Common Stock in respect of which the Option has been exercised, the dates of such exercise and the maximum number of shares of Common Stock which the Participant may still purchase under the Option. Upon the reasonable request therefor from a Participant and at such other times as the Corporation shall determine, the Corporation shall furnish the Participant with a statement setting forth the details of (a) his or her shareholding arising from his or her exercise of his or her Options hereunder and (b) his or her Options. Such statement shall be deemed to have been accepted by the Participant as correct unless written notice to the contrary is given to the Corporation within thirty (30) days after such statement is given to the Participant. SECTION 17. WITHHOLDING TAXES. Whenever under the Plan shares of Common Stock are to be delivered to a Participant upon exercise of an Option, the Corporation shall be entitled to require as a condition of delivery that the Participant remit or, in appropriate cases, agree to remit when due, an amount sufficient to satisfy all current or estimated future Federal, state and local income tax withholding with respect to the employee's portion of any employment tax requirements relating thereto. SECTION 18. GOVERNING LAW. The validity and construction of the Plan and the instruments evidencing the Options granted hereunder shall be governed by and construed in accordance with the domestic laws of the State of Utah without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Utah. ******** -10- 11 As adopted by the Board of Directors and the holders of voting stock of Huntsman Packaging Corporation as of May 31, 2000. /s/ RONALD G. MOFFITT -------------------------------------- Name: Ronald G. Moffitt Title: Secretary -11- 12 The following amendment to the Huntsman Packaging Corporation 2000 Stock Incentive Plan (the "Plan") was adopted by the Board of Directors of Huntsman Packaging Corporation on July 14, 2000. The Plan is hereby amended by striking out paragraph (a) of Section 3 of the Plan and by substituting in lieu of said paragraph, the following new paragraph (a): "Maximum Number of Shares. Subject to the provisions of Section 9(a) (relating to adjustments upon changes in capital structure and other corporate transactions), the maximum number of shares of Common Stock subject at any one time to Options, plus the number of shares of Common Stock theretofore issued and delivered pursuant to the exercise of Options granted under the Plan, shall not exceed 51,010 shares of Common Stock. If and to the extent that Options terminate, expire or are canceled without having been fully exercised, any unissued shares of Common Stock which have been reserved to be issued upon the exercise of such Options shall become available to be issued upon the exercise of Options subsequently granted." /s/ Ronald G. Moffitt -------------------------- Name: Ronald G. Moffitt Title: Secretary EX-10.27 32 ex10-27.txt SECOND AMENDED AND RESTATED STOCK OPTION AGMT. 1 EXHIBIT 10.27 SECOND AMENDED AND RESTATED EMPLOYEE OPTION AGREEMENT dated as of May 31, 2000 (this "Agreement"), between Huntsman Packaging Company, a Utah corporation (the "Company"), and Jack E. Knott (the "Employee"). The Company has previously granted the Employee options to acquire shares of the Company's Class C Common Stock pursuant to an agreement dated January 1, 1998, as amended and restated on February 22, 1999 (as amended, the "Original Agreement"), between the Company and the Employee. The parties hereto desire to amend and restate in its entirety the Original Agreement in accordance with the terms herein. NOW THEREFORE, in consideration of the premises and of the mutual agreements contained in this Agreement, the parties hereby agree as set forth below. SECTION 1. AMENDMENT OF ORIGINAL AGREEMENT; THE PLAN. (a) The terms of the Original Agreement are hereby amended and restated in their entirety as set forth herein. (b) The terms of this Agreement shall be subject to the terms of the Huntsman Packaging Corporation Stock Option Plan (the "Plan") and, following the exercise of the Options granted hereunder, the terms of the Stockholders' Agreement dated as of May 31, 2000, among the Company and the stockholders of the Company signatory thereto. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Plan. SECTION 2. GRANT OF OPTION. The Company has previously granted to the Employee a non-statutory stock option to purchase 10,849 shares of the Company's Common Stock (the "Option Stock"), at a price per share (the "Exercise Price"). The Employee has exercised 1,587 Options. The Company acknowledges that the Employee has 8,902 remaining Options (the "Option" and, as to corresponding shares of Option Stock (as defined below), "Options") which will be governed by, and subject to, the terms of the Plan and this Agreement. The Employee acknowledges that the Options shall be exercisable for the Company's Common Stock in lieu of the Company's Class C Common Stock. SECTION 3. EXERCISE PRICE. The Exercise Price shall be $100 per share of Option Stock. 2 SECTION 4. TIME EXERCISE. The Options shall be immediately exercisable and shall remain exercisable in accordance with the terms and conditions of this Agreement and the Plan. SECTION 5. TERM OF OPTION. Subject to the terms of the Plan, the Option shall not be exercisable after December 31, 2007. SECTION 6. PROCEDURE FOR EXERCISE. (a) The Option may be exercised from time to time in whole or in part (but for the purchase of whole shares only), by delivery of a written notice in the form attached hereto as Exhibit A (the "Exercise Notice") from the Employee to the Secretary of the Company, which Exercise Notice shall state, or be accompanied by, as the case may be: (i) that the Employee elects to exercise the Option; (ii) the number of Options with respect to which the Employee is exercising the Option; (iii) any representations of the Employee required under Section 8; (iv) the date upon which the Employee desires to consummate the purchase of such Options (which date must be prior to the termination of the Option); (v) payment for such Options; and (vi) comply with such further provisions consistent with the Plan as the Committee may reasonably require. (b) The Company shall be entitled to require as a condition of delivery of the Options that the Employee remit or, in appropriate cases, agree to remit when due an amount in cash sufficient to satisfy all current or estimated future federal, state and local income tax withholding and the Employee's portion of any employment or payroll taxes, if any, relating thereto. SECTION 7. NO RIGHTS AS A HOLDER OF COMMON STOCK. The Employee shall not have any rights or privileges of a shareholder of Common Stock with respect to any Option until the date of receipt of payment by the Company for such shares pursuant to the exercise of such Option. 2 3 SECTION 8. ADDITIONAL PROVISIONS RELATED TO EXERCISE. In the event of the exercise of the Option at a time when there is not in effect a Registration Statement relating to the Option, the Employee hereby represents and warrants, and by virtue of such exercise shall be deemed to represent and warrant, to the Company that the Option and any Options purchased hereunder are being acquired for investment only and not with a view to the distribution thereof. The Employee shall provide the Company with such further representations and warranties as the Board may require in order to ensure compliance with applicable federal and state securities, "blue sky" and other laws. No Options shall be purchased upon the exercise of the Option unless and until the Company and/or the Employee shall have complied with all applicable federal or state or provincial registration, listing and/or qualification requirements and all other requirements of law or of any regulatory agencies having jurisdiction. Each of the Company and the Employee shall use reasonable efforts to comply with all applicable federal or state registration, listing and/or qualification requirements and all other requirements of law or of any regulatory agencies having jurisdiction in connection with the exercise of the Option. SECTION 9. NO GUARANTEE OF EMPLOYMENT. Nothing herein confers or shall confer on the Employee any right to continue in the employment of the Company nor shall interfere with Company's right to terminate the employment of the Employee at any time. SECTION 10. CERTAIN TAX CONSEQUENCES. The Employee acknowledges that the Option granted hereby is not an incentive stock option for tax purposes and that both the award of the Option and the exercise thereof may have various tax consequences under federal and state law. The Employee has discussed such consequences with his personal tax advisor. The Employee may be required to report the grant of the Option to the Internal Revenue Service (Internal Revenue Code Reg. Section 1.61-15(c)) and he may be required to be reported to state tax authorities under applicable state law. SECTION 11. GOVERNING LAW. The Option shall be exercised in accordance with such administrative regulations as the Board or the Committee shall from time to time adopt. The Option and this Agreement shall be construed, administered and governed in all respects under and by the laws of the State of Utah. SECTION 12. ENTIRE AGREEMENT; THE PLAN. (a) This Agreement and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior written or oral negotiations, commitments, representations and agreements with respect thereto. The Employee acknowledges receipt of a copy of the Plan. 3 4 (b) Notwithstanding anything to the contrary contained in the Plan or in this Agreement, the rights and obligations of Section 9(a) of the Plan shall not apply to any of the Options, Option Stock or Owned Shares. ******* 4 5 IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and Restated Option Agreement as of the date first above written. HUNTSMAN PACKAGING CORPORATION By:/s/ RICHARD P. DURHAM ------------------------------------- Name: Richard P. Durham Title: Chief Executive Officer /s/ JACK E. KNOTT ---------------------------------------- Jack E. Knott 6 Exhibit A [Form of Exercise Notice] VIA CERTIFIED MAIL Huntsman Packaging Company 500 Huntsman Way Salt Lake City, Utah 84108 Attention: Secretary Dear Sir or Madam: Reference is hereby made to the Option Agreement dated May 31, 2000 (the "Option Agreement"), between Huntsman Packaging Company, a Utah corporation (the "Company"), and Jack E. Knott (the "Employee"). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Option Agreement. Pursuant to the terms of the Option Agreement, the undersigned Employee hereby elects to exercise the Employee's right to purchase [ ] shares of Common Stock at an Option Price per share equal to $100. The date of the exercise of the Options hereunder shall be [ ]. In connection with the foregoing, please find enclosed [cash or personal or certified check] in an amount equal to $[ ]. Sincerely, ----------------------------------- Name: EX-12.1 33 ex12-1.txt STATEMENT RE: COMPUTATION OF RATIOS OF EARNINGS 1 EXHIBIT 12.1 Computation of Ratio of Earnings to Fixed Charges (Dollars in Millions)
Historical: 3 months 3 months 1995 1996 1997 1998 1999 3/31/99 3/31/00 ---- ---- ---- ---- ---- ------- ------- Income before Taxes (a) $1.8 $(10.2) $(3.2) $11.1 $32.4 $6.0 $3.7 Interest Expense (b) 8.8 11.6 17.0 37.5 44.0 10.2 11.6 1/3 Rental Expense (c) 0.7 0.8 1.0 1.9 2.2 0.7 0.7 Fixed Charges (b+c) 9.5 12.4 18.0 39.4 46.2 10.9 12.3 Earnings (a+b+c) 11.3 2.2 14.8 50.5 78.6 16.9 16.0 Ratio 1.2x 0.2x 0.8x 1.3x 1.7x 1.6x 1.3x
LTM Pro Forma: 1999 3/31/00 ---- ------- Income before Taxes (a) $ 2.3 $ 4.8 Interest Expense (b) 77.8 77.6 1/3 Rental Expense (c) 2.2 2.2 Fixed Charges (b+c) 80.0 79.8 Earnings (a+b+c) 82.3 84.6 Ratio 1.0x 1.1x
EX-21.1 34 ex21-1.txt SUBSIDIARIES OF THE REGISTRANTS 1 EXHIBIT 21.1 HUNTSMAN PACKAGING CORPORATION LIST OF SUBSIDIARIES AND STATES OF INCORPORATION OR ORGANIZATION COMPANY NAME JURISDICTION OF INCORPORATION/ORGANIZATION - ------------ ------------------------------------------ Huntsman KCL Corporation(1) Utah Huntsman Container Corporation International(1) Utah Huntsman Packaging Georgia, Inc.(1) Georgia Huntsman Film Products of Mexico, Inc.(1) Utah Huntsman Film Products of Canada Ltd.(1) Canada Huntsman Film Products Pty. Ltd.(1) Australia Huntsman Film Products GmbH(1) Germany Huntsman Bulk Packaging Corporation(1) Utah Huntsman Packaging of Canada, LLC(1) Utah limited liability company HPC Investment, Inc.(1) Utah Huntsman Film Products UK, Limited(2) U.K. Huntsman Edison Films Corporation(1) Delaware Edison Plastics International Inc.(3) Delaware Edison Exports, Inc. FSC Limited(4) Jamaica ASPEN Industrial, S.A. de C.V.(5) Mexico Mexicana de Tintas, S.A.(6) Mexico Nepsa de Mexico, S.A. de C.V.(6) Mexico - ------------------ (1) Owned by Huntsman Packaging Corporation (2) Owned by Huntsman Container Corporation International (3) Owned by Huntsman Edison Films Corporation (4) Owned by Edison Plastics International Inc. (5) Owned by Huntsman Packaging Corporation ((greater than)99%) and Huntsman Container Corporation International ((less than)1%) (6) Owned by ASPEN Industrial, S.A. de C.V. ((greater than)99%) and Huntsman Edison Films Corporation ((less than)1%) EX-23.3 35 ex23-3.txt CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports (and to all references to this Firm) included in or made a part of this registration statement. /s/ Arthur Andersen LLP Arthur Andersen LLP Salt Lake City, Utah July 20, 2000 EX-23.4 36 ex23-4.txt CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23.4 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of Huntsman Packaging Corporation on Form S-4 of our report dated February 11, 1998, appearing in the Prospectus, which is part of this Registration Statement, and of our report dated February 11, 1998 relating to the financial statement schedules appearing elsewhere in this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. DELOITTE & TOUCHE LLP Salt Lake City, Utah July 20, 2000 EX-25.1 37 ex25-1.txt FORM T-1 1 EXHIBIT 25.1 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| ------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) One Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ------------- CALPINE CAPITAL TRUST III (Exact name of obligor as specified in its charter) Delaware (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 50 West San Fernando Street San Jose, CA 95113 (Address of principal executive offices) (Zip code) ------------- __ % Convertible Preferred Securities ("HIGH TIDES") (Title of the indenture securities) ================================================================================ 2 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. - ------------------------------------------ ---------------------------------- Name Address - ------------------------------------------ ---------------------------------- Superintendent of Banks of the State 2 Rector Street, New York, of New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes. 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None. 16. LIST OF EXHIBITS. EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.229.10(D). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. 3 SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 26th day of June, 2000. THE BANK OF NEW YORK By: \S\MICHAEL CULHANE Name: MICHAEL CULHANE Title: VICE PRESIDENT 4 - -------------------------------------------------------------------------------- Consolidated Report of Condition of THE BANK OF NEW YORK of One Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business December 31, 1999, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. ASSETS Dollar Amounts In Thousands Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin. $3,247,576 Interest-bearing balances.......................... 6,207,543 Securities: Held-to-maturity securities........................ 827,248 Available-for-sale securities...................... 5,092,464 Federal funds sold and Securities purchased under agreements to resell............................... 5,306,926 Loans and lease financing receivables: Loans and leases, net of unearned income...............37,734,000 LESS: Allowance for loan and lease losses............575,224 LESS: Allocated transfer risk reserve........................13,278 Loans and leases, net of unearned income, allowance, and reserve........................... 37,145,498 Trading Assets........................................ 8,573,870 Premises and fixed assets (including capitalized leases)............................................ 723,214 Other real estate owned............................... 10,962 Investments in unconsolidated subsidiaries and associated companies............................... 215,006 Customers' liability to this bank on acceptances outstanding........................................ 682,590 Intangible assets..................................... 1,219,736 Other assets.......................................... 2,542,157 ----------- Total assets.......................................... $71,794,790 ===========
5 LIABILITIES Deposits: In domestic offices................................ $27,551,017 Noninterest-bearing......................11,354,172 Interest-bearing.........................16,196,845 In foreign offices, Edge and Agreement subsidiaries, and IBFs........................... 27,950,004 Noninterest-bearing.........................639,410 Interest-bearing.........................27,310,594 Federal funds purchased and Securities sold under agreements to repurchase........................... 1,349,708 Demand notes issued to the U.S.Treasury............... 300,000 Trading liabilities................................... 2,339,554 Other borrowed money: With remaining maturity of one year or less........ 638,106 With remaining maturity of more than one year through three years.............................. 449 With remaining maturity of more than three years... 31,080 Bank's liability on acceptances executed and outstanding........................................ 684,185 Subordinated notes and debentures..................... 1,552,000 Other liabilities..................................... 3,704,252 ---------- Total liabilities..................................... 66,100,355 ========== EQUITY CAPITAL Common stock.......................................... 1,135,284 Surplus............................................... 866,947 Undivided profits and capital reserves................ 3,765,900 Net unrealized holding gains (losses) on available-for-sale securities...................... ( 44,599) Cumulative foreign currency translation adjustments... ( 29,097) ----------- Total equity capital.................................. 5,694,435 ----------- Total liabilities and equity capital.................. $71,794,790 ============
6 I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Thomas J. Mastro We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. --- Thomas A. Renyi | Alan R. Griffith | Directors Gerald L. Hassell | --- - -------------------------------------------------------------------------------- EX-27.1 38 ex27-1.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HUNTSMAN PACKAGING CORPORATION'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 INCLUDED IN THE PROSPECTUS THAT FORMS A PART OF THE REGISTRATION STATEMENT ON FORM S-4, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001049442 HUNTSMAN PACKAGING CORP 1,000 YEAR 3-MOS DEC-31-1999 DEC-31-2000 DEC-31-1999 MAR-31-2000 9,097 12,228 0 0 109,768 120,463 2,115 1,898 78,199 92,348 220,673 231,471 392,045 402,662 77,593 84,782 769,023 708,098 116,827 128,875 493,262 488,275 0 0 0 0 63,676 63,676 26,986 28,014 769,023 780,098 781,416 212,537 781,416 212,537 623,438 169,524 81,987 28,185 435 430 0 0 44,028 11,558 32,398 3,700 14,087 2,299 18,311 1,401 0 0 0 0 0 0 18,311 1,401 0 0 0 0
EX-99.1 39 ex99-1.txt FORM OF LETTER OF TRANSMITTAL 1 EXHIBIT 99.1 LETTER OF TRANSMITTAL FOR 13% SENIOR SUBORDINATED NOTES DUE 2010 OF HUNTSMAN PACKAGING CORPORATION THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2000 (THE "EXPIRATION DATE") UNLESS EXTENDED. The Exchange Agent is: THE BANK OF NEW YORK For Overnight Delivery, Delivery by Hand or Delivery by Registered or Certified Mail: The Bank of New York 101 Barclay Street, Reorg 7 East New York, New York 10286 Attention: By Facsimile Transmission (for Eligible Institutions only): (212) 815- Confirm facsimile by telephone only: (212) 815- DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus dated , 2000 (the "Prospectus") of Huntsman Packaging Corporation (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together describe the Company's offer (the "Exchange Offer") to exchange its 13% Senior Subordinated Notes due 2010 (the "New Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for an equal aggregate principal amount of its outstanding 13% Senior Subordinated Notes due 2010 (the "Old Notes" and, together with the New Notes, the "Notes") from the holders thereof. The Old Notes are, and the New Notes will be, guaranteed by all of the domestic restricted subsidiaries of the Company. The terms of the New Notes are identical in all material respects (including principal amount, interest rate and maturity) to the terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the New Notes are freely transferable by holders thereof (except as provided herein or in the Prospectus). Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus. YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. 2 List below the Old Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and aggregate principal amounts should be listed on a separate signed schedule affixed hereto. The minimum permitted tender is $1,000 in principal amount. All other tenders must be in integral multiples of $1,000. DESCRIPTION OF OLD NOTES TENDERED HEREWITH - ------------------------------------------------------------------------------------------------------------------------ AGGREGATE PRINCIPAL AMOUNT NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY OLD PRINCIPAL PLEASE FILL IN NUMBER(S)* NOTES* AMOUNT TENDERED** - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ TOTAL - ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Old Notes. See instruction 2. Holders of Old Notes whose Old Notes are not immediately available or who cannot deliver all other required documents to the Exchange Agent on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus. Unless the context otherwise requires, the term "holder" for purposes of this Letter of Transmittal means any person in whose name Old Notes are registered or any other person who has obtained a properly completed bond power from the registered holder or any person whose Old Notes are held of record by The Depository Trust Company ("DTC"). If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. A broker-dealer may not participate in the Exchange Offer with respect to Old Notes acquired other than as a result of market-making activities or other trading activities. Any holder who is an "affiliate" of the Company or who has an arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, or any broker-dealer who purchased Old Notes from the Company to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act must comply with the registration and prospectus delivery requirements under the Securities Act. 2 3 [ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) - -------------------------------------------------------------------------------- Window Ticket Number (if any) - -------------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery - ----------------------------------------------------------------- Name of Eligible Institution that Guaranteed Delivery - ---------------------------------------------------------------- [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO AND COMPLETE THE FOLLOWING: Name(s) - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- ------------------------------------------------------------ SPECIAL EXCHANGE INSTRUCTIONS (SEE INSTRUCTIONS 3, 4 AND 5) To be completed ONLY if certificates for Old Notes in a principal amount not tendered, or New Notes issued in exchange for Old Notes accepted for exchange, are to be issued in the name of someone other than the undersigned. Issue certificate(s) to: Name ---------------------------------------------------- (PLEASE PRINT) Address ------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) ------------------------------------------------------------ ------------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3, 4 AND 5) To be completed ONLY if certificates for Old Notes in a principal amount not tendered, or New Notes issued in exchange for Old Notes accepted for exchange, are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above. Deliver certificate(s) to: Name ---------------------------------------------------- (PLEASE PRINT) Address ------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) ------------------------------------------------------------ 3 4 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of the Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of all or any portion of the Old Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Old Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of the Issuers, in connection with the Exchange Offer) to cause the Old Notes to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Old Notes and to acquire New Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Old Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned and any beneficial owner of the Old Notes tendered hereby further represent and warrant that (i) the New Notes acquired by the undersigned and any such beneficial owner of Old Notes pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, (ii) neither the undersigned nor any such beneficial owner has an arrangement with any person to participate in the distribution of such New Notes, (iii) neither the undersigned nor any such beneficial owner nor any such other person is engaging in or intends to engage in a distribution of such New Notes and (iv) neither the undersigned nor any such other person is an "affiliate", as defined under Rule 405 promulgated under the Securities Act, of the Company. The undersigned and each beneficial owner acknowledge and agree that any person who is an affiliate of the Company or who tenders in the Exchange Offer for the purpose of participating in a distribution of the New Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale transaction of the New Notes acquired by such person and may not rely on the position of the staff of the Securities and Exchange Commission set forth in the no-action letters discussed in the Prospectus under the caption "The Exchange Offer -- Purpose and Effect of the Exchange Offer." The undersigned and each beneficial owner will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. For purposes of the Exchange Offer, the Company shall be deemed to have accepted validly tendered Old Notes when, as and if the Company has given oral notice (confirmed in writing) or written notice thereof to the Exchange Agent. If any tendered Old Notes are not accepted for exchange pursuant to the Exchange Offer because of an invalid tender, the occurrence of certain other events set forth in the Prospectus or otherwise, any such unaccepted Old Notes will be returned, without expense, to the undersigned at the address shown below or at a different address as may be indicated herein under "Special Delivery Instructions" as promptly as practicable after the Expiration Date. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. The undersigned understands that tenders of Old Notes pursuant to the procedures described under the caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer, subject only to withdrawal of such tenders on the terms set forth in the Prospectus under the caption "The Exchange Offer -- Withdrawal of Tenders." 4 5 Unless otherwise indicated under "Special Exchange Instructions," please cause the New Notes to be issued, and return any Old Notes not tendered or not accepted for exchange, in the name(s) of the undersigned (and, in the case of Old Notes tendered by book-entry transfer, by credit to the account at DTC). Similarly unless otherwise indicated under "Special Delivery Instructions," please mail any certificates for Old Notes not tendered or not accepted for exchange (and accompanying documents, as appropriate), and any certificates for New Notes, to the undersigned at the address shown below the undersigned's signature(s). If both "Special Exchange Instructions" and "Special Delivery Instructions" are completed, please cause the New Notes to be issued, and return any Old Notes not tendered or not accepted for exchange, in the name(s) of, and deliver any certificates for such Old Notes or New Notes to, the person(s) so indicated (and in the case of Old Notes tendered by book-entry transfer, by credit to the account at DTC so indicated). The undersigned recognizes that the Company has no obligation, pursuant to the "Special Exchange Instructions," to transfer any Old Notes from the name of the registered holder(s) thereof if the Company does not accept for exchange any of the Old Notes so tendered. Holders of Old Notes whose Old Notes are not immediately available or who cannot deliver all other required documents to the Exchange Agent on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus. 5 6 TENDERING HOLDER(S) SIGN HERE - ------------------------------------------------------ - ------------------------------------------------------ (SIGNATURE OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY) - ------------------------------------------------------ (Date) - ------------------------------------------------------ (Date) (MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE(S) FOR OLD NOTES HEREBY TENDERED OR IN WHOSE NAME OLD NOTES ARE REGISTERED ON THE BOOKS OF DTC OR ONE OF ITS PARTICIPANTS, OR BY ANY PERSON(S) AUTHORIZED TO BECOME THE REGISTERED HOLDER(S) BY ENDORSEMENTS AND DOCUMENTS TRANSMITTED HEREWITH. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH THE FULL TITLE OF SUCH PERSON. SEE INSTRUCTION 3.) Names(s): - -------------------------------------------------------------------------------- ----------------------------------------------------------------------- (PLEASE PRINT) Capacity: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- ------------------------------------------------------------------------ (INCLUDING ZIP CODE) Area Code and Telephone Number: - ------------------------------------------------------------------------------ Taxpayer Identification No.: - -------------------------------------------------------------------------------- GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTION 3) Authorized Signature: - -------------------------------------------------------------------------------- Name: - -------------------------------------------------------------------------------- Title: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- ------------------------------------------------------------------------ (INCLUDING ZIP CODE) Name of Firm: - -------------------------------------------------------------------------------- Area Code and Telephone No.: - -------------------------------------------------------------------------------- Dated: , 2000 6 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. A holder of Old Notes may tender the same by (i) properly completing and signing this Letter of Transmittal or a facsimile hereof (all references in the Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates, if applicable, representing the Old Notes being tendered and any required signature guarantees and any other documents required by this Letter of Transmittal, to the Exchange Agent at its address set forth above on or prior to the Expiration Date, or (ii) complying with the procedure for book-entry transfer described below, or (iii) complying with the guaranteed delivery procedures described below. Holders of Old Notes may tender Old Notes by book-entry transfer by crediting the Old Notes to the Exchange Agent's account at DTC in accordance with DTC's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer. DTC participants that are accepting the Exchange Offer should transmit their acceptance to DTC, which will edit and verify the acceptance and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will then send a computer-generated message (an "Agent's Message") to the Exchange Agent for its acceptance in which the holder of the Old Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter of Transmittal, the DTC participant confirms on behalf of itself and the beneficial owners of such Old Notes all provisions of this Letter of Transmittal (including any representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent. Delivery of the Agent's Message by DTC will satisfy the terms of the Exchange Offer as to execution and delivery of a Letter of Transmittal by the participant identified in the Agent's Message. DTC participants may also accept the Exchange Offer by submitting a Notice of Guaranteed Delivery through ATOP. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE ISSUERS. Holders whose Old Notes are not immediately available or who cannot deliver their Old Notes and all other required documents to the Exchange Agent on or prior to the Expiration Date or comply with book-entry transfer procedures on a timely basis must tender their Old Notes pursuant to the guaranteed delivery procedure set forth in the Prospectus. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) on or prior to the Expiration Date, the Exchange Agent must have received from such Eligible Institution a letter, telegram or facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) setting forth the name and address of the tendering holder, the names in which such Old Notes are registered, and, if applicable, the certificate numbers of the Old Notes to be tendered; and (iii) all tendered Old Notes (or a confirmation of any book-entry transfer of such Old Notes into the Exchange Agent's account at a book-entry transfer facility) as well as this Letter of Transmittal and all other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three New York Stock Exchange trading days after the date of execution of such letter, telegram or facsimile transmission, all as provided in the Prospectus. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Old Notes for exchange. 7 8 2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Notes will be accepted only in integral multiples of $1,000. If less than the entire principal amount of Old Notes evidenced by a submitted certificate is tendered, the tendering holder must fill in the aggregate principal amount of Old Notes tendered in the box entitled "Description of Old Notes Tendered Herewith." A newly issued certificate for the Old Notes submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise clearly indicated. If not yet accepted, a tender pursuant to the Exchange Offer may be withdrawn prior to the Expiration Date. To be effective with respect to the tender of Old Notes, a written notice of withdrawal must: (i) be received by the Exchange Agent at one of the addresses for the Exchange Agent set forth above before the Company notifies the Exchange Agent that it has accepted the tender of Old Notes pursuant to the Exchange Offer; (ii) specify the name of the person who tendered the Old Notes to be withdrawn; (iii) identify the Old Notes to be withdrawn (including the principal amount of such Old Notes, or, if applicable, the certificate numbers shown on the particular certificates evidencing such Old Notes and the principal amount of Old Notes represented by such certificates); (iv) include a statement that such holder is withdrawing its election to have such Old Notes exchanged; and (v) be signed by the holder in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantee). The Exchange Agent will return the properly withdrawn Old Notes promptly following receipt of notice of withdrawal. If Old Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Old Notes or otherwise comply with the book-entry transfer facility's procedures. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by the Company, and such determination will be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Old Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the book-entry transfer facility pursuant to the book-entry transfer procedures described above, such Old Notes will be credited to an account with such book-entry transfer facility specified by the holder) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described under the caption "The Exchange Offer -- Procedures for Tendering" in the Prospectus at any time prior to the Expiration Date. 3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the Old Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Old Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of Old Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Old Notes. When this Letter of Transmittal is signed by the registered holder or holders (which term, for the purposes described herein, shall include the book-entry transfer facility whose name appears on a security listing as the owner of the Old Notes) of Old Notes listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required unless New Notes issued in exchange therefor are to be issued, or Old Notes are not tendered or not exchanged are to be returned, in the name of any person other 8 9 than the registered holder. Signatures on any such certificates or separate written instruments of transfer or exchange must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder or holders of the Old Notes listed, such Old Notes must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to the Company and duly executed by the registered holder, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the Old Notes. If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange 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, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution, unless Old Notes are tendered: (i) by a holder who has not completed the box entitled "Special Exchange Instructions" or "Special Delivery Instructions" on this Letter of Transmittal; or (ii) for the account of an Eligible Institution (as defined below). In the event that the exhibit signatures in this Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by an eligible guarantor institution which is a member of a firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or another "eligible institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an "Eligible Institution"). If Old Notes are registered in the name of a person other than the signer of this Letter of Transmittal, the Old Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Company, in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution. 4. SPECIAL EXCHANGE AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, as applicable, the name and address to which the New Notes or certificates for Old Notes not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the tax identification number of the person named must also be indicated. Holders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the book-entry transfer facility as such holder may designate. 5. TRANSFER TAXES. The Company shall pay all transfer taxes, if any, applicable to the transfer and exchange of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New Notes or Old Notes not tendered or accepted for exchange are to be delivered to, or are registered or issued in the name of any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or it a transfer tax is imposed for any reason other than the transfer and exchange of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exception therefrom is not submitted herewith the amount of such transfer taxes will be billed directly to such tendering holder. 6. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 9 10 7. MUTILATED, LOST, STOLEN OR DESTROYED SECURITIES. Any holder whose Old Notes have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated below for further instructions. 8. IRREGULARITIES. All questions as to the validity, form, eligibility (including time of receipt), and acceptance of Letters of Transmittals or Old Notes will be resolved by the Company, whose determination will be final and binding. The Company reserves the absolute right to reject any or all Letters of Transmittal or tenders that are not in proper form or the acceptance of which would, in the opinion of the Company's counsel, be unlawful. The Company also reserves the right to waive any irregularities or conditions of tender as to the particular Old Notes covered by any Letter of Transmittal or tendered pursuant to such letter. None of the Company, the Exchange Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Company's interpretation of the terms and conditions of the Exchange Offer shall be final and binding. 9. SUBSTITUTE FORM W-9. Each holder of Old Notes whose Old Notes are accepted for exchange (or other payee) is required to provide a correct taxpayer identification number ("TIN"), generally the holder's Social Security or federal employer identification number, and certain other information, on Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify that the holder (or other payee) is not subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the holder (or other payee) to a $50 penalty imposed by the Internal Revenue Service and 31% federal income tax backup withholding on payments made in connection with the Old Notes. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth above. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number indicated above. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE OR COPY THEREOF (TOGETHER WITH CERTIFICATES OF OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 10 11 IMPORTANT TAX INFORMATION The Holder is required to give the Exchange Agent the social security number or employer identification number of the Holder of the Old Notes. If the Old Notes are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. - -------------------------------------------------------------------------------- Name of Holder (if joint, list first and circle the name of the person or entity whose number you enter in Part I below) - -------------------------------------------------------------------------------- Address (if Holder does not complete, signature below will constitute a certification that the above address is correct) - ----------------------------------------------------------------------------------------------------------------------------- PAYOR'S NAME: Huntsman Packaging Corporation - ----------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND FORMW-9 CERTIFY BY SIGNING AND DATING BELOW. If you do not have a number, see How to Obtain a "TIN" in the enclosed ------------------------- Guidelines. Social Security Number OR ------------------------- Employer Identification Number ------------------------------------------------------------------------------------------------ Department of the Treasury PART 2 -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING, SEE THE ENCLOSED GUIDELINES FOR Internal CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Certification -- Under Revenue Service penalties of perjury, I certify that: PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION (1) The number shown on this form is my correct Taxpayer Identification Number (or I am NUMBER (TIN) waiting for a number to be issued for me); and (2) I am not subject to backup withholding either because 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 the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------------------------------------------------ CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding, do not cross item (2). (Also see instruction in the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9) - -----------------------------------------------------------------------------------------------------------------------------
SIGNATURE DATE _____________________ NAME (Please Print) - -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31 PERCENT OF ANY PAYMENTS MADE TO YOU UNDER THE NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. (DO NOT WRITE IN SPACE BELOW) Certificate Surrendered Old Notes Tendered Old Notes Accepted - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Delivery Prepared By Checked By Date 11 EX-99.2 40 ex99-2.txt FORM OF NOTICE OF GUARANTED DELIVERY 1 EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF ALL OUTSTANDING 13% SENIOR SUBORDINATED NOTES DUE 2010 IN EXCHANGE FOR NEW 13% SENIOR SUBORDINATED NOTES DUE 2010 OF HUNTSMAN PACKAGING CORPORATION Registered holders of outstanding 13% Senior Subordinated Notes due 2010 (the "Old Notes") who wish to tender their Old Notes in exchange for a like principal amount of new 13% Senior Subordinated Notes due 2010 (the "New Notes") and whose Old Notes are not immediately available or who cannot deliver their Old Notes and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to The Bank of New York (the "Exchange Agent") prior to the Expiration Date, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) or mail to the Exchange Agent. See "The Exchange Offer -- Procedures for Tendering" in the Prospectus dated , 2000 of Huntsman Packaging Corporation (the "Prospectus"). The Exchange Agent for the Exchange Offer is: THE BANK OF NEW YORK For Overnight Delivery, Delivery by Hand or Delivery by Registered or Certified Mail: The Bank of New York 101 Barclay Street, Reorg 7 East New York, New York 10286 Attention: By Facsimile Transmission (for eligible institutions only): (212) 815- Confirm facsimile by telephone only: (212) 815- DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an eligible institution (as defined in the Prospectus), such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. 2 Ladies and Gentlemen: The undersigned hereby tenders for exchange to the Company, upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." The undersigned understands and acknowledges that the Exchange Offer will expire at 5:00 p.m., New York City time, on , 2000, unless extended by the Issuers. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 2000 unless the Exchange Offer is extended as provided in the Prospectus, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. All authority conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death, incapacity or dissolution of the undersigned, and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. SIGNATURE - -------------------------------------------------------- Date: --------------- - -------------------------------------------------------- Date: --------------- (Signature(s) of Holder(s) or Authorized Signatory) Area Code and Telephone Number: - ------------------------------------------------------------------------------ Name(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please Print) Capacity (full title), if signing in a fiduciary or representative capacity: - ------------------------------------- - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security No.: - ------------------------------------------------------------------ Principal Amount of Old Notes Tendered (must be in integral multiples of $1,000): - ----------------------- Certificate Number(s) of Old Notes (if available): - ------------------------------------------------------------- Aggregate Principal Amount Represented by Certificate(s): - -------------------------------------------------- IF OLD NOTES WILL BE TENDERED BY BOOK-ENTRY TRANSFER, PROVIDE THE FOLLOWING INFORMATION: DTC Account Number: - ------------------------------------------------ Transaction Number: - -------------------------------------------------- 2 3 GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of its addresses set forth on the reverse hereof, the certificates representing the Old Notes (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at the book-entry transfer facility), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the Expiration Date (as defined in the Letter of Transmittal). Name of Firm: -------------------------------------- ----------------------------------------------------- (AUTHORIZED SIGNATURE) Address: -------------------------------------------- Title: ------------------------------------------------- Name: ----------------------------------------------- - ----------------------------------------------------- (ZIP CODE) (PLEASE TYPE OR PRINT) Area Code and Date: ------------------------------------------------ Telephone No.: -------------------------------------
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.3 41 ex99-3.txt FORM OF BROKERS, DEALERS, COMMERCIAL BANKERS ET AL 1 EXHIBIT 99.3 HUNTSMAN PACKAGING CORPORATION OFFER TO EXCHANGE UP TO $220,000,000 OF ITS 13% SENIOR SUBORDINATED NOTES DUE 2010 FOR ANY AND ALL OF ITS OUTSTANDING 13% SENIOR SUBORDINATED NOTES DUE 2010 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2000, UNLESS EXTENDED. , 2000 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: Huntsman Packaging Corporation (the "Company"), is offering, upon the terms and subject to the conditions set forth in the Prospectus dated , 2000 (the "Prospectus") and the accompanying Letter of Transmittal enclosed herewith (which together constitute the "Exchange Offer"), to exchange its 13% Senior Subordinated Notes due 2010 (the "New Notes") for an equal principal amount of their 13% Senior Subordinated Notes due 2010 (the "Old Notes" and together with the New Notes, the "Notes"). As set forth in the Prospectus, the terms of the New Notes are identical in all material respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended, and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the Exchange and Registration Rights Agreement dated as of May 31, 2000 among the Company, the Note Guarantors listed therein and Chase Securities Inc. and Deutsche Bank Securities Inc. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CERTAIN CONDITIONS TO THE EXCHANGE OFFER. SEE "THE EXCHANGE OFFER -- CONDITIONS" IN THE PROSPECTUS. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. the Prospectus, dated , 2000; 2. the Letter of Transmittal for your use (unless Old Notes are tendered by an Agent's Message) and for the information of your clients (facsimile copies of the Letter of Transmittal may be used to tender Old Notes); 3. a form of letter which may be sent to your clients for whose accounts you hold Old Notes registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 4. a Notice of Guaranteed Delivery; 5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. a return envelope addressed to The Bank of New York, the Exchange Agent. YOUR PROMPT ACTION IS REQUESTED. PLEASE NOTE THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2000, UNLESS EXTENDED. PLEASE FURNISH COPIES OF THE ENCLOSED MATERIALS TO THOSE OF YOUR CLIENTS FOR WHOM YOU HOLD OLD NOTES REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE AS QUICKLY AS POSSIBLE. 2 In all cases, exchanges of Old Notes accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of (a) certificates representing such Old Notes, or confirmation of book entry transfer of such Old Notes, as the case may be, (b) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, or an Agent's Message and (c) any other required documents. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, the Letter of Transmittal or an Agent's Message and in either case together with any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth under the caption "The Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus. The Exchange Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Old Notes residing in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. The Company will not pay any fees or commissions to brokers, dealers or other persons for soliciting exchanges of Notes pursuant to the Exchange Offer. The Company will, however, upon request, reimburse you for customary clerical and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. The Company will pay or cause to be paid any transfer taxes payable on the transfer of Notes to it, except as otherwise provided in Instruction 5 of the Letter of Transmittal. Questions and requests for assistance with respect to the Exchange Offer or for copies of the Prospectus and Letter of Transmittal may be directed to the Exchange Agent by telephone at (212) 815- or by facsimile at (212) 815- . Very truly yours, HUNTSMAN PACKAGING CORPORATION NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE COMPANY, OR ANY AFFILIATE THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY DOCUMENT ON BEHALF OF ANY OF THE COMPANY IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 2 EX-99.4 42 ex99-4.txt FORM OF LETTER TO CLIENTS 1 EXHIBIT 99.4 HUNTSMAN PACKAGING CORPORATION OFFER TO EXCHANGE UP TO $220,000,000 OF ITS 13% SENIOR SUBORDINATED NOTES DUE 2010 FOR ANY AND ALL OF ITS OUTSTANDING 13% SENIOR SUBORDINATED NOTES DUE 2010 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2000, UNLESS EXTENDED. To Our Clients: Enclosed for your consideration is a Prospectus dated , 2000 (the "Prospectus") and a Letter of Transmittal (which together constitute the "Exchange Offer") relating to the offer by Huntsman Packaging Corporation (the "Company") to exchange its 13% Senior Subordinated Notes due 2010 (the "New Notes") for an equal principal amount of its outstanding 13% Senior Subordinated Notes due 2010 (the "Old Notes" and together with the New Notes, the "Notes"). As set forth in the Prospectus, the terms of the New Notes are identical in all material respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended, and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the Exchange and Registration Rights Agreement dated as of May 31, 2000 among the Company, the Note Guarantors listed therein and Chase Securities Inc. and Deutsche Bank Securities Inc. (the "Exchange and Registration Rights Agreement"). Old Notes may be tendered only in integral multiples of $1,000. The enclosed material is being forwarded to you as the beneficial owner of Old Notes carried by us for your account or benefit but not registered in your name. An exchange of any Old Notes may only be made by us as the registered Holder and pursuant to your instructions. Therefore, the Company urges beneficial owners of Old Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such Holder promptly if they wish to exchange Old Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to exchange any or all such Old Notes held by us for your account or benefit, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to exchange your Old Notes. Your instructions to us should be forwarded as promptly as possible in order to permit us to exchange Old Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer expires at 5:00 p.m., New York City time, on , 2000, unless extended. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 2000, unless the Exchange Offer is extended as provided in the Prospectus, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. A tender of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for the exchange of $1,000 principal amount of the New Notes for each $1,000 principal amount of the Old Notes, of which $220,000,000 aggregate principal amount was outstanding as of , 2000. The terms of the New Notes are identical in all 2 respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended, and therefore will not bear legends restricting their transfer and will not contain certain provisions providing for the payment of liquidated damages to the holders of the Old Notes under certain circumstances relating to the Exchange and Registration Rights Agreement. 2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE "THE EXCHANGE OFFER -- CERTAIN CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS. 3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on , 2000, unless extended. 4. The Company has agreed to pay the expenses of the Exchange Offer. 5. Any transfer taxes incident to the transfer of Old Notes from the tendering Holder to the Company will be paid by the Company, except as provided in the Prospectus and the Letter of Transmittal. The Exchange Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Old Notes residing in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. If you wish us to tender any or all of your Old Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the attached instruction form. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to exchange Old Notes held by us and registered in our name for your account or benefit. 2 3 INSTRUCTIONS The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer of Huntsman Packaging Corporation. This will instruct you to tender for exchange the aggregate principal amount of Old Notes indicated below (or, if no aggregate principal amount is indicated below, all Old Notes) held by you for the account or benefit of the undersigned, pursuant to the terms of and conditions set forth in the Prospectus and the Letter of Transmittal. Aggregate Principal Amount of Old Notes to be tendered for exchange: $ * I (we) understand that if I (we) sign this instruction form without indicating an aggregate principal amount of Old Notes in the space above, all Old Notes held by you for my (our) account will be tendered for exchange. - -------------------------------------------------------------------------------- Signature(s) - -------------------------------------------------------------------------------- Capacity (full title), if signing in a fiduciary or representative capacity - -------------------------------------------------------------------------------- Name(s) and address, including zip code Date: - ------------------------------------------------------ - -------------------------------------------------------------------------------- Area Code and Telephone Number - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security No. 3 -----END PRIVACY-ENHANCED MESSAGE-----