-----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, GH0ZRBFnjb3eOzLZQfR1tH6iuyVmDUwEAWJX33CzapqZKU9aA3CjeQlimgBVkDA+ gw8iAE6Lq3lUBrrTEWVV+A== 0001047469-98-014980.txt : 19980415 0001047469-98-014980.hdr.sgml : 19980415 ACCESSION NUMBER: 0001047469-98-014980 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19980414 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BLESSINGS CORP CENTRAL INDEX KEY: 0000012614 STANDARD INDUSTRIAL CLASSIFICATION: UNSUPPORTED PLASTICS FILM & SHEET [3081] IRS NUMBER: 135566477 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-06016 FILM NUMBER: 98593646 BUSINESS ADDRESS: STREET 1: 200 ENTERPRISE DRIVE CITY: NEWPORT NEWS STATE: VA ZIP: 23603 BUSINESS PHONE: 7578872100 MAIL ADDRESS: STREET 1: 200 ENTERPRISE DRIVE CITY: NEWPROT NEWS STATE: VA ZIP: 23603 FORMER COMPANY: FORMER CONFORMED NAME: ASSOCIATED BABY SERVICES INC DATE OF NAME CHANGE: 19720828 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HUNTSMAN PACKAGING CORP CENTRAL INDEX KEY: 0001049442 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, FOIL & COATED PAPER BAGS [2673] IRS NUMBER: 042162223 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 500 HUNTSMAN WAY CITY: SALT LAKE CITY STATE: UT ZIP: 84108 BUSINESS PHONE: 8015325200 SC 13D 1 SC 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 -------------------------- BLESSINGS CORPORATION (NAME OF ISSUER) COMMON STOCK, PAR VALUE $.71 PER SHARE (TITLE OF CLASS OF SECURITIES) 093532109 (CUSIP NUMBER) RICHARD P. DURHAM HUNTSMAN PACKAGING CORPORATION 500 HUNTSMAN WAY SALT LAKE CITY, UTAH 84108 (801) 532-5200 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS) Copy to: JOHN L. MACCARTHY, ESQ. WINSTON & STRAWN 35 WEST WACKER DRIVE SUITE 4200 CHICAGO, ILLINOIS 60601 (312) 558-5600 APRIL 7, 1998 (DATE OF EVENT WHICH REQUIRES FILING STATEMENT) IF THE FILING PERSON HAS PREVIOUSLY FILED A STATEMENT ON SCHEDULE 13G TO REPORT THE ACQUISITION WHICH IS THE SUBJECT OF THIS SCHEDULE 13d, AND IS FILING THIS SCHEDULE BECAUSE OF RULE 13d-1(b)(3) OR (4), CHECK THE FOLLOWING BOX: / / - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CUSIP No. 093532109 1. NAME OF REPORTING PERSONS: SS or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON VA Acquisition Corp. (87-0579748) - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS BK, AF - -------------------------------------------------------------------------------- 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH | 7. SOLE VOTING POWER - 0 -------------------------------------------- | 8. SHARED VOTING POWER - 5,925,072* -------------------------------------------- | 9. SOLE DISPOSITIVE POWER - 0 -------------------------------------------- | 10. SHARED DISPOSITIVE POWER - 5,925,072* - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,925,072* - -------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / / - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Approximately 57.3% (fully diluted) - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- *See footnote on following page. 2 CUSIP No. 093532109 - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS: SS or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Huntsman Packaging Corporation (87-0496065) - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS BK - -------------------------------------------------------------------------------- 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Utah - -------------------------------------------------------------------------------- NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |7. SOLE VOTING POWER - 0 ---------------------------------------- |8. SHARED VOTING POWER - 5,925,072* ---------------------------------------- |9. SOLE DISPOSITIVE POWER - 0 ---------------------------------------- |10. SHARED DISPOSITIVE POWER - 5,925,072* - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,925,072* - -------------------------------------------------------------------------------- 12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / / - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Approximately 57.3% (fully diluted) - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- *On April 7, 1998, Huntsman Packaging Corporation ("Parent") and VA Acquisition Corp., a wholly-owned subsidiary of Parent (the "Purchaser"), entered into a Tender Agreement and Irrevocable Proxy (the "Tender Agreement") with Williamson-Dickie Manufacturing Company and the individuals named therein (collectively, the "Stockholders"), pursuant to which the Stockholders have agreed, among other things, to validly tender (and not to withdraw) pursuant to the Purchaser's tender offer (the "Offer") described in the Offer to Purchase dated April 14, 1998 of Parent and the Purchaser (the "Offer to Purchase") for all outstanding shares of common stock ("Shares") of Blessings Corporation, a Delaware corporation ("Blessings Corporation" or the "Company"), beneficially owned by each such Stockholder (representing an aggregate of 5,925,072 Shares, or approximately 57.3% of the Shares outstanding as of March 31, 1998 on a fully diluted basis). Pursuant to the Tender Agreement, each Stockholder has also irrevocably appointed the Purchaser as the attorney and proxy of such Stockholder to vote and otherwise act (by written consent or otherwise) with respect to all Shares that such Stockholder is entitled to vote at any meeting of stockholders of the corporation, subject to certain limitations and restrictions. The Tender Agreement is described more fully in Section 12 of the Offer to Purchase. 3 ITEM 1. SECURITY AND ISSUER. The title of the class of equity securities to which this statement relates is the Common Stock, par value $.71 per share, of Blessings Corporation, a Delaware corporation. The principal executive offices of Blessings Corporation are located at 200 Enterprise Drive, Newport News, Virginia 23603. ITEM 2. IDENTITY AND BACKGROUND. (a)-(c) and (f) This statement is being filed on behalf of Huntsman Packaging Corporation, a Utah corporation ("Parent"), and its wholly-owned subsidiary, VA Acquisition Corp., a Delaware corporation (the "Purchaser"). The information set forth in "Introduction" and Section 9 ("Certain Information Concerning the Purchaser and Parent") of, and Schedule I ("Information Concerning the Directors and Executive Officers of Parent and the Purchaser") to, the Offer to Purchase is incorporated herein by reference. (d)-(e) Neither the Purchaser nor Parent nor, to their knowledge, any of the persons listed in Schedule I ("Information Concerning the Directors and Executive Officers of Parent and the Purchaser") to the Offer to Purchase, has during the last five years (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The information set forth in Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. ITEM 4. PURPOSE OF TRANSACTION. (a)-(g) and (j) The information set forth in "Introduction," Section 6 ("Price Range of the Shares; Dividends"), Section 11 ("Background of the Offer"), Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; The Merger Agreement; The Tender Agreement") and Section 13 ("Dividends and Distributions") of the Offer to Purchase is incorporated herein by reference. (h),(i) and (j) The information set forth in Section 7 ("Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Margin Regulations") of the Offer to Purchase is incorporated herein by reference. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a)-(c) The information set forth in "Introduction," Section 9 ("Certain Information Concerning the Purchaser and Parent") and Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; The Merger Agreement; The Tender Agreement") of the Offer to Purchase is incorporated herein by reference. 4 ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. The information set forth in "Introduction," Section 9 ("Certain Information Concerning the Purchaser and Parent"), Section 11 ("Background of the Offer") and Section 12 ("Purpose of the Offer and the Merger; Plans for the Company; The Merger Agreement; The Tender Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase dated April 14, 1998. (b)(1) Credit Agreement dated as of September 30, 1997 among Parent, The Chase Manhattan Bank, as Administrative Agent, and the lenders named therein. (b)(2) Commitment Letter dated April 7, 1998 from The Chase Manhattan Bank and Chase Securities Inc. to Parent. (c)(l) Agreement and Plan of Merger dated as of April 7, 1998 by and among Parent, the Purchaser and the Company. (c)(2) Tender Agreement and Irrevocable Proxy dated as of April 7, 1998 among Parent, the Purchaser, Williamson-Dickie Manufacturing Company and the individuals named therein. (c)(3) Confidentiality Agreement dated as of January 22, 1998 from Parent for the benefit of the Company. (c)(4) Bid letter dated as of March 20, 1998 from Parent to the Company. (c)(5) Exclusivity Letter dated as of March 29, 1998 by and between Parent and the Company. (c)(6) Extension to Exclusivity Letter dated as of April 5, 1998 by and between Parent and the Company. 5 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: April 14, 1998 VA ACQUISITION CORP. By: /s/ Richard P. Durham ------------------------------ Name: Richard P. Durham Title: President and Chief Executive Officer HUNTSMAN PACKAGING CORPORATION By: /s/ Richard P. Durham ------------------------------ Name: Richard P. Durham Title: President and Chief Executive Officer 6 EXHIBIT INDEX
Exhibit Number Exhibit Name - -------------- --------------- 99(a)(1) -- Offer to Purchase dated April 14, 1998. 99(b)(1) -- Credit Agreement dated as of September 30, 1997 among Parent, The Chase Manhattan Bank, as Administrative Agent, and the lenders named therein. 99(b)(2) -- Commitment Letter dated April 7, 1998 from The Chase Manhattan Bank and Chase Securities Inc. to Parent. 99(c)(1) -- Agreement and Plan of Merger dated as of April 7, 1998 by and among Parent, the Purchaser and the Company. 99(c)(2) -- Tender Agreement and Irrevocable Proxy dated as of April 7, 1998 among Parent, the Purchaser, Williamson-Dickie Manufacturing Company and the individuals named therein. 99(c)(3) -- Confidentiality Agreement dated as of January 22, 1998 from Parent for the benefit of the Company. 99(c)(4) -- Bid Letter dated March 20, 1998 from Parent to the Company. 99(c)(5) -- Exclusivity Letter dated as of March 29, 1998 by and between Parent and the Company. 99(c)(6) -- Extension to Exclusivity Letter dated as of April 5, 1998 by and between Parent and the Company.
EX-99.(A)(1) 2 EXHIBIT 99(A)(1) EXHIBIT 99(a)(1) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF BLESSINGS CORPORATION AT $21.00 NET PER SHARE BY VA ACQUISITION CORP. A WHOLLY-OWNED SUBSIDIARY OF HUNTSMAN PACKAGING CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MAY 11, 1998, UNLESS THE OFFER IS EXTENDED. THE BOARD OF DIRECTORS OF BLESSINGS CORPORATION (THE "COMPANY") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES WHICH REPRESENTS AT LEAST A MAJORITY OF THE NUMBER OF SHARES OUTSTANDING ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE, (2) ANY WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (AND THE REGULATIONS THEREUNDER), AND THE MEXICAN FEDERAL LAW OF ECONOMIC COMPETITION, APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR HAVING BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER, AND (3) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS DESCRIBED HEREIN. SEE SECTIONS 12 AND 14. ------------------------ IMPORTANT ANY STOCKHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH STOCKHOLDER'S SHARES (AS DEFINED HEREIN) SHOULD EITHER (1) COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF TRANSMITTAL AND MAIL OR DELIVER THE CERTIFICATE(S) REPRESENTING TENDERED SHARES, AND ANY OTHER REQUIRED DOCUMENTS, TO THE DEPOSITARY OR TENDER SUCH SHARES PURSUANT TO THE PROCEDURE FOR BOOK-ENTRY TRANSFER SET FORTH IN SECTION 3 OR (2) REQUEST SUCH STOCKHOLDER'S BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE TRANSACTION FOR SUCH STOCKHOLDER. A STOCKHOLDER WHOSE SHARES ARE REGISTERED IN THE NAME OF A BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT SUCH BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE IF SUCH STOCKHOLDER DESIRES TO TENDER SUCH SHARES. A STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATES REPRESENTING SUCH SHARES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT COMPLY WITH THE PROCEDURES FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS, MAY TENDER SUCH SHARES BY FOLLOWING THE PROCEDURE FOR GUARANTEED DELIVERY SET FORTH IN SECTION 3. QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION AGENT OR TO THE DEALER MANAGER AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS SET FORTH ON THE BACK COVER OF THIS OFFER TO PURCHASE. ADDITIONAL COPIES OF THIS OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL, THE NOTICE OF GUARANTEED DELIVERY AND OTHER RELATED MATERIALS MAY BE OBTAINED FROM THE INFORMATION AGENT OR FROM BROKERS, DEALERS, COMMERCIAL BANKS AND TRUST COMPANIES. ------------------------ THE DEALER MANAGER FOR THE OFFER IS: CHASE SECURITIES INC. April 14, 1998 TABLE OF CONTENTS
PAGE ----- INTRODUCTION.................................................................................................... 1 1. Terms of the Offer................................................................................... 3 2. Acceptance for Payment and Payment for Shares........................................................ 4 3. Procedure for Tendering Shares....................................................................... 6 4. Withdrawal Rights.................................................................................... 9 5. Certain Federal Income Tax Consequences.............................................................. 9 6. Price Range of the Shares; Dividends................................................................. 10 7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Margin Regulations........................................................................................ 10 8. Certain Information Concerning the Company........................................................... 11 9. Certain Information Concerning the Purchaser and Parent.............................................. 14 10. Source and Amount of Funds........................................................................... 15 11. Background of the Offer.............................................................................. 17 12. Purpose of the Offer and the Merger; Plans for the Company; The Merger Agreement; The Tender Agreement.......................................................................................... 18 13. Dividends and Distributions.......................................................................... 29 14. Certain Conditions of the Offer...................................................................... 30 15. Certain Legal Matters................................................................................ 31 16. Fees and Expenses.................................................................................... 34 17. Miscellaneous........................................................................................ 34 Schedule I-- INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER....................................................... I-1
To Holders of Common Stock of Blessings Corporation: INTRODUCTION VA Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly-owned subsidiary of Huntsman Packaging Corporation, a Utah corporation ("Parent"), hereby offers to purchase all of the outstanding shares of Common Stock, par value $.71 per share (the "Common Stock" or "Shares"), of Blessings Corporation, a Delaware corporation (the "Company"), at a purchase price of $21.00 per Share, net to the seller in cash (the "Offer Price") without interest thereon, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The Purchaser will pay all fees and expenses of Chase Securities Inc. ("Chase Securities"), which is acting as Dealer Manager (the "Dealer Manager"), ChaseMellon Shareholder Services, L.L.C., which is acting as the Depositary (the "Depositary"), and MacKenzie Partners, Inc., which is acting as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER (AS DEFINED BELOW) AND DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER. For a discussion of the Board's recommendation, see "Item 4. The Solicitation or Recommendation" set forth in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to stockholders with this Offer to Purchase. Bowles Hollowell Conner & Co. ("BHCC") has delivered to the Board its written opinion that, as of April 7, 1998, and based upon and subject to the matters set forth therein, the consideration to be received pursuant to the Merger Agreement by the stockholders of the Company in the Offer and the Merger is fair to such stockholders from a financial point of view. A copy of the opinion of BHCC is contained in the Schedule 14D-9. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) A NUMBER OF SHARES WHICH REPRESENTS AT LEAST A MAJORITY (OVER 50%) OF THE NUMBER OF SHARES OUTSTANDING ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "MINIMUM CONDITION"), (2) ANY WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER (THE "HSR ACT"), AND UNDER THE MEXICAN FEDERAL LAW OF ECONOMIC COMPETITION (THE "FLEC"), APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR HAVING BEEN TERMINATED PRIOR TO THE EXPIRATION DATE, AND (3) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS DESCRIBED HEREIN. SEE SECTIONS 12 AND 14. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of April 7, 1998 (the "Merger Agreement") by and among Parent, the Purchaser and the Company pursuant to which, following the purchase of Shares by the Purchaser pursuant to the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company (the "Merger"). In the Merger, each outstanding Share (other than Shares then held by the Company, Parent, the Purchaser, or any wholly-owned direct or indirect subsidiary of the Company or Parent, and other than Shares held by stockholders, if any, who perfect their appraisal rights under the General Corporation Law of the State of Delaware (the "Delaware Law")) will be converted into the right to receive $21.00, or any higher price per Share paid pursuant to the Offer, without interest thereon, in cash (the "Merger Consideration") and the Company will become a wholly-owned subsidiary of Parent. See Section 12. Concurrently with the execution of the Merger Agreement, Parent and the Purchaser entered into a Tender Agreement and Irrevocable Proxy dated as of April 7, 1998 (the "Tender Agreement") with Williamson-Dickie Manufacturing Company ("Williamson-Dickie") and certain members of senior management of the Company (together with Williamson-Dickie, the "Stockholders") owning, in the aggregate, 5,925,072 Shares, or approximately 57.3% of the Shares outstanding on March 31, 1998 on a fully-diluted basis. Pursuant to the Tender Agreement, the Stockholders have agreed, among other things, to validly tender and sell pursuant to the Offer and not withdraw all Shares which are beneficially owned by them, provided that the Offer Price is not less than $21.00, and to irrevocably appoint the Purchaser as the attorney and proxy of each Stockholder to vote and otherwise act (by written consent or otherwise) with respect to all Shares that such Stockholder is entitled to vote at any meeting of stockholders of the Company, subject to certain limitations and restrictions. Based on the representations and warranties of the Company contained in the Merger Agreement, as of March 31, 1998: (i) 10,126,857 Shares were outstanding and (ii) 216,450 Shares were reserved for issuance upon exercise of outstanding stock options to acquire Common Stock (collectively, the "Stock Options") issued pursuant to the Company's stock option plans. Based on the foregoing, the Minimum Condition will be satisfied if 5,171,654 Shares are validly tendered and not withdrawn prior to the Expiration Date. Because the Stockholders own an aggregate of 5,925,072 Shares and are required to tender (and not withdraw) such Shares pursuant to the Offer, the Minimum Condition will be satisfied by the tender of such Shares. The number of Shares required to be validly tendered and not withdrawn in order to satisfy the Minimum Condition will increase to the extent additional Shares are deemed to be outstanding on a fully diluted basis under the Merger Agreement. The consummation of the Merger is subject to the satisfaction or waiver of a number of conditions, including, if required, the approval of the Merger by the requisite vote or consent of the stockholders of the Company. Under the Delaware Law, the stockholder vote necessary to approve the Merger will be the affirmative vote of at least a majority of the outstanding Shares, including Shares held by the Purchaser and its affiliates. Accordingly, if the Purchaser acquires a majority of the outstanding Shares, the Purchaser will have the voting power required to approve the Merger without the affirmative vote of any other stockholders of the Company. Furthermore, if the Purchaser acquires at least 90% of the outstanding Shares pursuant to the Offer or otherwise, the Purchaser would be able to effect the Merger pursuant to the "short-form" merger provisions of Section 253 of the Delaware Law, without prior notice to, or any action by, any other stockholder of the Company. In such event, the Purchaser intends to effect the Merger as promptly as practicable following the purchase of Shares in the Offer. See Section 12. The Merger Agreement and the Tender Agreement are more fully described in Section 12. Certain Federal income tax consequences of the sale of the Shares pursuant to the Offer are described in Section 5. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 2 THE OFFER 1. TERMS OF THE OFFER Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not withdrawn in accordance with Section 4. The term "Expiration Date" means 12:00 Midnight, New York City time, on Monday, May 11, 1998, unless and until the Purchaser (in its sole discretion, subject to the terms of the Merger Agreement) shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. The Merger Agreement provides that the Purchaser may extend the Offer without the consent of the Company (i) for one or more periods of 10 business days, not exceeding 60 days in the aggregate, if any of the conditions set forth in Section 14 shall not have been satisfied or waived at the scheduled Expiration Date, (ii) for one or more periods not exceeding 30 days, if required by any rule, regulation or interpretation of the Securities and Exchange Commission (the "Commission") applicable to the Offer, or (iii) for an aggregate period of not more than 10 business days beyond the latest Expiration Date that would otherwise be permitted under clauses (i) and (ii) immediately above, on one occasion if on such Expiration Date more than 90% of the issued and outstanding Shares shall not have been tendered. Moreover, the Purchaser has agreed in the Merger Agreement that if all the conditions set forth in Section 14 are not satisfied on any Expiration Date, but are then reasonably capable of being satisfied within 10 business days, the Purchaser will extend the Offer for a period or periods of not less than 10 days in the aggregate on one occasion if requested to do so by the Company. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In the Merger Agreement, the Purchaser expressly reserves the right to increase the Offer Price, to waive any of the conditions of the Offer, or to make any other changes in the terms and conditions of the Offer. However, the Purchaser will not, without the consent of the Company, (i) decrease the Offer Price or change the form of consideration payable in the Offer, (ii) reduce the maximum number of Shares to be purchased in the Offer, or (iii) impose conditions to the Offer in addition to the conditions set forth in Section 14 (or broaden the scope thereof). Subject to the terms of the Merger Agreement and the Tender Agreement and the applicable rules and regulations of the Commission, the Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events or facts set forth in Section 14 hereof shall have occurred or shall have been determined by the Purchaser to have occurred, (i) to extend the period of time during which the Offer is open, and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary and (ii) to amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE FOR TENDERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES ITS RIGHT TO EXTEND THE OFFER. If by 12:00 Midnight, New York City time, on Monday, May 11, 1998 (or any other date or time then set as the Expiration Date), any or all conditions to the Offer have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated, subject to the terms and conditions contained in the Merger Agreement (including the Purchaser's obligation under the Merger Agreement in certain circumstances described above to extend the Offer on one occasion at the Company's request) and the Tender Agreement and to the applicable rules and regulations of the Commission), to (i) terminate the Offer and not accept for payment or pay for any Shares and return all tendered Shares to tendering stockholders, (ii) waive all the unsatisfied conditions and, subject to complying with the terms of the Merger Agreement and the Tender Agreement and the applicable rules and regulations of the Commission, accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (iii) extend the Offer and, subject to the right of stockholders to withdraw Shares 3 until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (iv) amend the Offer. There can be no assurance that the Purchaser will exercise its right to extend the Offer. Any extension, waiver, amendment or termination will be followed as promptly as practicable by public announcement thereof. In the case of an extension, Rule 14e-1(d) under the Exchange Act requires that the announcement be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change) and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser will not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to the Dow Jones News Service. If the Purchaser extends the Offer or if the Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its acceptance for payment of or payment for Shares or it is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in Section 4. However, the ability of the Purchaser to delay the payment for Shares that the Purchaser has accepted for payment is limited by Rule 14d-1(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer (including a waiver of the Minimum Condition), the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or a change in the percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. With respect to a change in price or a change in the percentage of securities sought, a minimum period of 10 business days is generally required to allow for adequate dissemination to stockholders. Consummation of the Offer is conditioned upon satisfaction of the Minimum Condition, the expiration or termination of all waiting periods imposed by the HSR Act and the FLEC, and the other conditions set forth in Section 14. Subject to the terms and conditions contained in the Merger Agreement and the Tender Agreement, the Purchaser reserves the right (but shall not be obligated) to waive any or all such conditions. The Company has provided the Purchaser its lists of stockholders and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares, and will be furnished by the Purchaser to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 4, promptly after the Expiration Date. Any determination concerning the satisfaction or waiver of such terms and conditions will be within the sole discretion of the 4 Purchaser, and such determination will be final and binding on all tendering stockholders. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of, or payment for, Shares in order to comply in whole or in part with any applicable law, including, without limitation, the HSR Act or the FLEC. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer). Parent will file a Notification and Report Form with respect to the Offer under the HSR Act. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on the 15th day after the filing date, unless early termination of the waiting period is granted. In addition, the Antitrust Division of the Department of Justice (the "Antitrust Division") or the Federal Trade Commission (the "FTC") may extend the waiting period by requesting additional information or documentary material from Parent. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the 10th day after substantial compliance by Parent with such request. Parent will also make a pre-notification filing with the Mexican Federal Competition Commission with respect to the Offer under the FLEC. The waiting period under such law with respect to the Offer will expire at 11:59 p.m., New York time, on the 45th day after the filing, unless early termination of the waiting period is granted. See Section 15 hereof for additional information concerning the HSR Act, the FLEC and the applicability of the antitrust laws to the Offer. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates representing Shares or timely confirmation (a "Book-Entry Confirmation") of the book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3, (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book-entry transfer, and (iii) any other documents required by the Letter of Transmittal. The per Share consideration paid to any stockholder pursuant to the Offer will be the highest per Share consideration paid to any other stockholder pursuant to the Offer. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares which are the subject of such Book-Entry Confirmation, that the participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against such participant. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares so accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payments from the Purchaser and transmitting such payments to tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. Upon the deposit of funds with the Depositary for the purpose of making payments to tendering stockholders, the Purchaser's obligation to make such payment shall be satisfied and tendering stockholders must thereafter look solely to the Depositary for payment of amounts owed to them by reason of the acceptance for payment of Shares pursuant to the Offer. The Purchaser will pay any stock transfer taxes incident to the transfer to it of validly tendered Shares, except as otherwise provided in Instruction 6 of the Letter of Transmittal, as well as any charges and expenses of the Depositary, the Information Agent and the Dealer Manager. If the Purchaser is delayed in its acceptance for payment of or payment for Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to compliance with Rule 14e-1(c ) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after the termination or withdrawal of a tender offer), the Depositary may, nevertheless, on 5 behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 4. If any tendered Shares are not purchased pursuant to the Offer because of an invalid tender or otherwise, certificates for any such Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility), as promptly as practicable after the expiration, termination or withdrawal of the Offer. If, prior to the Expiration Date, the Purchaser increases the consideration to be paid per Share pursuant to the Offer, the Purchaser will pay such increased consideration for all such Shares purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in consideration. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Parent, or to one or more direct or indirect wholly-owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURE FOR TENDERING SHARES VALID TENDER. For Shares to be validly tendered pursuant to the Offer, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date. In addition, either (i) certificates for tendered Shares must be received by the Depositary along with the Letter of Transmittal at one of such addresses or such Shares must be tendered pursuant to the procedure for book-entry transfer set forth below (and a Book-Entry Confirmation received by the Depositary), in each case prior to the Expiration Date, or (ii) the tendering stockholder must comply with the guaranteed delivery procedure set forth below. BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry at the Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other required documents, must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Participants in the Book-Entry Transfer Facility may tender their Shares in accordance with the Book-Entry Transfer Facility's Automated Tender Offer Program, to the extent it is available to such participants for the Shares they wish to tender. A stockholder tendering through the Automated Tender Offer Program must expressly acknowledge that the stockholder has received and agreed to be bound by the Letter of Transmittal and that the Letter of Transmittal may be enforced against such stockholder. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH 6 RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of Transmittal if (i) the Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in the Book-Entry Transfer Facility's system whose name appears on a security position listing as the owner of the Shares) of Shares tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) such Shares are tendered for the account of a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of a recognized Medallion Program approved by The Securities Transfer Association, Inc. or any other "Eligible Guarantor Institution" as such term is defined in Rule 17Ad-15 under the Exchange Act (such member, an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not tendered or not accepted for payment are to be returned to a person other than the registered holder of the certificates surrendered, the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as described above. See Instruction 5 to the Letter of Transmittal. GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected if all the following conditions are met: (1) such tender is made by or through an Eligible Institution; (2) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser herewith, is received by the Depositary, as provided below, prior to the Expiration Date; and (3) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to all such Shares), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other documents required by the Letter of Transmittal, are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the American Stock Exchange is open for business. Any Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, telex, facsimile transmission or mail to the Depositary and must include a signature guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for the Shares or a Book-Entry Confirmation with respect to such Shares, (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and (iii) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations with respect to Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. 7 The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer, including the tendering stockholder's representation and warranty that the tender of such Shares complies with Rule 14e-4 under the Exchange Act. BACKUP WITHHOLDING. In order to avoid "backup withholding" of Federal income tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. If a stockholder does not provide its correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. All stockholders surrendering Shares pursuant to the Offer should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Purchaser and the Depositary). Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 10 to the Letter of Transmittal. APPOINTMENT. By executing the Letter of Transmittal, the tendering stockholder will irrevocably appoint designees of the Purchaser as such stockholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after April 7, 1998. All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such stockholder as provided herein. Upon such acceptance for payment, all prior powers of attorney, proxies and consents given by such stockholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares and other securities or rights in respect of any annual, special or adjourned meeting of the Company's stockholders, actions by written consent in lieu of any such meeting or otherwise, as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting and other rights with respect to such Shares and other securities or rights, including voting at any meeting of stockholders then scheduled. DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Purchaser, in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right to waive any defect or irregularity in any tender with respect to any particular Shares, whether or not similar defects or irregularities are waived in the case of other Shares. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager 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 Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. 8 4. WITHDRAWAL RIGHTS Except as otherwise provided in this Section 4, tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date (which is initially May 11, 1998) and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after June 12, 1998. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered for the account of an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 3, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser in its reasonable discretion, which determination will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES THE SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW IS FOR GENERAL INFORMATION ONLY AND IS BASED ON THE LAW AS CURRENTLY IN EFFECT. THE TAX TREATMENT OF EACH STOCKHOLDER WILL DEPEND IN PART UPON SUCH STOCKHOLDER'S PARTICULAR SITUATION. SPECIAL TAX CONSEQUENCES NOT DESCRIBED HEREIN MAY BE APPLICABLE TO PARTICULAR CLASSES OF TAXPAYERS, SUCH AS FINANCIAL INSTITUTIONS, TAX-EXEMPT ORGANIZATIONS, INSURANCE COMPANIES, BROKER-DEALERS, PERSONS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES AND STOCKHOLDERS WHO ACQUIRED THEIR SHARES THROUGH THE EXERCISE OF ANY EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION. ALL STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS. The receipt of cash pursuant to the Offer or the Merger will be a taxable transaction for Federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and may also be a taxable transaction under applicable state, local or foreign income or other tax laws. Generally, for Federal income tax purposes, a tendering stockholder will recognize gain or loss in an amount equal to the difference between the cash received and the stockholder's adjusted tax basis in the Shares tendered by the stockholder and purchased pursuant to the Offer or the Merger, as the case may be. Gain or loss generally will be calculated separately for each block of Shares (i.e., Shares acquired at the same time and place) tendered and purchased pursuant to the Offer. Such gain or loss generally will be capital gain or loss if the Shares disposed of were held as capital assets by the stockholder. Any net capital gain (i.e., generally, capital gain in excess of capital loss) recognized by an individual upon a disposition of the Shares pursuant to the Offer that have been held for more than 18 months will generally be subject to tax at a rate not to exceed 20%. Net capital gain recognized by an individual upon such a disposition of Shares that have been held for more than 12 months but for not more than 18 months will be subject to tax at a rate not to exceed 28% and net capital gain recognized upon the sale of Shares that have been held for 12 months or less will 9 be subject to tax at ordinary income tax rates. In addition, any net capital gain recognized by a corporation upon a disposition of Shares pursuant to the Offer or the Merger will be subject to tax at ordinary income tax rates. 6. PRICE RANGE OF THE SHARES; DIVIDENDS According to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (the "Company Form 10-K") and information supplied to the Purchaser by the Company, the Shares are traded on the American Stock Exchange, Inc. ("American Stock Exchange" or "AMEX") under the trading symbol "BCO". The following table sets forth, for the fiscal quarters indicated, the high and low sales prices per Share on the AMEX and the amount of cash dividends paid per Share in each such quarter. The information set forth in this Section regarding the Company is entirely taken from or based upon public information and neither Parent nor the Purchaser assumes responsibility for the accuracy or completeness of such information.
PRICE RANGE -------------------- CASH HIGH LOW DIVIDENDS --------- --------- ------------- Fiscal Year Ended December 31, 1996 First Quarter.................................................................. $ 12.00 $ 8.50 $ .10 Second Quarter................................................................. 14.25 9.25 .10 Third Quarter.................................................................. 11.00 8.50 .10 Fourth Quarter................................................................. 11.88 8.63 .10 Fiscal Year Ended December 31, 1997 First Quarter.................................................................. $ 11.25 $ 9.25 $ .00 Second Quarter................................................................. 10.88 9.31 .00 Third Quarter.................................................................. 15.38 10.13 .00 Fourth Quarter................................................................. 15.88 13.75 .00 Fiscal Year Ended December 31, 1998 First Quarter.................................................................. $ 18.13 $ 12.13 $ .00 Second Quarter (through April 13, 1998)........................................ 20.88 17.25 --
On April 7, 1998, the last full trading day before the public announcement of the execution of the Merger Agreement and the Purchaser's intention to acquire the Shares pursuant to the Offer, the closing sales price per Share on the AMEX was $17.69. On April 13, 1998, the last full trading day before the commencement of the Offer, the closing sales price per Share on the AMEX was $20.75. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS MARKET FOR THE SHARES. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares, if any, held by the public. The Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether such reduction would cause future market prices to be greater or less than the Offer Price. STOCK QUOTATION. The Shares are currently listed and traded on the AMEX, which constitutes the principal trading market for the Shares. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the AMEX for continued listing thereon, which require that an issuer have at least 200,000 publicly held shares, held by at least 300 shareholders, with a market value of at least $1,000,000. Additionally, an issuer must maintain $2,000,000 in stockholders' equity if the issuer has had losses in two of the most recent three years, or $4,000,000 if the issuer has had losses in three of the most recent four years. According to information provided by the Company, as of 10 March 31, 1998, there were approximately 753 registered holders of Shares and 10,126,857 Shares were issued and outstanding. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the AMEX for continued listing thereon and the Shares in fact are no longer listed on the AMEX, the market for Shares could be adversely affected. In the event that the Shares no longer meet the requirements of the AMEX for continued listing thereon, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining at such time, the interests in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. EXCHANGE ACT REGISTRATION. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and to the Commission and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with stockholders' meetings, the related requirement of furnishing an annual report to stockholders, and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"), may be impaired or eliminated. The Purchaser intends to seek delisting of the Shares from the American Stock Exchange and to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such delisting and termination are met. If registration of the Shares is not terminated prior to the Merger, then the Shares will be delisted from all stock exchanges and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. MARGIN REGULATIONS. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. 8. CERTAIN INFORMATION CONCERNING THE COMPANY The Company is a Delaware corporation with its principal executive offices located at 200 Enterprise Drive, Newport News, Virginia 23603. The historical information concerning the Company contained in this Offer to Purchase, including financial information, has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. Neither Parent, the Purchaser nor the Dealer Manager assumes any responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information to Parent or the Purchaser. 11 According to the Company Form 10-K, the Company is a diversified manufacturer and supplier of plastic film products oriented principally towards health care, agricultural and industrial applications. The Company's operations, both domestic and international, can be characterized as one business segment producing extruded polyethylene and polypropylene films through the Edison Plastics-Registered Trademark- Division domestically and through its wholly-owned subsidiary, Nacional de Envases Plasticos, S.A. de C.V., and its associated companies, collectively known as NEPSA-Registered Trademark-, in Mexico. Through its Edison Converting-TM- Division and NEPSA, the Company has printing operations which print point-of-purchase messages on its products for a variety of increasingly sophisticated packaging end-uses. Set forth below is certain selected historical consolidated financial information with respect to the Company and its subsidiaries excerpted or derived from the information contained in the Company Form 10-K. More comprehensive financial information is included in such reports and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to such reports and such other documents and all the financial information (including any related notes) contained therein. Such reports and other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information." BLESSINGS CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, ---------------------------------- 1995 1996 1997 ---------- ---------- ---------- INCOME STATEMENT DATA: Net sales................................................................ $ 156,309 $ 158,135 $ 174,756 Net earnings............................................................. 5,885 5,012 8,192 Net earnings per share................................................... .58 .49 .81 BALANCE SHEET DATA (AT PERIOD END): Cash, cash equivalents and short-term investments........................ $ 3,317 $ 5,802 $ 5,106 Property, plant and equipment--net....................................... 69,148 80,574 89,378 Total assets............................................................. 136,094 158,077 165,323 Long-term debt........................................................... 23,747 34,253 30,938 Shareholders' equity..................................................... 70,884 71,748 79,762
To the knowledge of Parent and the Purchaser, the Company does not as a matter of course make public forecasts as to its future financial performance. However, in connection with the preliminary discussions concerning the feasibility of the Offer and the Merger, the Company prepared and furnished Parent with certain financial projections. The projections presented in the table below (the "Projections") are derived or excerpted from information provided by the Company and are based on numerous assumptions concerning future events. The Projections have not been adjusted to reflect the effects of the Offer or the Merger or the incurrence of indebtedness in connection therewith. The Projections have been prepared utilizing numerous assumptions, including, among others, the successful launch of certain products by the Company's U.S. customers, signficant expansion of customer orders in the Company's U.S. printing and converting operations, the successful development of the Company's South American operations, and 100% ownership of NEPSA for the entire fiscal year 1998. 12 BLESSINGS CORPORATION CERTAIN PROJECTIONS OF FUTURE OPERATING RESULTS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ---------------------- 1998 1999 ---------- ---------- Net Sales............................................................. $ 207,381 $ 234,871 Gross Profit.......................................................... 59,104 70,461 EBITDA (Earnings before interest, taxes, depreciation and amortization)....................................................... 41,054 50,192
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO COMPLYING WITH PUBLISHED GUIDELINES OF THE COMMISSION AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO PARENT. THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO COMPLIANCE WITH THE GUIDELINES ESTABLISHED BY THE COMMISSION OR THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS AND FORECASTS. THE PROJECTIONS REFLECT NUMEROUS ASSUMPTIONS, ALL MADE BY MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS, ALL OF WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY PARENT OR THE PURCHASER. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE CONTAINED IN THE PROJECTIONS. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT ANY OF PARENT, THE PURCHASER, THE COMPANY OR THEIR RESPECTIVE FINANCIAL ADVISORS CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS, AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS SUCH. NEITHER PARENT, THE PURCHASER, THE COMPANY NOR THEIR RESPECTIVE FINANCIAL ADVISORS ASSUME ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF THE PROJECTIONS. NEITHER PARENT, THE PURCHASER, THE COMPANY NOR ANY OF THEIR FINANCIAL ADVISORS HAS MADE, OR MAKES, ANY REPRESENTATION TO ANY PERSON REGARDING THE INFORMATION CONTAINED IN THE PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN ERROR. AVAILABLE INFORMATION. The Company is subject to the reporting requirements of the Exchange Act and, in accordance therewith, is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located in the Citicorp Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies should be obtainable, by mail, upon payment of the Commission's customary charges, by writing to the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains an Internet website at http://www.sec.gov that contains reports, proxy statements and other information. Such information should also be available for inspection at the library of the American Stock Exchange, Inc., 86 Trinity Place, New York, New York 10006. Although neither Parent nor the Purchaser has any knowledge that any such information is untrue, Parent and the Purchaser take no responsibility for the accuracy or completeness of information contained in this Offer to Purchase with respect to the Company or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information. 13 9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT The Purchaser, a Delaware corporation and a wholly-owned subsidiary of Parent, was organized to acquire the Company and has not conducted any unrelated activities since its organization. The principal offices of the Purchaser are located at 500 Huntsman Way, Salt Lake City, Utah 84108. All outstanding shares of capital stock of the Purchaser are owned by Parent. Parent is a Utah corporation, with its principal office located at 500 Huntsman Way, Salt Lake City, Utah 84108. Parent was founded in 1992 and is one of the largest manufacturers of film and flexible packaging products in North America. Parent's product lines constitute two business segments, flexible packaging and foam products. The flexible packaging segment's product lines are comprised of (i) converter films, that are sold for additional fabrication and resale by other flexible packaging manufacturers for use in a wide range of consumer and industrial markets, (ii) barrier films, that contain and protect food and other products, (iii) printed products, that include printed rollstock, bags and sheets used to package products in the food and medical industries, (iv) stretch films, that are used for industrial unitizing and containerization, and (v) PVC films, that are used by supermarkets, institutions and homes to wrap meat, cheese and produce. The foam products segment includes meat trays, egg cartons and fast food containers. In September 1997, Parent was split-off from Huntsman Corporation in a transaction in which the common stock of Parent was transferred from Huntsman Corporation to Jon M. Huntsman and The Christena Karen H. Durham Trust and additional shares of common stock were purchased by Richard P. Durham. Set forth below is certain selected historical consolidated financial information with respect to Parent and its subsidiaries excerpted or derived from Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. More comprehensive financial information is included in such report and other documents filed by Parent with the Commission, and the following summary is qualified in its entirety by reference to such report and other documents and all the financial information (including any related notes) contained therein. Such report and other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information." HUNTSMAN PACKAGING CORPORATION SELECTED FINANCIAL DATA (DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31, ------------------------------- 1995 1996 1997 --------- --------- --------- STATEMENT OF OPERATIONS: Sales-net.......................................................................... $ 325.0 $ 339.1 $ 491.1 Cost of sales...................................................................... 273.5 288.9 424.8 --------- --------- --------- Gross profit..................................................................... 51.5 50.2 66.3 Total operating expenses........................................................... 36.5 42.2 49.2 --------- --------- --------- Operating income................................................................. 15.0 8.0 17.1 Interest expense-net............................................................... (8.7) (11.6) (16.4) Other income (expense)-net......................................................... (2.3) (3.8) 0.5 --------- --------- --------- Income (loss) before income taxes and extraordinary item........................... 4.0 (7.4) 1.2 Income tax expense (benefit)....................................................... 1.7 (4.2) 0.8 --------- --------- --------- Income (loss) before extraordinary item............................................ 2.3 (3.2) 0.4 Extraordinary item................................................................. -- (1.3 (1) -- --------- --------- --------- Net income (loss).................................................................. $ 2.3 $ (4.5) $ 0.4 --------- --------- --------- --------- --------- ---------
14
YEAR ENDED DECEMBER 31, ------------------------------- 1995 1996 1997 --------- --------- --------- BALANCE SHEET DATA (AT PERIOD END): Working capital.................................................................... $ 54.8 $ 74.6 $ 94.1 Total assets....................................................................... 231.7 329.1 409.6 Long-term debt..................................................................... 103.0 187.2 250.5 Total liabilities.................................................................. 160.7 262.1 346.6 Stockholders' equity............................................................... 71.0 67.0 63.0
- ------------------------ (1) In 1996, the Company refinanced most of its long-term debt and recorded an extraordinary item for the write-off of previously deferred loan costs. Except as described in this Offer to Purchase, neither the Purchaser nor Parent (together, the "Corporate Entities") or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I or any associate or majority-owned subsidiary of the Corporate Entities or any of the persons so listed, beneficially owns any equity security of the Company, except for 2,500 Shares beneficially owned by Richard P. Durham, and none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. Except as described in this Offer to Purchase, (1) there have not been any contacts, transactions or negotiations between the Corporate Entities, any of their respective subsidiaries or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I, on the one hand, and the Company or any of its directors, officers or affiliates, on the other hand, that are required to be disclosed pursuant to the rules and regulations of the Commission and (2) none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I has any contract, arrangement, understanding or relationship with any person with respect to any securities of the Company. Except as set forth in this Offer to Purchase, there have been no contacts, negotiations or transactions between the Purchaser, Parent, or its subsidiaries, or to the best knowledge of Parent and the Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and the Company or its executive officers, directors or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors, or a sale of other transfer of a material amount of assets. AVAILABLE INFORMATION. Parent is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning Parent's directors and officers, their remuneration, any options granted to them, the principal holders of Parent's securities and any material interest of such persons in transactions with Parent is disclosed in such reports and other information filed with the Commission. Such reports and other information should be available for inspection at the Commission, and copies thereof should be obtainable from the Commission, in the same manner as set forth with respect to information concerning the Company in Section 8. 10. SOURCE AND AMOUNT OF FUNDS The Purchaser estimates that approximately $285 million will be required to acquire all of the Shares pursuant to the Offer and the Merger, to refinance certain indebtedness of the Company, and to pay fees and expenses related to the Offer and the Merger. The Purchaser expects to obtain these funds from capital contributions and/or loans from Parent. Parent, in turn, expects to obtain these funds from borrowings under an amended and restated credit agreement (the "Amended Credit Agreement") to be entered into with The Chase Manhattan Bank ("Chase") and a syndicate of financial institutions including Chase on the date the Purchaser consummates the Offer. Parent has received a Commitment Letter dated 15 April 7, 1998 (the "Commitment Letter") from Chase to provide the Amended Credit Agreement. The Commitment Letter contemplates that Parent's existing $250 million Credit Agreement dated as of September 30, 1997 (the "Existing Credit Agreement") with Chase and the financial institutions party thereto will be amended in order to permit the Offer and the Merger and to increase by $285 million (the "Additional Credit Facilities") the available credit facilities under the Existing Credit Agreement. The Additional Credit Facilities will be used (i) to finance the purchase of the Shares pursuant to the Offer and the Merger and to pay the fees and expenses thereof, (ii) to refinance existing indebtedness of the Company, and (iii) for general corporate purposes. The commitment and agreements of Chase under the Commitment Letter are subject to customary conditions, including among other things: (i) that there has not occurred any material adverse change since December 31, 1997 in the business, assets, results of operations, conditions (financial or otherwise) or prospects of or relating to Parent, the Company and their respective subsidiaries, taken as a whole; (ii) that there has not occurred nor is there continuing any material adverse change in financial, banking or capital markets that materially and adversely affects the syndication of bank credit facilities for comparable transactions; (iii) that there is no default or event of default under the Existing Credit Agreement on such date; and (iv) that the parties have negotiated, executed and delivered definitive documentation with respect to the Amended Credit Agreement. In addition, $50 million of the $285 million in Additional Credit Facilities is subject to the condition that the Indenture dated as of September 30, 1997 (the "Indenture") among Parent, each of the guarantors named therein and The Bank of New York, as Trustee, relating to Parent's existing $125,000,000 of 9 1/8% Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes") shall have been amended to the extent necessary to permit the Additional Credit Facilities. The consent of a majority of the holders of the Senior Subordinated Notes will be required to amend the Indenture. Parent intends to seek such amendment and expects to receive the necessary consents on or before the date of consummation of the Offer. In the event that such consents are not received, it is contemplated that the Additional Credit Facilities will be reduced to $235 million, the current stockholders of Parent will create a special purpose holding company to own all of the outstanding capital stock of Parent, and such holding company will borrow $50 million pursuant to a new senior unsecured credit facility. Although it is not expected to be used, Parent has received a commitment letter (the "Alternate Commitment Letter") from Chase to provide this facility in the event that the requisite consent of the holders of the Senior Subordinated Notes as contemplated above is not received on or before the date of consummation of the Offer. The commitment and agreements of Chase under the Alternate Commitment Letter are subject to conditions substantially similar to those in the Commitment Letter. The Commitment Letter provides that the Additional Credit Facilities will consist of new term loans in two tranches. The first tranche in the amount of up to $185 million will mature on September 30, 2005 and will amortize on a quarterly basis to be determined. The second tranche in the amount of up to $100 million will mature on June 30, 2006 and will amortize on a quarterly basis during the first seven years in nominal amounts and in amounts to be determined thereafter. In addition to quarterly scheduled amortization to be determined, the Amended Credit Agreement will provide for customary mandatory prepayments with a percentage of excess cash flow and with certain proceeds from asset sales and certain proceeds from the issuance of additional debt or equity. The Additional Credit Facilities will bear interest, at the election of Parent, at either (i) zero to 1%, depending on certain of Parent's financial ratios, plus the higher of (a) Chase's prime rate, (b) the federal funds rate plus 1/2% or (c) Chase's base CD rate plus 1% or (ii) the London Interbank Offered Rate plus 1.00% to 2.25%, also depending on certain of Parent's financial ratios. Parent will pay Chase certain financing, agent administration and other fees in connection with the Amended Credit Agreement, which Parent believes to be customary. In addition, the Amended Credit Agreement will provide for a commitment fee on any amount of the first tranche of new term loans which 16 is not funded at the time of the initial loans under the Additional Credit Facilities at the rate of 0.50% per annum. The obligations of Parent under the Amended Credit Agreement will be guaranteed by Parent's direct and indirect domestic wholly-owned "unrestricted" subsidiaries and secured by substantially all of the assets of Parent and its existing and subsequently acquired "unrestricted" domestic subsidiaries, including upon consummation of the Merger, the assets of the Company and its domestic subsidiaries. The Amended Credit Agreement will also be secured by a pledge of 65% of the capital stock of each of Parent's foreign subsidiaries. Pending the Merger, the obligations of Parent under the Amended Credit Agreement will also be secured by the Shares acquired by the Purchaser pursuant to the Offer. The definitive documentation with respect to the Amended Credit Agreement will contain the representations and warranties, covenants, conditions and events of default contained in the Existing Credit Agreement modified to reflect the acquisition of the Company. Such covenants include, among other things, financial covenants relating to maintenance of ratios of indebtedness to EBITDA and of EBITDA to interest expense, minimum net worth levels and restrictions on indebtedness, guarantees, acquisitions and other fundamental corporate changes, capital expenditures, investments, loans and advances, liens, dividends and other stock payments, asset sales, sale and lease-back transactions, hedging agreements, transactions with affiliates and issuances of stock. The Existing Credit Agreement provides for events of default customary in facilities of this type, including, among others, (i) failure to make a payment when due; (ii) breach of covenants; (iii) breach of representations or warranties in any material respect when made; (iv) default under any agreement relating to debt for borrowed money in excess of $5 million in the aggregate; (v) bankruptcy defaults; (vi) judgments in excess of $5 million; (vii) change in control; and (viii) any loan document ceasing to be in full force and effect. The Amended Credit Agreement will provide for similar events of default. The foregoing descriptions of the Commitment Letter and the Existing Credit Agreement are qualified by reference to the text of such letter and agreement filed as exhibits to the Schedule 14D-1, a copy of which may be obtained from the offices of the Commission in the manner set forth with respect to information concerning the Company in Section 8 (except that such information will not be available at the regional offices of the Commission). It is anticipated that the indebtedness incurred through borrowings under the Amended Credit Agreement will be repaid from funds generated internally by Parent and its subsidiaries, including the Company and its subsidiaries, and from other sources, which may include the proceeds of the private or public sale of debt or equity securities or asset dispositions. The margin regulations promulgated by the Federal Reserve Board place restrictions on the amount of credit that may be extended for the purposes of purchasing margin stock (including the Shares) if such credit is secured directly or indirectly by margin stock. The Purchaser believes that the financing of the acquisition of the Shares will be in full compliance with the margin regulations. 11. BACKGROUND OF THE OFFER In October, 1996, Richard P. Durham, currently the President and Chief Executive Officer of Parent, and N. Brian Stevenson, currently the Senior Vice President and General Manager, Packaging Division, of Parent, met in Fort Worth, Texas with John W. McMackin, Chairman of the Board of Directors of the Company, and certain members of the Williamson family, to discuss a possible purchase of the Company. Parent requested, but did not receive, non-public information concerning the Company. After certain follow-up preliminary discussions, talks between the parties broke off. In December, 1997, Mr. Durham again contacted Mr. McMackin to inquire whether the Company would be interested in exploring a transaction in which Parent would acquire the Company. Mr. McMackin indicated that he was unable to discuss such a transaction with Parent at that time. Mr. Durham indicated that Parent would welcome the opportunity to discuss such a transaction when the Company was able to discuss it. 17 In January, 1998, a representative of BHCC contacted Parent to indicate that the Board of the Company was reviewing strategic alternatives for the Company and to inquire whether Parent continued to be interested in pursuing a possible acquisition of the Company. Following this contact, Parent initiated a review of certain publicly available information concerning the Company. On January 22, 1998, Parent entered into a confidentiality agreement pursuant to which the Company agreed to provide Parent with certain information concerning the Company (the "Confidentiality Agreement"). Parent and the Purchaser have received certain non-public information from the Company under the terms of the Confidentiality Agreement. See Section 8. On February 19, 1998, certain members of Parent's management and certain members of the Company's management and their advisors met. At this meeting, members of the Company's management presented an overview of the Company's operations and answered general due diligence questions concerning the Company. Following this meeting, Parent initiated a comprehensive financial, operations and legal due diligence review of the Company that included, among other things, plant tours, management meetings and a review of certain financial, operations and legal matters. On March 4, 1998, Parent received from BHCC an invitation to submit an offer for the acquisition of the Company, along with procedures and guidelines for the submission of such offer (the "Guidelines"). The Guidelines provided that all offers were to be received by 12:00 noon (EST) on Friday, March 20, 1998. BHC also furnished Parent with a proposed form of merger agreement for the acquisition of the Company, which agreement was to be submitted with proposed modifications, together with Parent's offer. On March 20, 1998, Parent submitted a bid letter containing an offer with respect to the acquisition of the Company. The offer included Parent's proposed revisions to the proposed form of merger agreement and information regarding Parent's financing for such offer. Parent's offer was conditioned upon the completion of certain additional due diligence. Parent's offer also stipulated that Parent would proceed with the transaction only if the Stockholders, among other things, granted Parent or its designee an option to purchase their Shares. Parent's offer remained in effect until 5:00 p.m. (EST) on Friday, March 27, 1998. On March 21 and March 22, 1998, representatives of BHCC contacted representatives of Parent. The parties discussed certain aspects of Parent's offer and the provisions of the proposed merger agreement. On Tuesday, March 24, 1998 representatives of BHCC contacted representatives of Parent and indicated that the Company would be interested in pursuing negotiations with Parent if Parent would complete its additional due diligence and consider extending its offer beyond March 27, 1998. As a result of these conversations, Parent commenced its additional due diligence. On Friday, March 27 and Saturday, March 28, 1998, representatives of BHCC and representatives of Parent discussed the requested extension of Parent's offer. As a result of these discussions, Parent extended its offer until 12:00 midnight on Sunday, April 5, 1998 in exchange for the Company's agreement to negotiate exclusively with Parent. The expiration date was subsequently extended to 12:00 midnight on Wednesday, April 8, 1998. Beginning March 30, 1998, and continuing through April 7, 1998, the parties, directly and through their respective advisors, negotiated the financial and legal terms of the Merger Agreement as well as the terms of the Tender Agreement. On April 7, 1998, the Board of Directors of the Company met and approved the Offer and the Merger and the transaction contemplated thereby, including the Tender Agreement as well as the execution and delivery of the Merger Agreement. Later that day, the Merger Agreement and the Tender Agreement were executed. 12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; THE MERGER AGREEMENT; THE TENDER AGREEMENT PURPOSE OF THE OFFER AND THE MERGER The purpose of the Offer and the Merger is to enable Parent, through the Purchaser, to acquire control of, and the entire equity interest in, the Company. The Offer is intended to facilitate the acquisition of all of the Shares. The purpose of the Merger is to acquire all Shares not tendered and 18 purchased pursuant to the Offer, the Tender Agreement or otherwise. Parent regards the acquisition of the Company as a strategic opportunity to increase its market shares in specific value-added films, to acquire new technology and more flexible manufacturing facilities, and to gain entry into the growing Mexican and Latin American personal care and medical products markets. PLANS FOR THE COMPANY If the Purchaser acquires control of the Company, Parent and the Purchaser intend to conduct a detailed review of the Company and its assets, operations, properties, policies, management and personnel and consider and determine what, if any, changes would be desirable in light of the circumstances which then exist. Except as noted in this Offer to Purchase, the Purchaser and Parent have no present plans or proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation, relocation of operations, or sale or transfer of a material amount of assets, involving the Company or any subsidiary of the Company or any other material changes in the Company's capitalization, dividend policy, corporate structure, business or composition of its management, personnel or Board of Directors. THE MERGER AGREEMENT The following is a summary of the material terms of the Merger Agreement. This summary is not a complete description of the terms and conditions thereof and is qualified in its entirety by reference to the full text thereof, which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement may be examined, and copies thereof may be obtained, as set forth in Section 8 above. THE OFFER. The Merger Agreement provides for the commencement of the Offer, in connection with which Parent and the Purchaser have expressly reserved the right to increase the Offer Price for the shares of Common Stock payable in the Offer or waive certain conditions of the Offer. However, without the prior written consent of the Company, the Purchaser has agreed not to (i) decrease the Offer Price or change the form of consideration payable in the Offer, (ii) reduce the maximum number of Shares sought pursuant to the Offer, or (iii) impose additional conditions to the Offer (or broaden the scope thereof); PROVIDED, HOWEVER, that, the Purchaser may extend the Offer (a) if at the scheduled expiration date of the Offer any of the conditions to the Offer shall not have been satisfied or waived for one or more periods not to exceed 60 days in the aggregate, until such time as such conditions are satisfied or waived, (b) for one or more periods, not to exceed 30 days, if required by any rule, regulation, interpretation or position of the Commission, or (c) on one occasion for an aggregate period of not more than 10 Business Days beyond the latest expiration date that would otherwise be permitted under clause (a) or (b) of this sentence if on such expiration date there shall not have been tendered that number of shares of Common Stock which would equal more than 90% of the issued and outstanding shares of Common Stock. The Purchaser agrees that if all of the conditions to the Offer are not satisfied on any expiration date of the Offer, then, PROVIDED that all such conditions are then reasonably capable of being satisfied within 10 Business Days, the Purchaser shall extend the Offer for a period of not less than 10 days in the aggregate if requested to do so by the Company; PROVIDED that the Company shall be entitled to make only one such request. BOARD REPRESENTATION. The Merger Agreement provides that promptly upon the purchase by the Purchaser of Shares pursuant to the Offer, and from time to time thereafter, Parent or the Purchaser shall be entitled to designate such number of directors, rounded up to the next whole number (but in no event more than one less than the total number of directors on the Board of Directors of the Company (the "Board") as will give Parent, subject to compliance with Section 14(f) of the Exchange Act, representation on the Board equal to the product of (x) the number of directors on the Board (giving effect to any increase in the number of directors pursuant to the Merger Agreement) and (y) the percentage that such number of Shares so purchased bears to the aggregate number of Shares outstanding (such number being the "Board Percentage"). The Company has agreed, upon request of Parent, to promptly satisfy the Board 19 Percentage by (i) increasing the size of the Board or (ii) using its best efforts to secure the resignations of such number of directors as is necessary to enable Parent's designees to be elected to the Board and in each case to cause Parent's designees to be promptly elected. Following the election or appointment of Parent's designees pursuant to the Merger Agreement and prior to the Effective Time (as defined below) of the Merger, any amendment or termination of the Merger Agreement, extension for the performance or waiver of the obligations or other acts of Parent or the Purchaser or waiver of the Company's rights thereunder, shall require the concurrence of a majority of the directors of the Company then in office who were directors on the date of the Merger Agreement and who voted to approve the Merger Agreement. CONSIDERATION TO BE PAID IN THE MERGER. The Merger Agreement provides that subject to the terms and conditions set forth in the Merger Agreement, the Purchaser will be merged with and into the Company, the separate existence of the Purchaser shall cease and the Company shall continue as the surviving corporation in the Merger (the "Surviving Corporation"), as a wholly-owned subsidiary of Parent. Notwithstanding anything to the contrary in the Merger Agreement, Parent, at its option, may prior to the date and time of filing of the appropriate certificate of merger with the Secretary of State of Delaware (the "Effective Time"), elect, instead of merging the Purchaser into the Company as hereinabove provided, to merge the Company into the Purchaser or another direct or indirect wholly-owned subsidiary of Parent, with the Purchaser or such other subsidiary of Parent as the Surviving Corporation. In such event, the parties have agreed to execute an appropriate amendment to the Merger Agreement in order to reflect the foregoing change. In the Merger at the Effective Time, each Share then issued and outstanding (other than Shares then held by the Company, Parent, the Purchaser, or any wholly-owned direct or indirect subsidiary of the Company or Parent, and other than Shares held by stockholders, if any, who perfect their appraisal rights under the Delaware Law) shall by virtue of the Merger be converted into and represent the right to receive a cash payment per Share, without interest, equal to the Offer Price (the "Merger Consideration") upon the surrender of the certificate representing such Share. Each share of the capital stock of the Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. Each share of capital stock held by the Company (as treasury stock or otherwise) or held by Parent, the Purchaser or any wholly-owned direct or indirect subsidiary of Parent, the Purchaser or the Company immediately prior to the Effective Time shall by virtue of the Merger be canceled, retired and cease to exist, and no consideration shall be delivered with respect thereto. The Merger Agreement provides that the closing of the Merger shall take place at a time and date to be specified by the parties to the Merger Agreement but no later than the fifth Business Day after which the last of the conditions to the Merger set forth in the Merger Agreement is satisfied or waived. STOCK OPTIONS. Pursuant to the Merger Agreement the Company has confirmed that the applicable plans and instruments (collectively, the "Option Plans") governing all outstanding options to purchase shares of Common Stock (each a "Company Stock Option") provide for the acceleration of the exercisability of each such option in connection with the transactions contemplated by the Merger Agreement. Pursuant to the Merger Agreement, the Company has agreed to take all actions necessary prior to the Effective Time to assure that, at the Effective Time: (i) each Company Stock Option shall be canceled in exchange for an amount (the "Option Payment") in cash equal to the Offer Price less the applicable exercise price of such Company Stock Option, subject to applicable withholding taxes; and (ii) each stock appreciation right will be canceled in exchange for an amount in cash (the "SAR Payment") equal to the Offer Price less the exercise price of the Company Stock Option to which it is linked, subject to applicable withholding taxes. The surrender of a Company Stock Option in exchange for the Option Payment and of a stock appreciation right in exchange for the SAR Payment shall be deemed a release of any and all rights the holder had or may have had in such Company Stock Option or under such Option Plan. Effective as of the Effective Time, the Company shall take all action as is necessary prior to the Effective Time to terminate all Option Plans so that on and after the Effective Time no current or former employee director, consultant or other person shall have any option to purchase Shares or any other equity interests in the Company under any Option Plan. The Merger Agreement provides that in lieu of making 20 the awards of Restricted Stock under the Company's 1993 Restricted Stock Plan for Non-Employee Directors and certain key employees scheduled to be made at the annual meeting of Company stockholders in May of 1998, the Company will pay to the participants in such plan (not individually but in the aggregate) an aggregate amount of $121,800 in cash at the earlier of May 20, 1998 or the Effective Time. SHAREHOLDERS MEETING. The Merger Agreement provides that if a vote of the Company's stockholders is required by law, the Company will, as promptly as practicable following the acceptance for payment of Shares by the Purchaser pursuant to the Offer, take, in accordance with applicable law and its Certificate of Incorporation and Bylaws, all action necessary to convene a meeting of holders of Shares (the "Shareholders Meeting") to consider and vote upon the approval of the Merger Agreement. In connection with such Shareholders Meeting, the Company will prepare and file with the Commission a proxy statement for the solicitation of a vote of holders of Shares approving the Merger (the "Proxy Statement"), which shall include the recommendation of the Company's Board that stockholders of the Company vote in favor of the approval and adoption of the Merger Agreement and the written opinion of the financial advisor referred to herein that the cash consideration to be received by the stockholders of the Company pursuant to the Merger is fair to such stockholders from a financial point of view. The Company shall use all reasonable efforts to have the Proxy Statement cleared by the Commission as promptly as practicable after such filing, and promptly thereafter mail the Proxy Statement to the stockholders of the Company. The Company shall also use its best efforts to obtain all necessary state securities law or "blue sky" permits and approvals required in connection with the Merger and to consummate the other transactions contemplated by the Merger Agreement and will pay all expenses incidental thereto. Notwithstanding the foregoing, if Parent, the Purchaser and/or any other subsidiary of Parent shall acquire at least 90% of the Shares pursuant to the Offer, the parties shall take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a Shareholders Meeting in accordance with Delaware Law. Parent and the Purchaser have agreed to cause all shares of Common Stock purchased pursuant to the Offer and all other Shares owned by Parent, the Purchaser or any subsidiary of Parent to be voted in favor of the Merger. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various representations and warranties of the parties thereto. These include representations and warranties by the Company with respect to (i) due incorporation, existence, good standing, corporate power and authority or qualifications of the Company and subsidiaries of the Company; (ii) capitalization of the Company, including the number of shares of capital stock of the Company outstanding, the number of shares reserved for issuance on the exercise of options and similar rights to purchase shares; (iii) no equity interests in any corporation, partnership, limited liability company, trust or similar business entity and that each of the Company's subsidiaries (the "Subsidiaries") is a corporation or limited liability company, each duly organized, validly existing and in good standing under the laws of its jurisdiction; (iv) the authorization, execution, delivery and performance of the Merger Agreement and the consummation of transactions contemplated thereby, and the validity and enforceability thereof; (v) subject to certain exceptions, the absence of consents and approvals necessary for consummation by the Company of the Merger, and the absence, except as disclosed, of any violations, breaches or defaults which would result from compliance by the Company with any provision of the Merger Agreement; (vi) the absence of any suit, proceeding or investigation pending or threatened against the Company or any of its Subsidiaries or any of their respective properties or assets which is reasonably likely to have a material adverse effect on the business, assets, prospects, results of operations or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole (a "Material Adverse Effect") or would prevent or delay the consummation of the transactions contemplated by the Merger Agreement; (vii) compliance in all material respects with the Securities Act and the Exchange Act, in connection with the SEC Reports (as defined in the Merger Agreement) filed by the Company with the Commission; (viii) compliance with applicable law; (ix) the absence of certain changes and events which would constitute a Material Adverse Effect; (x) certain employee benefit and ERISA matters; (xi) certain labor matters; (xii) certain matters related to real property; (xiii) certain intellectual property matters; (xiv) certain tax matters; (xv) certain environmental matters; (xvi) the valid and binding obligations of the Company or a Subsidiary with respect to Contracts (as defined in the Merger Agreement), except such Contracts which if not so valid and binding would not have a Material Adverse 21 Effect; (xvii) liabilities or other obligations which would have been required to be recorded on a balance sheet or which would have a Material Adverse Effect; (xviii) certain matters related to the Company's relationships with its customers; and (xix) certain matters relating to affiliate transactions. Parent and the Purchaser have also made certain representations and warranties, including with respect to (i) due incorporation, existence, good standing, corporate power and authority or qualifications of Parent and the Purchaser; (ii) the authorization, execution, and delivery of the Merger Agreement and the consummation of transactions contemplated thereby, and the validity and enforceability thereof; and (iii) assuming that the Commitments (as defined in the Merger Agreement) are received, Parent has or will have, prior to the expiration of the Offer, sufficient funds available to purchase all of the Shares outstanding on a fully diluted basis and to pay all related fees and expenses pursuant to the Offer and the Merger Agreement. INTERIM OPERATIONS. The Company has agreed that during the period from the date of the Merger Agreement to Effective Time except as specifically contemplated in the Merger Agreement, (i) the businesses of the Company and each of its Subsidiaries shall be conducted only in the ordinary and usual course of business consistent with past practice; and (ii) the Company and its Subsidiaries shall use their commercially reasonable efforts to preserve the business organization of the Company and each Subsidiary. The Company has also agreed that prior to the Effective Time, the Company will not, without the prior written consent of Parent or the Purchaser and will not permit any of its Subsidiaries to: (a) amend its charter or bylaws; (b) amend or modify (except as contemplated in the Merger Agreement) the terms of any benefit or stock option plan or authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver any stock of any class or any other securities or equity equivalents (including, without limitation, any stock options or stock appreciation rights), except for the sale of shares of Common Stock pursuant to the Company Stock Options issued and outstanding on the date of the execution of the Merger Agreement; (c) split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution in respect of its capital stock, or redeem or otherwise acquire any Company Securities (as defined in the Merger Agreement) or any securities of the Company's Subsidiaries; (d) (i) incur or assume any long-term or short-term debt or issue any debt securities, except for borrowings under existing lines of credit in the ordinary course of business; (ii) except as described in the Merger Agreement assume, guarantee, endorse or otherwise become liable or responsible for the obligations of any other person, except in the ordinary course of business consistent with past practice; (iii) except for short-term investments in the ordinary course of business, make any loans, advances or capital contributions to, or investments in, any other person other than intercompany loans between any wholly-owned Subsidiary and the Company and the Company or another wholly-owned Subsidiary; (iv) pledge or otherwise encumber shares of capital stock of the Company or its Subsidiaries; or (v) mortgage or pledge any of its assets, tangible or intangible, or create or suffer to exist any lien thereupon except for liens securing indebtedness not exceeding $1,000,000 in the aggregate; (e) except as described in the Merger Agreement enter into, adopt or amend or terminate any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit, stock equivalent, stock purchase agreement, pension, retirement, deferred compensation, employment, severance or other employee benefit agreement, trust, plan, fund or other arrangement for the benefit or welfare of any director, officer or employee in any manner, or (except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits or compensation expense to the Company or its Subsidiaries), increase in any manner the compensation or fringe benefits of any director, officer or employee or pay any benefit not required by any plan and arrangement as in effect as of the date of the Merger Agreement (including, without limitation, the granting of stock appreciation rights or performance units); (f) except with the consent of Parent or the Purchaser, which consent will not be unreasonably withheld, acquire, sell, lease, license, transfer or dispose of any assets outside the ordinary course of business; (g) except as may be required as a result of a change in law or in generally accepted accounting principles, change any of the accounting principles or practices used by it, including tax accounting policies and procedures; (h) except as described in the draft of the Joint Venture Agreement between the Company and Canguru Embalagens Criciuma Ltda., a subsidiary of Servinec Industria e Servicos Mecanicos Ltda., a limited liability corporation, under the laws of Brazil 22 (which the Company agrees not to execute without the prior consent of Parent), (i) acquire (by merger, consolidation or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof or any equity interest therein; (ii) authorize or make any new capital expenditure or expenditures other than those already included in the Company's 1998 capital expenditure budget previously provided to Parent or the Purchaser; or (iii) enter into or amend any contract, agreement, commitment or arrangement providing for the taking of any action that would be prohibited under the Merger Agreement; (i) make any tax election or settle or compromise any material income tax liability; (j) pay, discharge or satisfy any claims, liabilities or obligations other than the payment, discharge or satisfaction of liabilities in the ordinary course of business consistent with past practice reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company and its Subsidiaries at December 31, 1997; (k) settle or compromise any suit, action or claim or threatened suit, action or claim where the amount involved is greater than $500,000; (l) other than the ordinary course of business and consistent with past practice, (i) waive any rights of substantial value, (ii) cancel or forgive any material indebtedness owed to the Company or any of its Subsidiaries, or (iii) make any payment, direct or indirect, of any material liability of the Company or any of its Subsidiaries before the same come due in accordance with its terms; (m) permit any insurance policy naming the Company or any of its Subsidiaries as a beneficiary or a loss payee to be canceled or terminated, except in the ordinary course of business consistent with past practice; or (n) take, or agree in writing or otherwise to take, any of the actions described in subparagraph (a) through (m) above or any action which would make any of the representations or warranties of the Company contained in the Merger Agreement untrue or incorrect as of the date when made. ADDITIONAL AGREEMENTS. The Merger Agreement provides that upon reasonable notice the Company shall, and shall cause each of the Subsidiaries to, afford Parent and the Purchaser and their respective officers, employees and authorized representatives reasonable access during normal business hours throughout the period prior to the Effective Time to all of its properties, books, contracts, commitments, records, tax records and accountants' working papers. NO SOLICITATION. The Merger Agreement provides that neither the Company nor any of its Subsidiaries nor any of its and their respective officers, directors, employees, representatives, agents and affiliates ("Representatives") shall, directly or indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries or the making of any proposal or offer with respect to a merger, liquidation, recapitalization, reorganization, share exchange, consolidation or similar transaction involving it, or any purchase of, or tender offer for, any equity securities of it or any of its Subsidiaries or 15% or more of its and its subsidiaries' assets (based on the fair market value thereof) taken as a whole (any such proposal or offer being hereinafter referred to as an "Acquisition Proposal"). The Company further agrees that neither it nor any of its subsidiaries nor any of the Representatives or Subsidiaries shall, directly or indirectly, have any discussions with or provide any non-public information or data to any person relating to an Acquisition Proposal or engage in any negotiations concerning an Acquisition Proposal, or otherwise facilitate any effort to attempt to make or implement an Acquisition Proposal or enter into any agreement or understanding requiring it to abandon, terminate, delay or fail to consummate the Merger or any other transactions contemplated by the Merger Agreement; PROVIDED, HOWEVER, that nothing contained in the Merger Agreement shall prevent the Company or its board of directors from complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal; and further PROVIDED, HOWEVER, that nothing contained in the Merger Agreement shall prohibit the Company or any Representative from furnishing information to, or entering into discussions or negotiations with, any person or entity that makes an unsolicited written, bona fide Acquisition Proposal (i) that involves all cash consideration and contains no express financing contingency; and (ii) that the Company's Board concludes in good faith is reasonably capable of being completed, taking into account all legal, financial, regulatory and other aspects of the Acquisition Proposal and the person making the Acquisition Proposal, and that would, if consummated, result in a transaction more favorable to the Company's stockholders from a financial point of view than the transaction contemplated by the Merger Agreement (any such more favorable Acquisition Proposal being referred to herein as a "Superior Proposal") if, and only to the extent that, (A) prior to taking such action, the Company (x) provides reasonable notice to Parent to the effect that it is taking such 23 action, and (y) receives from such person or entity an executed confidentiality agreement in reasonably customary form, and (B) the Company promptly advises Parent as to all of the relevant details relating to, and all material aspects, of any such discussions or negotiations. At any time after 48 hours following notification to Parent of the Company's intent to accept the Superior Proposal and if the Company has otherwise complied with the terms of the Merger Agreement, the Board may withdraw or modify its approval or recommendation of the Offer, terminate the Merger Agreement and cause the Company to enter into any agreement with respect to a Superior Proposal, provided it shall concurrently with entering into such agreement pay or cause to be paid to Purchaser the Termination Fee (as defined below). If the Company shall have notified Parent of its intent to enter into an agreement with respect to a Superior Proposal in compliance with the preceding sentence and has otherwise complied with such sentence, the Company may enter into an agreement with respect to such Superior Proposal (with the bidder and on terms no less favorable than those specified in such notification to Parent) after the expiration of such 48 hour period. The Company agrees that it, its Subsidiaries and their respective officers, directors, employees, representatives and agents will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. The Company also agrees that it will promptly request each Person that has executed a confidentiality agreement in connection with its consideration of any Acquisition Proposal to return all confidential information furnished to such person by or on behalf of it or any of its Subsidiaries. FEES AND EXPENSES. In the event that the Merger Agreement shall have been terminated (a) pursuant to certain provisions in the Merger Agreement or (b) as a result of a willful breach of any representation, warranty, covenant or agreement of the Company and, within 12 months thereafter, the Company enters into an agreement with respect to a Third Party Acquisition (as defined below) or a Third Party Acquisition occurs involving any party (or any affiliate thereof) (x) with whom the Company (or its agents) had discussions with a view to a Third Party Acquisition, (y) to whom the Company (or its agents) furnished information with a view to a Third Party Acquisition or (z) who had submitted a proposal or expressed an interest in a Third Party Acquisition, in the case of each of clauses (x), (y) and (z) after the date of the execution of the Merger Agreement and prior to such termination; the Company shall pay to Parent in the case of (a) not later than two Business Days after termination of the Merger Agreement and in the case of (b), upon the consummation of the Third Party Acquisition referred to therein, a fee equal to $13,000,000 (the "Termination Fee") immediately upon such a termination. "Third Party Acquisition" means the occurrence of any of the following events: (i) the acquisition of the Company by merger or otherwise by any person (which includes a "person" as such term is defined in Section 13(d)(3) of the Exchange Act) or entity other than Parent, the Purchaser or any affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of 30% of the total assets of the Company and its Subsidiaries, taken as a whole; or (iii) the acquisition by a Third Party of 30% or more of the outstanding Shares (excluding an acquisition of Shares by a wholly-owned subsidiary of Williamson-Dickie permitted by the Tender Agreement). Upon the termination of the Merger Agreement pursuant to certain provisions therein, the Company shall reimburse Parent, the Purchaser and their affiliates (not later than 10 Business Days after submission of statements therefor) for all actual documented out-of-pocket fees and expenses, not to exceed $500,000, actually and reasonably incurred by any of them or on their behalf in connection with the Merger and the consummation of all transactions contemplated by the Merger Agreement. If Parent or the Purchaser shall have submitted a request for reimbursement under the Merger Agreement, Parent will provide the Company with invoices or other reasonable evidence of such expenses upon request. The Company shall in any event pay the amount requested (not to exceed $500,000) within 10 Business Days of such request, subject to the Company's right to demand a return of any portion as to which invoices are not received in due course. Upon the termination of the Merger Agreement pursuant to certain provisions therein, Parent shall reimburse the Company and its affiliates (not later than 10 Business Days after submission of statements therefor) for all actual documented out-of-pocket fees and expenses, not to exceed $500,000, actually and reasonably incurred by any of them or on their behalf in connection with the Merger and the consummation of all transactions contemplated by the Merger Agreement. If the Company shall have submitted a request for reimbursement under the Merger Agreement, the Company will provide Parent in 24 due course with invoices or other reasonable evidence of such expenses upon request. Parent shall in any event pay the amount requested (not to exceed $500,000) within 10 Business Days of such request, subject to Parent's right to demand a return of any portion as to which invoices are not received in due course. CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the obligations of each party to the Merger Agreement to consummate the Merger shall be subject to the fulfillment at or prior to the Effective Time of the following conditions: (i) the approval of the stockholders of the Company as referred to in the Merger Agreement shall have been obtained, if required by applicable law, (ii) no applicable statute, rule, regulation, judgment, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or enforced by any Governmental Entity (as defined in Section 14) which prohibits, restrains, enjoins or restricts the consummation of the Merger or has the effect of making the purchase of the Shares illegal, (iii) any applicable waiting period (and any extension thereof) applicable to the Merger under the HSR Act shall have expired or been terminated and any other governmental or regulatory notices or approvals required with respect to the transactions contemplated by the Merger Agreement shall have been filed or received, and (iv) the Purchaser will have purchased the Shares pursuant to the Offer. TERMINATION. The Merger Agreement provides that it may be terminated at any time prior to the Effective Time (a) by the mutual written consent of Parent, the Purchaser and the Company; (b) by Parent, the Purchaser or the Company if any Governmental Entity shall have issued, enacted, entered, promulgated or enforced any final order, judgment, decree or ruling or taken any other final action restraining, enjoining or otherwise prohibiting the Offer or the Merger and such order, judgment, decree, ruling or other action is or shall have become nonappealable; (c) by Parent and the Purchaser if (A) due to an occurrence or circumstance which would result in a failure to satisfy any of the conditions to the Offer (it being understood that if such occurrence or circumstance is curable by the Company through the exercise of its reasonable best efforts prior to the next scheduled Expiration Date of the Offer, and for so long as the Company continues to exercise such reasonable best efforts prior to such Expiration Date, the Purchaser may not terminate the Offer prior to such Expiration Date) the Purchaser shall have (i) terminated the Offer or (ii) failed to pay for shares of Common Stock pursuant to the Offer (but only following the expiration of the 10-day extension which the Company may request under the Merger Agreement) or (B) the Offer shall not have been consummated on or before July 31, 1998; PROVIDED, HOWEVER, that the right to terminate the Merger Agreement pursuant to this clause (c) shall not be available to Parent or the Purchaser if (X) either of them has breached in any material respect its obligations under the Merger Agreement in any manner that shall have proximately contributed to the failure referenced in this clause (c) or (Y) during the up to 10-day extension of the Offer permitted pursuant to the Merger Agreement if 90% of the outstanding Shares shall not have been tendered; (d) by the Company if the Purchaser shall have failed to commence the Offer pursuant to the Merger Agreement, or if the Offer shall not have been consummated by July 31, 1998; PROVIDED, HOWEVER, that the right to terminate the Agreement pursuant to this clause (d) shall not be available to the Company if it has breached in any material respect its obligations under the Merger Agreement in any manner that shall have proximately contributed to the failure referenced in this clause (d); (e) by the Company prior to the purchase of Shares pursuant to the Offer (i) if there shall have been a breach of any representation or warranty on the part of Parent or the Purchaser set forth in the Merger Agreement, or if any representation or warranty of Parent or the Purchaser shall have become untrue, in either case which materially adversely affects (or materially delays) the consummation of the Offer; (ii) if there shall have been a breach on the part of Parent or the Purchaser of any of their respective covenants or agreements under the Merger Agreement or materially adversely affecting (or materially delaying) the consummation of the Offer (including the payment for Shares), and Parent or the Purchaser, as the case may be, has not cured such breach prior to the earlier of (A) 10 days following notice by the Company thereof and (B) two Business Days prior to the date on which the Offer expires, provided that with respect to clauses (i) and (ii) the Company has not breached in any material respect any of its obligations under the Merger Agreement in any manner that shall have proximately contributed to the breaches referenced in this clause (e) or (iii) pursuant to the provisions of the Merger Agreement described above under "No Solicitation"; or (f) by Parent or the Purchaser prior to the purchase of shares of Common Stock pursuant to the Offer if (i) the Company's Board or any committee 25 thereof (A) withdraws or modifies in a manner adverse to Parent or the Purchaser its approval or favorable recommendation of the Offer or the approval or recommendation of the Merger or (B) approves or recommends an Acquisition Proposal by a person other than Parent or the Purchaser or (C) resolves to do any of the foregoing; (ii) (X) the Company enters into an agreement with respect to an Acquisition Proposal or a Third Party Acquisition or (Y) except for a transaction described in the following clause (Z), a transaction contemplated by an Acquisition Proposal (other than such a transaction without the consent or approval of the Company which results in a Third Party acquiring less than 10% of the outstanding Shares and does not otherwise constitute an Acquisition Proposal) or a Third Party Acquisition occurs or (Z) a transaction contemplated by an Acquisition Proposal occurs without the consent or approval of the Company which results in a Third Party acquiring from 10% to 20% of the outstanding Shares that does not otherwise constitute an Acquisition Proposal (excluding for purposes of this clause (f)(ii) an acquisition of Shares by a wholly-owned subsidiary of the Williamson-Dickie permitted by the Tender Agreement); (iii) there shall have been a breach of any representation or warranty on the part of the Company set forth in the Merger Agreement, or any representation or warranty of the Company shall have become untrue, in either case if the respects in which the representations and warranties made by the Company are inaccurate would in the aggregate have a material adverse effect on the Company or materially adversely affect (or delay) the consummation of the Offer or the Merger; or (iv) there shall have been a breach on the part of the Company of its covenants or agreements under the Merger Agreement having a material adverse effect on the Company or materially adversely affecting (or materially delaying) the consummation of the Offer and, with respect to clauses (iii) and (iv) above (other than with respect to any breach of the provisions of the Merger Agreement described above under "No Solicitation" or the Company's obligation to file with the Commission a Schedule 14D-9), the Company has not cured such breach prior to the earlier of (A) 10 days following notice by Parent or the Purchaser thereof and (B) two Business Days prior to the date on which the Offer expires, provided that, with respect to clauses (iii) and (iv) above, neither Parent nor the Purchaser has breached in any material respect any of their respective obligations under the Merger Agreement in any manner that shall have proximately contributed to the failure referenced in this clause (f). INDEMNIFICATION. The Merger Agreement provides that after the Effective Time, or such earlier date as Parent acquires control of the Company, Parent and the Purchaser agree that all rights to indemnification or exculpation now existing in favor of the directors, officers, employees and agents of the Company and its Subsidiaries as provided in their respective charters or bylaws or otherwise in effect as of the date of the Merger Agreement with respect to matters occurring prior to the Effective Time shall survive the Merger and shall continue in full force and effect for a period of not less than six years following the Effective Time. To the maximum extent permitted by Delaware Law, such indemnification shall be mandatory rather than permissive. Parent shall cause the Surviving Corporation to maintain in effect for not less than six years from the Effective Time the policies of the directors' and officers' liability and fiduciary insurance most recently maintained by the Company with respect to matters occurring prior to the Effective Time; provided, that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are no less beneficial to the beneficiaries of the existing policies in effect on the date hereof; provided, further, that during the last three years of the six year period following the Effective Time, the Surviving Corporation shall not be obligated to pay an annual premium in excess of 200% of the most recent annual premium paid by Company prior to the date of the Merger Agreement (which the Company has represented to have been $80,000). WAIVER AND AMENDMENT. The Merger Agreement provides that (i) any inaccuracies in the representations and warranties may be waived by the other party; and (ii) compliance by the other parties with any of the agreements or conditions contained in the Merger Agreement may also be waived by the other party. Subject to certain sections in the Merger Agreement, the Merger Agreement may be amended by action taken by the Company, Parent and the Purchaser at any time before or after any required approval of the Merger by the shareholders of the Company but, after any such approval, no amendment shall be made which requires the approval of such shareholders under applicable law without such approval. 26 THE TENDER AGREEMENT The following is a summary of the material terms of the Tender Agreement. This summary is not a complete description of the terms and conditions thereof and is qualified in its entirety by reference to the full text thereof which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Tender Agreement may be examined, and copies thereof may be obtained, as set forth in Section 8 above. TENDER OF SHARES. The Tender Agreement provides that certain stockholders, including Williamson-Dickie, Leonard Birnbaum, Michael C. Carlson, Wayne A. Durboraw, Joseph J. Harkins, James P. Luke, John W. McMackin, Elwood M. Miller, Manuel G. Villareal and Robert E. Weber (collectively, the "Stockholders") will validly tender and sell, pursuant to and in accordance with the terms of the Offer, (i) not later than the seventh day after the commencement of the Offer pursuant to the Merger Agreement, 5,925,072 shares of Common Stock (the "Existing Shares"), and (ii) any Shares acquired by the Stockholders after the execution date of the Tender Agreement and prior to the termination of the Tender Agreement, whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise (the Stockholders shall promptly provide written notice to the Purchaser upon consummation of any such acquisition and the term "Shares" shall include such shares), provided that the Offer Price pursuant to the Offer shall be no less than the Per Share Price (as defined in the Merger Agreement). The Stockholders acknowledge and agree that Parent's and the Purchaser's obligation to accept for payment and pay for shares of Common Stock in the Offer, including the Shares owned by the Stockholders, are subject to the terms and conditions of the Offer. REPRESENTATIONS AND WARRANTIES. The Tender Agreement contains various representations and warranties of the parties thereto. These include representations and warranties by the Stockholders with respect to (i) the requisite power and authority to enter into the Tender Agreement and to consummate the transactions contemplated by the Tender Agreement; (ii) the execution and delivery of the Tender Agreement and the consummation of transactions contemplated thereby; (iii) the valid and binding obligation of the Stockholders with respect to the Tender Agreement; (iv) no conflict with or default under any provision of any agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to such Stockholder or to such Stockholder's property or assets; (v) the absence of any consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, necessary by any Stockholder with respect to the execution and delivery of the Tender Agreement or the consummation of the transactions contemplated thereby; (vi) that each Stockholder has good and marketable title to the number of Existing Shares; (vii) that each Stockholder has no record ownership of shares of Common Stock other than the Existing Shares; (viii) except pursuant to the Tender Agreement, no voting trust agreements or other contracts, agreements, arrangements, commitments or understanding restricting or otherwise relating to the voting, dividend rights or disposition of the Existing Shares; and (ix) no limitations, qualifications or restrictions on rights, subject to applicable securities laws and the terms of the Tender Agreement, with respect to the Existing Shares. Parent and the Purchaser have also made certain representations and warranties, including with respect to (i) corporate power and authority to enter into the Tender Agreement and to consummate the transactions contemplated thereby; (ii) the authorization, execution, and delivery of the Tender Agreement and the consummation of transactions contemplated thereby; (iii) the valid and binding obligation of Parent and the Purchaser with respect to the Tender Agreement; (iv) no conflict with or default under any provision of any agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Parent or the Purchaser or to Parent's or the Purchaser's property or assets; and (v) no consent, approval, order or authorization of, or registration, declaration or 27 filing with, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, necessary for the consummation by Parent or the Purchaser of the transactions contemplated by the Tender Agreement. COVENANTS OF THE STOCKHOLDERS. Pursuant to the Tender Agreement, the Stockholders severally agree not to (i) sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option or other arrangement with respect to the sale, transfer, pledge, assignment or other disposition of, any of the Shares to any person other than the Purchaser or the Purchaser's designee; provided, however, that (x) a Stockholder may transfer its Shares to a charitable organization, provided that such charitable organization agrees to be bound by the terms and provisions of the Tender Agreement applicable to such Stockholder and (y) Williamson-Dickie may transfer its Shares to a wholly-owned subsidiary of Williamson-Dickie, provided that such subsidiary agrees to be bound by the terms and provisions of the Tender Agreement applicable to Williamson-Dickie and, provided, further, in the case of clauses (x) and (y) above the transferring Stockholder shall continue to be bound by the terms and provisions of the Tender Agreement; (ii) deposit any Shares into a voting trust or grant a proxy or enter into a voting agreement with respect to any Shares except as provided in the Tender Agreement; or (iii) solicit, facilitate, initiate, encourage or take any other action to facilitate any Acquisition Proposal, the acquisition of any shares of Common Stock or the acquisition of all or substantially all the assets of the Company by any person other than Parent or the Purchaser, except in connection with any actions permitted under the Merger Agreement. Each Stockholder agrees to notify the Purchaser promptly and to provide all details requested by the Purchaser if such Stockholder shall be approached or solicited, directly or indirectly, by any person with respect to any matter described in clause (iii) immediately above. Each Stockholder agrees that at any annual or special meeting of the stockholders of the Company and in any action by written consent of the stockholders of the Company, such Stockholder will (i) vote the Shares in favor of the Merger and the Merger Agreement and (ii) vote the Shares against any action or agreement which could result in a breach of any representation, warranty or covenant of the Company in the Merger Agreement or which could otherwise impede, delay, prevent, interfere with or discourage the Offer or the Merger including, without limitation, any Acquisition Proposal. IRREVOCABLE PROXY. The Tender Agreement provides that each Stockholder irrevocably appoints the Purchaser as the attorney and proxy of such Stockholder, with full power of substitution, to vote, and otherwise act (by written consent or otherwise) with respect to all Shares that such Stockholder is entitled to vote at any meeting of stockholders of the Company or consent in lieu of any such meeting or otherwise, to vote such Shares as set forth in the immediately preceding paragraph; provided, that in any such vote or other action pursuant to such proxy, the Purchaser shall not have the right to vote to reduce the Per Share Price or the Merger Consideration or to otherwise modify or amend the Merger Agreement to reduce the rights or benefits of the Company or any stockholders of the Company (including the Stockholders) under the Offer or the Merger Agreement or to reduce the obligations of Purchaser thereunder; and provided further, that the proxy shall irrevocably cease to be in effect at any time that (x) the Offer shall have expired or terminated without any shares of Common Stock being purchased thereunder in violation of the terms of the Offer, (y) the Purchaser shall be in violation of the terms of the Tender Agreement or (z) the Merger Agreement shall have been terminated in accordance with its terms. The proxy and power of attorney is irrevocable and coupled with an interest. Under the Tender Agreement, the Stockholders shall revoke, effective upon the execution and delivery of the Merger Agreement by the parties thereto all other proxies and powers of attorney with respect to the Shares that such Stockholder may have heretofore appointed or granted, and no subsequent proxy or power of attorney (except in furtherance of such Stockholder's obligations under the immediately preceding paragraph) shall be given or written consent executed (and if given or executed, shall not be effective) by such Stockholder with respect thereto so long as the Tender Agreement remains in effect. Each Stockholder will forward to the Purchaser any proxy cards that such Stockholder receives with respect to the Offer or the Merger Agreement. WAIVER OF APPRAISAL RIGHTS. As set forth in the Tender Agreement, each Stockholder will waive any rights of appraisal or rights to dissent from the Merger that such Stockholder may have on the terms set 28 forth in the Merger Agreement as in effect on the date thereof with such changes which do not adversely affect such Stockholder. OTHER MATTERS APPRAISAL RIGHTS. No appraisal rights are available to holders of Shares in connection with the Offer. However, if the Merger is consummated, holders of Shares will have certain rights under Section 262 of the Delaware Law to dissent and demand appraisal of, and payment in cash for the fair value of, their Shares. Such rights, if the statutory procedures are complied with, could lead to a judicial determination of the fair value (excluding any element of value arising from accomplishment or expectation of the Merger) required to be paid in cash to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than in addition to the Offer Price and the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more or less than the Offer Price or the Merger Consideration. If any holder of Shares who demands appraisal under Section 262 of the Delaware Law fails to perfect, or effectively withdraws or loses his right to appraisal, as provided in the Delaware Law, the shares of such holder will be converted into the Merger Consideration in accordance with the Merger Agreement. A stockholder may withdraw his demand for appraisal by delivery to Parent of a written withdrawal of his demand for appraisal and acceptance of the Merger. Failure to follow the steps required by Section 262 of the Delaware Law for perfecting appraisal rights may result in the loss of such rights. GOING PRIVATE TRANSACTIONS. Rule 13e-3 under the Exchange Act is applicable to certain "going-private" transactions. The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger unless, among other things, the Merger is completed more than one year after termination of the Offer. If applicable, Rule 13e-3 would require, among other things, that certain financial information regarding the Company and certain information regarding the fairness of the Merger and the consideration offered to minority stockholders be filed with the Commission and disclosed to minority stockholders prior to consummation of the Merger. 13. DIVIDENDS AND DISTRIBUTIONS Pursuant to the terms of the Merger Agreement, the Company is prohibited from taking any of the actions described in the two immediately succeeding paragraphs, and nothing herein shall constitute a waiver by the Purchaser or Parent of any of its rights under the Merger Agreement or a limitation of remedies available to the Purchaser or Parent for any breach of the Merger Agreement, including termination thereof. If on or after the date of the Merger Agreement, the Company should (a) split, combine, reclassify or otherwise change the Shares or its capitalization, (b) acquire currently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares or other capital stock of the Company or (c) issue or sell additional Shares, shares of any other class of capital stock, other securities or any securities convertible into or exchangeable for, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, other than Shares issued pursuant to the exercise of outstanding Stock Options, then, subject to the provisions of Section 14 below, the Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. If, on or after the date of the Merger Agreement, the Company should declare or pay any cash dividend on the Shares or other distribution on the Shares, or issue with respect to the Shares any additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to stockholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to the Purchaser or its nominee or transferee on the Company's stock transfer 29 records, then, subject to the provisions of Section 14 below, (a) the Offer Price may, in the sole discretion of the Purchaser, be reduced by the amount of any such cash dividend or cash distribution and (b) the whole of any such noncash dividend, distribution or issuance to be received by the tendering stockholders will (i) be received and held by the tendering stockholders for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer, or (ii) at the direction of the Purchaser, be exercised for the benefit of the Purchaser, in which case the proceeds of such exercise will promptly be remitted to the Purchaser. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer Price or deduct from the Offer Price the amount or value thereof, as determined by the Purchaser in its sole discretion. 14. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other provisions of the Offer, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission or the Exchange Act, including Rule 14e-1(c) thereunder (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), to pay for any Shares tendered, and may delay the acceptance for payment or, subject to the restriction referred to above, payment for any Shares tendered, and, if required pursuant to the Merger Agreement, shall extend the Offer for a period of at least 10 days and may otherwise, subject to the terms of the Merger Agreement, amend, extend or terminate the Offer (whether or not any Shares have theretofore been accepted for payment) if, (i) immediately prior to the expiration of the Offer (as extended in accordance with the Offer), the condition that there shall be validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares which represents at least a majority of the number of Shares outstanding on a fully diluted basis on the date of purchase (the "Minimum Condition") shall not have been satisfied, (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated, or any applicable waiting period under the FLEC shall not have expired or been terminated without objection from the Mexican Federal Competition Commission, immediately prior to the expiration of the Offer, or (iii) at any time prior to the acceptance for payment of Shares, the Purchaser makes a good faith determination that any of the following conditions exist: (a) there shall have been any action taken, or any statute, rule, regulation, judgment, order or injunction (whether permanent or temporary) promulgated, enacted, entered, enforced or deemed applicable to the Offer, or any other action shall have been taken, by any court or tribunal or administrative, governmental or regulatory body, agency or authority, whether foreign, federal, state or local (a "Governmental Entity"), other than the routine application to the Offer or the Merger of waiting periods under the HSR Act, that (i) directly or indirectly prohibits, materially delays, or makes illegal the acceptance for payment of, or the payment for, some or all of the Shares or otherwise prohibits consummation of the Offer or the Merger; (ii) directly or indirectly prohibits, materially delays, or imposes material limitations on the ability of the Purchaser to acquire or hold or to exercise effectively all rights of ownership of the Shares, including, without limitation, the right to vote any Shares purchased by the Purchaser on all matters properly presented to the shareholders of the Company, or effectively to control in any material respect the business, assets or operations of the Company, its Subsidiaries, the Purchaser or any of their respective affiliates; or (iii) otherwise has a Material Adverse Effect; or (b) (i) the representation and warranties of the Company as set forth in the Merger Agreement (when read without any exception or qualification as to knowledge, materiality or Material Adverse Effect) shall not be true and correct as of the date of the Merger Agreement and as of consummation of the Offer as though made on or as of such date, but only if the respects in which the representations and warranties made by the Company are inaccurate would in the aggregate have a Material Adverse Effect or would materially increase the amount paid to the Company's stockholders in the Offer and the Merger; (ii) the Company shall have breached or failed to comply in any material respect with any of its obligations, 30 covenants or agreements under the Merger Agreement; or (iii) any change or event shall have occurred that has a Material Adverse Effect; or (c) any person (which includes a "person" as such term is defined in Section 13(d)(3) of the Exchange Act) other than Parent, the Purchaser, or any of their affiliates or any group of which any of them is a member, shall have entered into a definitive agreement or an agreement in principle with the Company or any Subsidiary with respect to an Acquisition Proposal or the Company's Board (or any committee thereof) shall have adopted a resolution approving any of the foregoing; or (d) the Company, Parent and the Purchaser shall have reached an agreement that the Offer or the Merger Agreement be terminated, or the Merger Agreement shall have been terminated in accordance with its terms; or (e) the Company Board (or any committee thereof) shall have withdrawn or modified (including by amendment of the Schedule 14D-9) in a manner adverse to Parent or the Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger or shall have recommended another Acquisition Proposal, or shall have adopted any resolution to effect any of the foregoing which, in the good faith judgment of the Purchaser in any such case, and regardless of the circumstances (including any action or omission by the Purchaser) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment; or (f) there shall have occurred (i) any general suspension of, or limitation on prices for trading in securities on the American Stock Exchange, any national securities exchange or on the Nasdaq National Market System for a period in excess of 24 hours (excluding suspension or limit resulting solely from physical damage or interference with such exchanges not related to market conditions), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) a commencement of a war, armed hostilities or other national or international crisis directly involving the United States (other than an action involving United Nations' personnel or support of United Nations' personnel), (iv) a change in the general financial, bank or capital markets which materially and adversely affects the ability of financial institutions in the United States to extend credit or syndicate loans or (v) in the case of any of the foregoing clauses (i) through (iv) existing at the time of the commencement of the Offer, a material acceleration or worsening thereof. The foregoing conditions are for the sole benefit of Parent and the Purchaser and may be asserted by Parent or the Purchaser regardless of the circumstances giving rise to any such conditions and may be waived by Parent or the Purchaser in whole or in part at any time and from time to time in its reasonable discretion, in each case, subject to the terms of the Merger Agreement. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by Parent or the Purchaser concerning the events described herein will be final and binding upon all parties. 15. CERTAIN LEGAL MATTERS Except as described in this Section 15, based on a review of publicly available filings made by the Company with the Commission and other publicly available information concerning the Company, as well as certain representations made to the Purchaser and Parent in the Merger Agreement by the Company, neither the Purchaser nor Parent is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares (and the indirect acquisition of the stock of the Company's subsidiaries) as contemplated herein or of any approval or other action by any Governmental Entity that would be required or desirable for the acquisition or ownership of Shares by the Purchaser as contemplated herein. Should any such approval or other action be required or desirable, the Purchaser and Parent currently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws." While, except as otherwise expressly described in this Section 15, the Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the 31 Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer. STATE TAKEOVER LAWS. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places of business in such states. In EDGAR V. MITE CORP., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders, provided that such laws were applicable only under certain conditions. Subsequently, a number of Federal courts ruled that various state takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside of the state of enactment. SECTION 203 OF THE DELAWARE LAW. Section 203 of the Delaware Law, in general, prohibits a Delaware corporation such as the Company from engaging in a "Business Combination" (defined to include a variety of transactions, including mergers) with an "Interested Stockholder" (defined generally as a person that is the beneficial owner of 15% or more of the corporation's outstanding voting stock) for a period of three years following the date such person became an Interested Stockholder unless, among other things, prior to the date such person became an Interested Stockholder, the board of directors of the corporation approved either the Business Combination or the transaction that resulted in the stockholder becoming an Interested Stockholder. The Board of Directors of the Company has unanimously approved the Merger Agreement, the Tender Agreement and the Purchaser's acquisition of Shares pursuant to the Offer and the Tender Agreement. Therefore, Section 203 of the Delaware Law is inapplicable to the Merger. Neither the Company nor the Purchaser has determined whether any other state takeover laws and regulations will by their terms apply to the Offer, and neither the Company, the Purchaser nor Parent has presently sought to comply with any state takeover statute or regulation. The Company and the Purchaser reserve the right to challenge the applicability or validity of any state law or regulation purporting to apply to the Offer or the Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. In the event it is asserted that any state takeover statute is applicable to the Offer or the Merger and an appropriate court does not determine that such statute is inapplicable or invalid as applied to the Offer or the Merger, the Company or Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. ANTITRUST. Under the provisions of the HSR Act applicable to the Offer, the acquisition of Shares under the Offer may be consummated following the expiration of a 15-calendar day waiting period following the filing by Parent of a Notification and Report Form with respect to the Offer, unless Parent receives a request for additional information or documentary material from the Antitrust Division or the FTC or unless early termination of the waiting period is granted. If, within the initial 15-day waiting period, either the Antitrust Division or the FTC requests additional information or documentary material from Parent concerning the Offer, the waiting period will be extended and would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by Parent with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by 32 the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of Parent. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. Expiration or termination of the applicable waiting period under the HSR Act is a condition to the Purchaser's obligation to accept for payment and pay for Shares tendered pursuant to the Offer. The Merger would not require an additional filing under the HSR Act if the Purchaser owns 50% or more of the outstanding Shares at the time of the Merger or if the Merger occurs within one year after the HSR Act waiting period applicable to the Offer expires or is terminated. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's proposed acquisition of the Company. At any time before or after the Purchaser's acquisition of Shares pursuant to the Offer, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or the consummation of the Merger or seeking the divestiture of Shares acquired by the Purchaser or the divestiture of substantial assets of the Company or its subsidiaries or Parent or its subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, of the results thereof. MEXICAN FEDERAL LAW OF ECONOMIC COMPETITION. According to the Company Form 10-K, the Company conducts certain operations in Mexico. The Mexican Federal Law of Economic Competition ("FLEC") requires pre-notification of concentrations derived from transactions carried out outside of Mexico prior to any legal or material effect in Mexico. For purposes of the FLEC, a concentration means a merger, control transaction, acquisition or other act among competitors, suppliers, customers or other economic agents which results in the concentration of corporations, partnerships, associations, shares of stock, partnership interests, trusts or assets in general. Pre-notifications generally are necessary when the parties to the transaction in question and/or their affiliates have assets in Mexico and (i) the allocated value of the Mexican assets subject to the transaction exceed approximately $42,385,965, or (ii) the transaction results in the accumulation of 35% or more of the assets or shares of an entity, the asset value or revenues of which exceeds approximately $42,385,965, or (iii) the transaction involves (a) two or more entities the aggregate asset value or annual revenue of which exceeds approximately $169,543,860 and (b) if as a result of such transaction, an entity accumulates assets or capital stock in excess of approximately $16,954,386. In the case of transactions subject to the pre-notification requirements, notice must be given to the Mexican Federal Competition Commission (the "Competition Commission") in writing and include the information referred to in the FLEC and its regulations. The Competition Commission may request additional information regarding the proposed transaction within 20 calendar days following notification, which additional information must be furnished within 15 calendar days after such request, unless a justified extension of such period is granted. The Competition Commission has 45 calendar days after receipt to notify or, if applicable, to issue its decision. If such time period lapses without notice from the Competition Commission, the Competition Commission is deemed to have no objections and the transaction may proceed. In exceptionally complex cases, the Chairman of the Competition Commission may extend the review period for up to an additional 60 days. If an illegal concentration is deemed to have occurred, the Competition Commission may, notwithstanding the imposition of sanctions provided in the FLEC and elsewhere, (i) allow the consummation of the proposed transaction on such conditions as it may impose, or (ii) order the total or partial divestiture of the improper acquisition, the termination of control by the controlling person, or the elimination of a particular activity, whichever action it deems appropriate. Parent will make a pre-notification filing with the Competition Commission pursuant to the FLEC. The expiration or termination of the waiting period under the FLEC without objection from the Competition Commission is a condition to the Purchaser's obligation to accept for payment and pay for Shares tendered pursuant to the Offer. 33 16. FEES AND EXPENSES Chase Securities is acting as Dealer Manager in connection with the Offer pursuant to a Dealer Manager Agreement dated April 14, 1998 (the "Dealer Manager Agreement"). Parent and the Purchaser have agreed to pay the Dealer Manager a fee of $250,000, payable upon consummation of the Offer, for its services as Dealer Manager in connection with the Offer. In addition, Parent and the Purchaser have agreed to reimburse the Dealer Manager for its out-of-pocket expenses, including the reasonable fees and expenses of its counsel, in connection with the Offer and to indemnify the Dealer Manager and certain related persons against certain liabilities and expenses, including certain liabilities under the Federal securities laws. The Purchaser has retained MacKenzie Partners, Inc. to act as the Information Agent and ChaseMellon Shareholder Services, L.L.C. to serve as the Depositary in connection with the Offer. The Information Agent and the Depositary each will receive reasonable and customary compensation for their services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the Federal securities laws. Neither the Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser upon request for customary mailing and handling expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. Neither the Purchaser nor Parent is aware of any jurisdiction in which the making of the Offer or the tender of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. If the Purchaser or Parent becomes aware of any state law prohibiting the making of the Offer or the acceptance of Shares pursuant thereto in such state, the Purchaser will make a good faith effort to comply with any such state statute or seek to have such state statute declared inapplicable to the Offer. If, after such good faith effort, the Purchaser cannot comply with any such state statute or have such state statute declared inapplicable to the Offer, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction the securities, blue sky or other laws of which require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. The Purchaser and Parent have filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, together with exhibits, furnishing certain additional information with respect to the Offer, and may file amendments thereto. In addition, the Company has filed with the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, together with exhibits, setting forth its recommendation with respect to the Offer and the reasons for such recommendation and furnishing certain additional related information. Such Schedules and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the manner set forth in Sections 8 and 9 (except that such material will not be available at the regional offices of the Commission). VA ACQUISITION CORP. April 14, 1998 34 SCHEDULE I INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER The following table sets forth the name, age, business address, citizenship and principal occupation or employment at the present time and during the past five years of each director and executive officer of Parent and the Purchaser. Unless otherwise noted, each such person is a citizen of the United States. In addition, unless otherwise noted, each such person's business address is Huntsman Packaging Corporation, 500 Huntsman Way, Salt Lake City, Utah 84108. Directors are indicated with an asterisk. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, MATERIAL OCCUPATIONS, NAME OFFICES OR EMPLOYMENTS HELD DURING PAST FIVE YEARS AND AGE. - ------------------------------------------ --------------------------------------------------------------------- Jon M. Huntsman*.......................... Mr. Huntsman is a Director and the Chairman of the Board of Directors of Parent and has served as Chairman of the Board, Chief Executive Officer and a Director of Huntsman Corporation, its predecessors and other Huntsman companies for over 25 years. He is also the Chairman and founder of the Huntsman Cancer Foundation. In addition, Mr. Huntsman serves on numerous charitable, civic and industry boards. In 1994, Mr. Huntsman received the prestigious Kavaler Award as the chemical industry's outstanding Chief Executive Officer. Mr. Huntsman formerly served as Special Assistant to the President of the United States and as Vice Chairman of the U.S. Chamber of Commerce. Mr. Huntsman is 60 years old. Karen H. Huntsman**....................... Mrs. Huntsman was appointed Vice Chairman of Parent on November 24, 1997, and serves as an officer and director of other Huntsman companies. She has served as a Vice President and Director of Huntsman Corporation since 1995 and as a Vice President and director of Huntsman Chemical Corporation since 1982 and 1986, respectively. By appointment of the Governor of the State of Utah, Mrs. Huntsman serves as a member of the Utah State Board of Regents. Mrs. Huntsman also serves on the board of directors of various corporate and non-profit entities, including First Security Corporation and Intermountain Health Care Inc. Mrs. Huntsman is 60 years old. Richard P. Durham*........................ Mr. Durham became President and Chief Executive Officer of Parent in March 1997. Mr. Durham is a Director of Parent and also is a Director of Huntsman Corporation. Mr. Durham has been with the Huntsman organization in various positions since 1985. Most recently, Mr. Durham served as Co-President and Chief Financial Officer of Huntsman Corporation, where in addition to being responsible for accounting, treasury, finance, tax, legal, human resources, public affairs, purchasing, research and development, and information systems, he also was responsible for Parent. Mr. Durham attended Columbia College and graduated from the Wharton School of Business at the University of Pennsylvania. Mr. Durham is 33 years old.
I-1 Christena H. Durham*...................... Mrs. Durham was appointed a Director of Parent on October 1, 1997, and became a Vice President on November 24, 1997. Prior to joining Parent, Mrs. Durham held no other officer positions or directorships with any other for-profit organizations. Mrs. Durham also serves on the Board of Directors of various non-profit organizations, including the YWCA of Salt Lake City, and as a trustee of the Huntsman Excellence in Education Foundation. Mrs. Durham is 33 years old. Jack E. Knott............................. Mr. Knott became Executive Vice President and Chief Operating Officer of Parent on September 1, 1997. Prior to joining Parent, Mr. Knott was a member of the Board of Directors of Rexene Corporation from April 1996 until August 1997 and held the position of Executive Vice President of Rexene Corporation and President of Rexene Products from March 1995 to August 1997. Mr. Knott was Executive Vice President of Sales and Market Development of Rexene Corporation from March 1992 to March 1995, Executive Vice President of Rexene Corporation from January 1991 to March 1992, and President of CT Film, a division of Rexene Corporation, from February 1989 to January 1991. 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 and holds nine patents. Mr. Knott is 43 years old. Scott K. Sorensen......................... Mr. Sorensen recently joined Parent as Executive Vice President and Chief Financial Officer. Prior to joining Parent, Mr. Sorensen was Chief Financial Officer of the Power Generation Division of Westinghouse Electric Corporation. Prior to joining Westinghouse in 1996, Mr. Sorensen spent two years as Director of Business Development and Planning at Phelps Dodge Industries and over four years as an Associate with McKinsey & Company. Mr. Sorensen received an M.B.A. degree from Harvard Business School and a B.S. degree in Accounting from the University of Utah. Mr. Sorensen is 36 years old. N. Brian Stevenson........................ Mr. Stevenson became Parent's Senior Vice President and General Manager, Packaging Division on September 1, 1997. Mr. Stevenson joined Parent in April 1992 as Executive Vice President and Chief Operating Officer. He has 27 years of operating and management experience in the flexible packaging industry. Prior to joining Parent, Mr. Stevenson held numerous management positions at James River and Crown Zellerbach, including Plant and Divisional Controller, Eastern Regional Sales Manager, Eastern General Manager and, most recently, Vice President of James River's Flexible Packaging Division. In 1990, he left James River to become President of Packaging Industries. Mr. Stevenson holds a B.S. degree in Accounting and an M.B.A. degree from the University of Utah. Mr. Stevenson is 53 years old.
I-2 Douglas W. Bengtson....................... Mr. Bengston joined Parent on September 15, 1997 as Senior Vice President and General Manager, Performance Films Division. Mr. Bengtson has 24 years of experience in sales, marketing and senior management. Most recently, Mr. Bengtson was Vice President, Sales and Marketing for Food Packaging at American National Can, where Mr. Bengtson was responsible for the sales and marketing of flexible packaging to the food industry segment. His former positions include Vice President, Sales and Marketing at CT Film and Vice President, Sales and Marketing, Rexene Products Division. Mr. Bengtson holds a B.S. degree in Business/Marketing from Colorado State University. Mr. Bengston is 50 years old. Ronald G. Moffitt......................... Mr. Moffitt joined Parent in 1997, after serving as Vice President and General Counsel of Huntsman Chemical Corporation. Prior to joining Huntsman in 1994, Mr. Moffitt was a partner and director in 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. Mr. Moffitt is 45 years old. Stanley B. Bikulege....................... Mr. Bikulege joined Parent in 1992 and was appointed Vice President Stretch Films, Packaging Division in 1997. Mr. Bikulege's prior positions with Parent include General Manger of Castflex in 1997, Managing Director-Europe from 1996 to 1997, Managing Director PVC Films-Europe from 1995 to 1996, Director of Manufacturing from 1993 to 1995, and Plant Manager in 1992. Prior to joining Huntsman, Mr. Bikulege held numerous positions in Goodyear's Wingfoot Films. Mr. Bikulege received a B.S. degree in chemical Engineering from Youngstown State University and an M.B.A. degree from Georgia State University. Mr. Bikulege is 34 years old. Dale A. Brockman.......................... Mr. Brockman joined Parent in February 1993 as the plant manager of the newly-acquired Huntsman Design Products plant in Rochester, New York and later that year was appointed to the position of Director of Operations. In 1994 he became Vice President Operations and in 1995 became responsible for numerous plants. He was appointed Vice President Manufacturing, Packaging Division in September 1997 and was appointed Vice President, Performance Films Division on November 24, 1997. He has 24 years of experience in the flexible packaging industry. He has held numerous engineering and management positions at Crown Zellerbach and James River, including General Manager/Bakery Business Unit Manager. Mr. Brockman holds a B.S. degree in Mechanical Technology from Indiana State University. Mr. Brockman is 47 years old.
I-3 Darren G. Cottle.......................... Mr. Cottle joined the Huntsman organization in 1989 and held various positions at Huntsman Chemical Corporation, including Plant Controller. Mr. Cottle joined Parent in July 1992 as the Assistant Controller, was named Controller in March 1997, and became Vice President and Controller on November 24, 1997. Prior to joining Huntsman, Mr. Cottle was employed by the international accounting firm of Deloitte & Touche. Mr. Cottle is a Certified Public Accountant and received a B.A. and a masters degree in Professional Accountancy from Weber State University. Mr. Cottle is 35 years old. Thornton L. Hill.......................... Mr. Hill joined Parent as Vice President Sales in July 1992 and became Vice President Sales and Marketing National Accounts on November 24, 1997. Prior to that time, Mr. Hill was General Sales Manager of Goodyear's Film Products Division and worked for Goodyear for 29 years in various sales and marketing positions, including Executive Vice President and Chief Operating Officer of Goodyear's Wingfoot Films. He holds a B.A. degree in Education from Morehead State University and has attended executive management programs at Kent State University and Northwestern University. Mr. Hill is 60 years old. Gary J. Penna............................. Mr. Penna became Vice President Sales and Marketing Converter Films, Performance Films Division on September 1, 1997. Mr. Penna joined Parent in 1996 as a result of Parent's acquisition of Deerfield Films. Mr. Penna had been with Deerfield since 1994, as Vice President of Sales for Converter Films. Prior to joining Deerfield, Mr. Penna served a variety of management positions at Exxon Corporation. Mr. Penna has a degree in Chemical Engineering from Princeton University and an M.B.A. degree from The Amos Tuck School at Dartmouth College. Mr. Penna is 50 years old. Patrick H. Price.......................... Mr. Price joined Parent in April 1992 as Vice President Administration. Prior to joining the Company, he was employed for fifteen years with Huntsman Chemical Corporation in the human resource department, holding positions as Director of Personnel and Director of Benefits. He holds a B.S. degree in Business Administration from California State University-Northridge. Mr. Price is 52 years old. Edwin W. Stranberg........................ Mr. Stranberg joined Parent in February 1993 as Vice President of Operations and became Vice President, PVC Films, Packaging Division on November 24, 1997. He has 25 years of experience in the flexible packaging industry. He held various manufacturing, technical and sales management positions with Crown Zellerbach and James River prior to joining Parent. Prior to James River, he was Vice President and General Manager of Sealright Co. Inc. Mr. Stranberg holds a B.S. degree in Industrial Engineering from New Mexico State University. Mr. Stranberg is 47 years old.
- ------------------------ * Such persons are members of the Board of Directors of Parent. ** The Vice Chairman is an advisory position to the Board of Directors of Parent, but does not vote on matters brought to the Board. I-4 DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT, MATERIAL OCCUPATIONS, NAME OFFICES OR EMPLOYMENTS HELD DURING PAST FIVE YEARS AND AGE. - ------------------------------------------ --------------------------------------------------------------------- Richard P. Durham......................... Mr. Durham became President and Chief Executive Officer of Purchaser in April 1998. Mr. Durham is the sole member of the Board of Directors of Purchaser, and also is a Director of Parent and Huntsman Corporation. Mr. Durham has been with the Huntsman organization in various positions since 1985. Most recently, Mr. Durham served as Co-President and Chief Financial Officer of Huntsman Corporation, where in addition to being responsible for accounting, treasury, finance, tax, legal, human resources, public affairs, purchasing, research and development, and information systems, he also was responsible for Parent. Mr. Durham attended Columbia College and graduated from the Wharton School of Business at the University of Pennsylvania. Mr. Durham is 33 years old. Jack E. Knott............................. Mr. Knott became Executive Vice President and Chief Operating Officer of Purchaser in April 1998. In addition, Mr. Knott became Executive Vice President and Chief Operating Officer of Parent on September 1, 1997. Prior to joining the Huntsman organization, Mr. Knott was a member of the Board of Directors of Rexene Corporation from April 1996 until August 1997 and held the position of Executive Vice President of Rexene Corporation and President of Rexene Products from March 1995 to August 1997. Mr. Knott was Executive Vice President of Sales and Market Development of Rexene Corporation from March 1992 to March 1995, Executive Vice President of Rexene Corporation from January 1991 to March 1992, and President of CT Film, a division of Rexene Corporation, from February 1989 to January 1991. 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 and holds nine patents. Mr. Knott is 43 years old. Scott K. Sorensen......................... Mr. Sorensen became Executive Vice President and Chief Financial Officer, Treasurer of Purchaser in April 1998. In addition, Mr. Sorensen recently joined Parent as Executive Vice President and Chief Financial Officer. Prior to joining the Huntsman organization, Mr. Sorensen was Chief Financial Officer of the Power Generation Division of Westinghouse Electric Corporation. Prior to joining Westinghouse in 1996, Mr. Sorensen spent two years as Director of Business Development and Planning at Phelps Dodge Industries and over four years as an Associate with McKinsey & Company. Mr. Sorensen received an M.B.A. degree from Harvard Business School and a B.S. degree in Accounting from the University of Utah. Mr. Sorensen is 36 years old.
I-5 Ronald G. Moffitt......................... Mr. Moffitt became Senior Vice President, Secretary and General Counsel for Purchaser in April 1998. Mr. Moffitt joined Parent in 1997, after serving as Vice President and General Counsel of Huntsman Chemical Corporation. Prior to joining Huntsman in 1994, Mr. Moffitt was a partner and director in 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. Mr. Moffitt is 45 years old. Darren G. Cottle.......................... Mr. Cottle became Vice President and Controller, Assistant Secretary for Purchaser in April 1998. Mr. Cottle joined the Huntsman organization in 1989 and has held various positions at Huntsman Chemical Corporation, including Plant Controller. Mr. Cottle joined Parent in July 1992 as the Assistant Controller, was named Controller in March 1997, and became Vice President and Controller on November 24, 1997. Prior to joining Huntsman, Mr. Cottle was employed by the international accounting firm of Deloitte & Touche. Mr. Cottle is a Certified Public Accountant and received a B.A. and a masters degree in Professional Accountancy from Weber State University. Mr. Cottle is 35 years old.
I-6 Manually signed facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or such stockholder's broker, dealer, bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY HAND: BY OVERNIGHT COURIER: ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder Services, L.L.C. Services, L.L.C. Services, L.L.C. Post Office Box 3305 120 Broadway, 13th Floor 85 Challenger Road South Hackensack, NJ New York, NY 10271 Mail Drop Reorganization 07606 Attn: Reorganization Department Attn: Reorganization Department Ridgefield Park, NJ 07660 Department Facsimile Transmission (for Eligible Institutions only): (201) 329-8936 Confirm Receipt of Notice of Guaranteed Delivery by Telephone: (201) 296-4860 -------------------------------- Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers and locations listed below. You may also contact your broker, dealer, bank, trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [LOGO] 156 FIFTH AVENUE NEW YORK, NEW YORK 10010 (212) 929-5500 (CALL COLLECT) OR CALL TOLL-FREE (800) 322-2885 THE DEALER MANAGER FOR THE OFFER IS: CHASE SECURITIES INC. 270 PARK AVENUE NEW YORK, NEW YORK 10017 (212) 270-3348 (CALL COLLECT) EX-99.(B)(1) 3 EXHIBIT 99(B)(1) EXHIBIT 99(b)(1) EXECUTION COPY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CREDIT AGREEMENT dated as of September 30, 1997 among HUNTSMAN PACKAGING CORPORATION, as Borrower The Lenders Party Hereto and THE CHASE MANHATTAN BANK, as Administrative Agent --------------------------- CHASE SECURITIES INC., as Arranger - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 [6700-578] TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms 1 SECTION 1.02. Classification of Loans and Borrowings 30 SECTION 1.03. Terms Generally 30 SECTION 1.04. Accounting Terms; GAAP; Treatment of Unrestricted Subsidiaries 31 SECTION 1.05. Certain Interim Financial Calculations 32 ARTICLE II THE CREDITS SECTION 2.01. Commitments 33 SECTION 2.02. Loans and Borrowings 33 SECTION 2.03. Requests for Borrowings 34 SECTION 2.04. Swingline Loans 35 SECTION 2.05. Letters of Credit 37 SECTION 2.06. Funding of Borrowings 43 SECTION 2.07. Interest Elections 44 SECTION 2.08. Termination and Reduction of Commitments 45 SECTION 2.09. Repayment of Loans; Evidence of Debt 47 SECTION 2.10. Amortization of Term Loans 48 SECTION 2.11. Prepayment of Loans 49 SECTION 2.12. Fees 52 SECTION 2.13. Interest 54 SECTION 2.14. Alternate Rate of Interest 55 SECTION 2.15. Increased Costs 55 3 SECTION 2.16. Break Funding Payments 57 SECTION 2.17. Taxes 58 SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Setoffs 59 SECTION 2.19. Mitigation Obligations; Replacement of Lenders 61 SECTION 2.20. Extension of Revolving Maturity Date 62 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Organization; Powers 63 SECTION 3.02. Authorization; Enforceability 63 SECTION 3.03. Governmental Approvals; No Conflicts 63 SECTION 3.04. Financial Condition; No Material Adverse Change 64 SECTION 3.05. Properties 65 SECTION 3.06. Litigation and Environmental Matters 65 SECTION 3.07. Compliance with Laws and Agreements 66 SECTION 3.08. Investment and Holding Company Status 66 SECTION 3.09. Taxes 66 SECTION 3.10. ERISA 66 SECTION 3.11. Disclosure 67 SECTION 3.12. Subsidiaries 67 SECTION 3.13. Insurance 67 SECTION 3.14. Labor Matters 68 SECTION 3.15. Solvency 68 SECTION 3.16. Security Documents 68 SECTION 3.17. Federal Reserve Regulations 69 SECTION 3.18. Existing Intercompany Indebtedness 70 SECTION 3.19. Agreements and Business Status as of Effective Date 70 4 ARTICLE IV CONDITIONS SECTION 4.01. Effective Date 70 SECTION 4.02. Each Credit Event 76 ARTICLE V AFFIRMATIVE COVENANTS SECTION 5.01. Financial Statements and Other Information 77 SECTION 5.02. Notices of Material Events 79 SECTION 5.03. Information Regarding Collateral 80 SECTION 5.04. Existence; Conduct of Business 80 SECTION 5.05. Payment of Obligations 80 SECTION 5.06. Maintenance of Properties 81 SECTION 5.07. Insurance 81 SECTION 5.08. Casualty and Condemnation 82 SECTION 5.09. Books and Records; Inspection and Audit Rights 82 SECTION 5.10. Compliance with Laws 83 SECTION 5.11. Use of Proceeds and Letters of Credit 83 SECTION 5.12. Additional Subsidiaries 83 SECTION 5.13. Further Assurances 84 ARTICLE VI NEGATIVE COVENANTS SECTION 6.01. Indebtedness 85 SECTION 6.02. Certain Equity Securities 87 SECTION 6.03. Liens 87 SECTION 6.04. Fundamental Changes 89 5 SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions 89 SECTION 6.06. Asset Sales 92 SECTION 6.07. Sale and Lease-Back Transactions 93 SECTION 6.08. Hedging Agreements 93 SECTION 6.09. Restricted Payments; Certain Payments of Indebtedness 93 SECTION 6.10. Transactions with Affiliates 94 SECTION 6.11. Restrictive Agreements 94 SECTION 6.12. Amendment of Material Documents 95 SECTION 6.13. Capital Expenditures 95 SECTION 6.14. Leverage Ratio 96 SECTION 6.15. Interest Coverage Ratio 96 SECTION 6.16. Minimum Net Worth 96 SECTION 6.17. Designated Senior Debt 97 ARTICLE VII EVENTS OF DEFAULT 97 ARTICLE VIII THE ADMINISTRATIVE AGENT 100 ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices 103 SECTION 9.02. Waivers; Amendments 104 SECTION 9.03. Expenses; Indemnity; Damage Waiver 106 SECTION 9.04. Successors and Assigns 108 SECTION 9.05. Survival 111 SECTION 9.06. Counterparts; Integration; Effectiveness 112 SECTION 9.07. Severability 112 6 SECTION 9.08. Right of Setoff 112 SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process 113 SECTION 9.10. WAIVER OF JURY TRIAL 114 SECTION 9.11. Headings 114 SECTION 9.12. Confidentiality 114 SECTION 9.13. Interest Rate Limitation 115
SCHEDULES: Schedule 1.01(a) -- Mortgaged Properties 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 3.19 -- Affiliate Agreements 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 Exhibit B-2 -- Form of Opinion of Borrower's Utah Counsel Exhibit B-3 -- Form of Opinion of Local Counsel Exhibit B-4 -- Form of Opinion of Foreign Counsel 7 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 CREDIT AGREEMENT dated as of September 30, 1997, among HUNTSMAN PACKAGING CORPORATION, a Utah corporation, the LENDERS party hereto, and THE CHASE MANHATTAN BANK, as Administrative Agent.
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. "ACQUISITION AGREEMENT" means the agreement or agreements entered into in connection with the CT Film Acquisition. "ADJUSTED CONSOLIDATED NET WORTH" means, as of any date, the capital stock and additional paid-in capital of the Borrower plus retained earnings (or minus accumulated deficit) of the Borrower, plus Excluded Charges, all determined as of such date on a consolidated basis in accordance with GAAP (except that such determination 8 shall be made without taking into account Unrestricted Subsidiaries). "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 The Chase Manhattan Bank, in its capacity as administrative agent for the Lenders hereunder. "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. The Borrower acknowledges that Richard Durham is an Affiliate of the Borrower. Each of Jon M. Huntsman and Huntsman (and their respective Affiliates) shall be deemed to be an Affiliate of the Borrower for purposes of Section 6.10. "ALTERNATE BASE RATE" means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) 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, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD 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. 9 "APPLICABLE RATE" means, for any day with respect to any ABR Loan or Eurodollar Loan that is a Revolving Loan or a Term Loan, or with respect to the commitment fees payable hereunder, 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 first full fiscal quarter ending after the Effective Date, 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 Equal to or greater than 4.00 to 1.00 0.75% 2.00% 0.500% - ---------------------------------------------------------------------------------------------------- CATEGORY 2 Less than 4.00 to 1.00 but greater than 3.50 to 1.00 0.50% 1.75% 0.400% - ---------------------------------------------------------------------------------------------------- CATEGORY 3 Less than or equal to 3.50 to 1.00 but greater than 3.00 to 1.00 0.25% 1.50% 0.375% - ---------------------------------------------------------------------------------------------------- CATEGORY 4 Less than or equal to 3.00 to 1.00 but greater than 2.50 to 1.00 0.00% 1.25% 0.350% - ---------------------------------------------------------------------------------------------------- CATEGORY 4 Less than or equal to 2.50 to 1.00 0.00% 1.00% 0.300% - ----------------------------------------------------------------------------------------------------
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 (such day, the "Applicable Rate Determination Date") 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 10 pursuant to Section 5.01(a) or (b), during the period from the expiration of the time for delivery thereof until such consolidated financial statements are delivered. "ASSESSMENT RATE" means, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in dollars at the offices of such member in the United States; PROVIDED that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to be representative of the cost of such insurance to the Lenders. "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. "BASE CD RATE" means the sum of (a) the Three-Month Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate. "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 each fiscal year 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, 1998), less the 11 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(d) 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 clause (ii) of Section 2.11(b) in respect of such Net Proceeds, (ii) all reductions of Revolving Commitments required to be made pursuant to Section 2.08(d) in respect of such Net Proceeds and (iii) any portion of such Net Proceeds reserved for a Permitted Acquisition 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 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. 12 "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. "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 to elect 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 date hereof) other than the Control Group, of shares representing more than 35% 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 13 by members of the Control Group or the board of directors of the Borrower nor (ii) appointed by directors so nominated; or (d) the acquisition of direct or indirect Control of the Borrower by any Person or group other than the Control Group. "CHANGE IN LAW" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement 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 date of this Agreement. "CLASS", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment or Term Loan 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 The Chase Manhattan Bank, in its capacity as collateral agent for the Secured Parties under the Security Documents. "COMMITMENT" means a Revolving Commitment, Term Loan 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 aggregate amount of Consolidated Interest Expense for such period, (b) the aggregate amount of letter of credit 14 fees paid during such period, (c) the aggregate amount of income tax expense for such period, (d) all amounts attributable to depreciation and amortization for such period, (e) all extraordinary charges and losses during such period and any Excluded Charges during such period, (f) for the period ended December 31, 1997, $9.5 million, (g) for the period ended March 31, 1998, $7.0 million, (h) for the period ended June 30, 1998, $4.5 million and (i) for the period ended September 30, 1998, $2.0 million, 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. "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 or paid by the Borrower and the Restricted Subsidiaries during such period (net of payments made or received under interest rate protection agreements), determined on a consolidated basis in accordance with GAAP. "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 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. 15 "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 the ability to exercise voting power, by contract or otherwise. "CONTROLLING" and "CONTROLLED" have meanings correlative thereto. "CONTROL GROUP" means Jon M. Huntsman, his spouse, direct descendants and their spouses, immediate family, any entities that are Controlled by any of the foregoing individuals and/or by a trust of the type described hereafter, and/or any trusts solely for the benefit of any of the foregoing. "CT FILM ACQUISITION" means the acquisition by the Borrower from Huntsman Polymers Corporation (formerly known as Rexene Corporation) of all or substantially all the assets comprising Huntsman Polymers Corporation's CT Film Division. "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. "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, 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, contingent or otherwise (including, but not limited to, any liability for damages, natural resource damage, costs of environmental remediation, administrative oversight 16 costs, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based 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. "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 any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, 17 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; 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 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 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 decreased during such period; MINUS 18 (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(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 to be incurred in respect of the restructurings, plant closings or similar actions expected to be taken in connection with the Borrower's facilities in Scunthorpe, U.K. and Birmingham, Alabama and the CT Film Acquisition, 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 19 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 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 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 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 with respect to such withholding tax pursuant to Section 2.17(a). "EXISTING INTERCOMPANY INDEBTEDNESS" means all Indebtedness owed by the Borrower and its Subsidiaries to Huntsman and its subsidiaries (other than the Borrower and its Subsidiaries), together with accrued interest thereon. "EXISTING LETTERS OF CREDIT" means the following letters of credit entered into by the Borrower and its Subsidiaries and outstanding as of the Effective Date: (i) the Irrevocable Standby Letter of Credit dated July 30, 1996 issued by U.S. Bank of Utah in the amount of $378,000 to Huntsman United Films Corporation on behalf of Old National Trust Company and (ii) the Irrevocable Standby Letter of Credit dated December 16, 1996 issued by U.S. Bank of Utah in the amount of 20 $5,250,000 to Huntsman Packaging Corporation on behalf of Fleet National Bank. "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. "FINANCIAL OFFICER" means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower. "FINANCING TRANSACTIONS" means (i) the repayment by the Borrower of the Existing Intercompany Indebtedness, (ii) the issuance by the Borrower of the Senior Subordinated Notes, and (iii) 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. "FOREIGN ASSETS" means the assets of or shares or other ownership interests in the Foreign Subsidiaries. "FOREIGN LENDER" means 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. "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. 21 "GOVERNMENTAL AUTHORITY" means the government of the United States of America, 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 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 Guarantee Agreement, substantially in the form of Exhibit C, made by the Subsidiary Loan Parties in favor of the Administrative Agent for the benefit of the Secured Parties. "HAZARDOUS MATERIALS" means all explosive or radioactive substances or wastes and all 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 22 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. "HUNTSMAN" mean Huntsman Corporation, a Utah corporation. "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 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 60 days, unless the payment thereof is being contested in good faith), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing 23 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 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 Indemnity, Subrogation and Contribution Agreement, substantially in the form of Exhibit D, among the Borrower, the Subsidiary Loan Parties and the Administrative Agent. "INFORMATION MEMORANDUM" means the Confidential Information Memorandum dated July 1997 relating to the Borrower and the Transactions. "INTEREST ELECTION REQUEST" means a request by the 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 (other than a Swingline Loan), the last day of each March, June, September and December, (b) with respect to any Eurodollar Loan, the last day of the 24 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, and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid. "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 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. "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 The Chase Manhattan Bank, 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 25 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, the U.S. Bank of Utah shall be deemed to be an Issuing Bank with respect to the Existing Letters of Credit but shall not be obligated to issue any additional Letters of Credit hereunder. "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. "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 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 26 Borrower most recently ended as of 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 11:00 a.m., London 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 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 and the Security Documents. "LOAN PARTIES" means the Borrower and the Subsidiary Loan Parties. 27 "LOANS" means the loans made by the Lenders to the Borrower pursuant 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, operations, prospects or condition, financial or otherwise, of the Borrower and the Restricted Subsidiaries taken as a whole, (b) the ability of any Loan Party to perform any of its 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 $5,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or 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. "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 granting a Lien on any Mortgaged Property to secure the Obligations. Each Mortgage shall be satisfactory in form and substance to the Collateral Agent. "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. 28 "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, 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, and (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, in each case during the year that such event occurred or the next succeeding year and that are directly attributable to such event (as determined reasonably and in good faith by the chief financial officer of the Borrower). "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. "OBLIGATIONS" has the meaning assigned to such term in the Security Agreement. 29 "OTHER TAXES" means any and all current or future stamp or documentary taxes or any other excise or property 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 (other than the CT Film 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 division or line of business 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 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 6.14, 6.15 and 6.16 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 30 Agent an officers' certificate to the effect set forth in clauses (a), (b), (c) and (d) above, together with all relevant financial information for the Person or assets to be acquired. For purposes of determining pro forma compliance with the covenants referred to in clause (d) above and for purposes of Section 1.05 as provided therein, the Borrower may give effect to synergistic benefits anticipated to be realized in connection with the proposed acquisition to the extent (but only to the extent) that the Borrower would be permitted to give effect to such benefits in pro forma financial statements to be filed with the SEC and prepared in accordance with Article 11 of Regulation S-X under the Securities Exchange Act of 1934, as amended, and the applicable interpretations of the SEC, in each case as in effect on the date of this Agreement. "PERMITTED ENCUMBRANCES" means: (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04; (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 30 days or are being contested in compliance with Section 5.04; (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; and 31 (f) Liens disclosed on title policies delivered to the Administrative Agent prior to the execution of this Agreement in respect of any Mortgaged Property and easements, zoning restrictions, rights-of-way and similar encumbrances 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 property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary; 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 an 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 32 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 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 and (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. "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 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) dispositions described in clauses (a), (b), (c), (d), (e) and (h) of Section 6.06 and (ii) other dispositions resulting in aggregate Net Proceeds not exceeding $1,000,000 during any fiscal year of the Borrower; or 33 (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 $1,000,000 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 and directors of the Borrower and its Restricted Subsidiaries resulting in aggregate Net Proceeds not exceeding $1,000,000 during any fiscal year of the Borrower; or (d) the incurrence by the Borrower or any Restricted Subsidiary of any Indebtedness, other than Indebtedness permitted by Section 6.01; 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 acquire other assets to be used in a line of business permitted under Section 6.04(b), in each case within 360 days of receipt of such Net Proceeds, or, in the case of Net Proceeds resulting from the disposition of Foreign Assets, to finance a Permitted Acquisition in the United States or Canada within 540 days of receipt of such Net Proceeds and (ii) certifying that no 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 360-day or 540-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 34 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 The Chase Manhattan Bank 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. "REGISTER" has the meaning set forth in Section 9.04. "REGULATION G" shall mean Regulation G of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "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" has the meaning set forth in Section 101(22) of CERCLA. "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. "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 35 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 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, 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 $150,000,000. "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. "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 September 30, 2004. 36 "S&P" means Standard & Poor's. "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 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 NOTE DOCUMENTS" means the Senior Subordinated Notes, the indenture under which the Senior Subordinated Notes are issued and all other documents evidencing, guaranteeing or otherwise governing the terms of the Senior Subordinated Notes. "SENIOR SUBORDINATED NOTES" means (i) the senior subordinated notes in an aggregate principal amount not less than $100,000,000 and not more than $125,000,000 issued by the Borrower in a Rule 144A or other private placement (the "Initial Notes") and (ii) any 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 Senior Subordinated Note Documents. "SPLIT-OFF" means the distribution of all the issued and outstanding capital stock of the Borrower to Richard Durham, the Christena Karen H. Durham Trust and Jon M. Huntsman in exchange for some or all of the capital stock of Huntsman owned by such Persons. "SPLIT-OFF DOCUMENTS" means all agreements and documents providing for or to be entered into in connection with the Split-Off. 37 "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 (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over $100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in 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. "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 (a) 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, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "SUBSIDIARY" means any subsidiary of the Borrower. "SUBSIDIARY LOAN PARTY" means any Restricted Subsidiary; PROVIDED that a Foreign Subsidiary shall not 38 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 Lender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time. "SWINGLINE LENDER" means The Chase Manhattan Bank, in its capacity as lender of Swingline Loans hereunder. "SWINGLINE LOAN" has the meaning set forth in Section 2.04. "TAXES" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "TERM COMMITMENT" means, with respect to each Lender, the commitment, if any, of such Lender to make a Term Loan hereunder on the Effective Date, expressed as an amount representing the maximum principal amount of the Term Loan to be made by such Lender hereunder, as such commitment may be reduced pursuant to Section 2.08. The initial aggregate amount of the Lenders' Term Commitments is $100,000,000. The initial amount of each Lender's Term Commitment is set forth on Schedule 2.01. "TERM LOAN" has the meaning set forth in Section 2.01. "TERM LOAN LENDER" means a Lender with a Term Commitment or an outstanding Term Loan. "TERM LOAN MATURITY DATE" means September 30, 2005. "THREE-MONTH SECONDARY CD RATE" means, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical 39 Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it. "TOTAL DEBT" means, as of any date of determination, without duplication, the aggregate principal amount 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). "TRANSACTION COSTS" means the fees and expenses incurred by, or required to be reimbursed or paid by, the Borrower and its Subsidiaries in connection in the Transactions. "TRANSACTIONS" means the Split-Off and the Financing Transactions. "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) any Subsidiary organized after the date of this Agreement 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 (b) 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 40 and warranties of the Borrower herein would be true and correct on and as of the date of such declaration (after giving effect to such declaration). The Borrower may not declare a Restricted Subsidiary to be an Unrestricted Subsidiary. "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 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 41 "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. SECTION 1.05. CERTAIN INTERIM FINANCIAL CALCULATIONS. Prior to September 30, 1998, solely for purposes of determining compliance with Sections 6.14 and 6.15 and for purposes of determining the Leverage Ratio, Consolidated Net Income for the period of four consecutive fiscal quarters ended (a) December 31, 1997, 42 shall be deemed to be equal to the product of (i) Consolidated Net Income for the fiscal quarter ended December 31, 1997, multiplied by (ii) four, (b) March 31, 1998, shall be deemed to be equal to the product of (i) Consolidated Net Income for the two consecutive fiscal quarters ended March 31, 1998, multiplied by (ii) two and (c) June 30, 1998, shall be deemed to be equal to the product of (i) Consolidated Net Income for the three consecutive fiscal quarters ended June 30, 1998, multiplied by (ii) four-thirds. Related calculations for Cash Interest Expense for the same periods shall be determined in the same manner. If a Permitted Acquisition occurs, then prior to the end of the period of four consecutive fiscal quarters commencing with the fiscal quarter during which such Permitted Acquisition occurs (each such quarter hereinafter referred to as an "Acquisition Fiscal Quarter"), solely for purposes of determining compliance with Sections 6.14 and 6.15 and for purposes of determining the Leverage Ratio, Consolidated Net Income for the trailing four fiscal quarters, calculated at the end of each of the Acquisition Fiscal Quarters, shall equal the sum of (a) Consolidated EBITDA for the trailing four fiscal quarters and (b) with respect to the first Acquisition Fiscal Quarter, Acquisition EBITDA multiplied by seven-eighths; (ii) with respect to the second Acquisition Fiscal Quarter, Acquisition EBITDA multiplied by five-eighths; (iii) with respect to the third Acquisition Fiscal Quarter, Acquisition EBITDA, multiplied by three-eighths; and (iv) with respect to the fourth Acquisition Fiscal Quarter, Adjusted EBITDA multiplied by one-eighth. For purposes of the immediately preceding paragraph, "Acquisition EBITDA" means, the sum of (i) the consolidated EBITDA of the entity or business associated with the Permitted Acquisition for the four fiscal quarters immediately preceding the date of effectiveness of the Permitted Acquisition, calculated on the same basis as required in the definition of "Consolidated EBITDA" as if calculated with respect to the Borrower but without giving effect to clauses (f), (g) (h) and (i) and clause (e) to the extent of Excluded Charges, and (ii) any synergistic benefits permitted to be realized 43 pursuant to the last sentence of the definition of "Permitted Acquisition". ARTICLE II THE CREDITS SECTION 2.01. COMMITMENTS. Subject to the terms and conditions set forth herein, each Lender agrees (a) to make a loan (a "TERM LOAN") to the Borrower on the Effective Date in the principal amount of its Term Commitment and (b) to make loans ("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. Amounts repaid 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 may request in accordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by 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 to repay such Loan 44 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 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, the Borrower shall not 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 or Term Loan Maturity Date, as applicable. SECTION 2.03. REQUESTS FOR BORROWINGS. To request a Revolving Borrowing or Term Borrowing, the Borrower 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 45 the Borrower. 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 or a 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 Borrower's 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 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 46 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 1:00 p.m., 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 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 47 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 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, 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. 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. 48 (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 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 $20,000,000 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 49 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. (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 50 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 discharged 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 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 51 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 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, 52 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 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 53 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, (i) the successor 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 to any previous Issuing Bank, or to such successor 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 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 54 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 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 by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in New York City and designated by the 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 55 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 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 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 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 with banking industry rules on interbank compensation or (ii) in the case of the 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 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 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 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 56 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. (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. 57 (e) If the Borrower 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 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 COMMITMENTS. (a) Unless previously terminated, (i) the 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 58 Section 2.11, the sum of the Revolving Exposures would exceed the total Revolving Commitments. (c) If the estimated Net Proceeds from the issuance of the Senior Subordinated Notes exceeds $100,000,000, then the Term Commitments shall be reduced (effective prior to the open of business on the Effective Date) by an amount equal to such excess. For purposes hereof, if the aggregate principal amount of the Senior Subordinated Notes issued or to be issued on or prior to the Effective Date exceeds $100,000,000, then the Borrower shall deliver to the Administrative Agent, prior to the Effective Date, a certificate of a Financial Officer setting forth a calculation of the estimated Net Proceeds therefrom (rounded to the nearest $1,000,000) and the reduction of the Term Commitments pursuant to this paragraph shall be made based upon such certificate. (d) 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. (e) The Borrower shall notify the Administrative Agent of any election or requirement to terminate or reduce the Commitments under paragraph (b) or (d) 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, 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 59 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 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 a calendar month and is at least two Business Days after such Swingline Loan is made; PROVIDED that on each date that a Revolving Borrowing is made, the Borrower shall repay all Swingline Loans then outstanding. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower 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 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 to repay the Loans in accordance with the terms of this Agreement. 60 (e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Borrower 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 form approved by the Administrative Agent. 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). SECTION 2.10. AMORTIZATION OF TERM LOANS. (a) Subject to adjustment pursuant to paragraph (d) of this Section, the Borrower shall repay Term Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date:
Date Amount ---- ------ December 30, 1998 $1,250,000 March 31, 1999 1,250,000 June 30, 1999 1,250,000 September 30, 1999 1,250,000 December 30, 1999 1,875,000 March 31, 2000 1,875,000 June 30, 2000 1,875,000 September 30, 2000 1,875,000 December 30, 2000 2,500,000 March 31, 2001 2,500,000 June 30, 2001 2,500,000 September 30, 2001 2,500,000 December 30, 2001 4,375,000 March 31, 2002 4,375,000 June 30, 2002 4,375,000 September 30, 2002 4,375,000 December 30, 2002 4,375,000 March 31, 2003 4,375,000 June 30, 2003 4,375,000 September 30, 2003 4,375,000 December 30, 2003 4,375,000 March 31, 2004 4,375,000 June 30, 2004 4,375,000 61 September 30, 2004 4,375,000 December 30, 2004 6,250,000 March 31, 2005 6,250,000 June 30, 2005 6,250,000 September 30, 2005 6,250,000
(c) To the extent not previously paid, all Term Loans shall be due and payable on the Term Loan Maturity Date. (d) If the initial aggregate amount of the Lenders' Term Commitments exceeds the aggregate principal amount of Term Loans that are made on the Effective Date, then the scheduled repayments of Term Borrowings 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 Term Borrowing shall be applied to reduce the subsequent scheduled repayments of the Term Borrowings to be made pursuant to this Section ratably; PROVIDED that any prepayment made pursuant to Section 2.11(a) shall be applied, first, to reduce the next four scheduled repayments of the Term Borrowings 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 have been eliminated as a result of reductions hereunder and, second, to reduce the remaining scheduled repayments of the Term Borrowings to be made pursuant to this Section ratably. (e) Prior to any repayment of any Term Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings 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 shall be applied to repay any outstanding ABR Term Borrowings before any other Borrowings. Each repayment 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. 62 SECTION 2.11. PREPAYMENT OF LOANS. (a) The Borrower shall have the right at any time and from 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 shall, within two Business Days after such Net Proceeds are received, prepay Term Borrowings in an aggregate amount equal to (i) in the case of a Prepayment Event described in clause (a), (b) or (d) of the definition of "Prepayment Event", the entire amount of such Net Proceeds, and (ii) in the case of a Prepayment Event described in clause (c) of the definition of "Prepayment Event", 50% of such Net Proceeds. (c) Following the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 1998, the Borrower shall prepay Term Borrowings in an aggregate amount equal to 50% of Excess Cash Flow for such fiscal year; PROVIDED that prepayments shall be required pursuant to this paragraph (c) only until the outstanding principal amount of Term Loans is reduced to an amount equal to or less than 50% of the aggregate principal amount of Term Loans borrowed on the Effective Date. 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 Borrowers 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. 63 (e) Notwithstanding the foregoing provisions of Section 2.11(b): (i) in the case of a Prepayment Event described in clause (a) or (b) of the definition of "Prepayment Event", the Borrower may, in lieu of prepaying Term Borrowings, prepay Revolving Borrowings (without reducing Revolving Commitments), or, 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 may, in lieu of prepaying Term Borrowings, permit such Foreign Subsidiary to retain the Net Proceeds of such disposition; 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 6.14, 6.15 and 6.16 before and after giving effect to such Prepayment Event and (C) the aggregate principal amount of Revolving Borrowings prepaid in lieu of Term Borrowings and Net Proceeds retained by Foreign Subsidiaries pursuant to this clause (i) shall not exceed $50,000,000 (on a cumulative basis) during the term of this Agreement; (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 to be consummated within 270 days after such Prepayment Event, in which case the 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 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 64 Prepayment Event and (C) to the extent such Net Proceeds are not applied to finance such Permitted Acquisition within the 270-day period after such Prepayment Event, the Borrower shall prepay Term Borrowings (at the earlier of (1) expiration of such period, (2) the date of abandonment of such Permitted Acquisition 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 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. (g) The 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 65 prepayment, a reasonably detailed calculation of the amount of such prepayment; PROVIDED that, if a notice of optional 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 Commitment terminates. Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Revolving Commitments terminate, 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 66 participations in Letters of Credit, which shall accrue at the same Applicable Rate as interest on Eurodollar 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 365 days (or 366 days in a leap year) 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 67 commitment fees and participation fees, to the Lenders 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 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 68 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 69 such 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. 70 (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 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 pursuant to Section 2.19, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. Such loss, cost or expense to any Lender 71 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 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower 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 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 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 shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, 72 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 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 delivered to the Borrower 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 to a Governmental Authority, the Borrower 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 that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall 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. SECTION 2.18. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SETOFFS. (a) The 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 73 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 270 Park Avenue, New York, New York, 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. (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 74 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 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 Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower 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 will not make such payment, the Administrative Agent may assume that the Borrower 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 has not in fact made such payment, then each of the Lenders or the 75 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 2.01(b), 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 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 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 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 76 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 (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 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. 77 (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 September 30, 2005. 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. SECTION 3.02. AUTHORIZATION; ENFORCEABILITY. The Transactions 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 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 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 78 such as have been obtained or made and are in full force and 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, (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, 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 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 (i) as of and for the fiscal year ended December 31, 1996, reported on by Deloitte & Touche LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended June 30, 1997, certified by its chief financial officer. 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, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (b) The Borrower has heretofore furnished to the Lenders its pro forma consolidated balance sheet as of June 30, 1997, 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 pro forma financial statements included in the Information Memorandum (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 adjustments necessary to give effect to the Transactions 79 and (iv) presents fairly, in all material respects, the pro forma financial position of the Borrower and its consolidated Subsidiaries as of June 30, 1997, as if the Transactions had occurred on such date. (c) The Borrower has heretofore furnished to the Lenders the consolidated balance sheet and statements of income, stockholders' equity and cash flows of Huntsman Polymer Corporation's CT Film Division as of and for the fiscal year ended December 31, 1996, included in the report of Deloitte & Touche 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 CT Film Division, as of such date and for such period in accordance with GAAP. (d) Since December 31, 1996, there has been no material adverse change in the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and its Restricted Subsidiaries, taken as a whole (with the CT Film Acquisition being deemed to have occurred on December 31, 1996, for the purposes of this representation). 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. (b) Each of the Borrower and its Restricted Subsidiaries owns, or is licensed 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. 80 (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 after giving effect to the Transactions. (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. 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 adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve any of the Loan Documents or the Transactions (other than the Split-Off). (b) Except with respect to any matters that, individually or in the aggregate, would not reasonably be expected 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 or (iii) has received notice of any claim with respect to 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 81 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 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 82 known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or 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, contained any material misstatement of fact or omitted 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. 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, 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. All 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 83 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 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 84 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 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 date hereof). (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 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 85 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 G, U or X. SECTION 3.18. EXISTING INTERCOMPANY INDEBTEDNESS. As of June 30, 1997, there was $198,300,000 of the Existing Intercompany Indebtedness (including accrued and unpaid interest as of such date). During the period from June 30, 1997, to and including the Effective Date, the Existing Intercompany Indebtedness has increased and decreased only as a result of borrowings, repayments and accrual of interest, in each case in the ordinary course of business and in accordance with past practice. SECTION 3.19. AGREEMENTS AND BUSINESS STATUS AS OF EFFECTIVE DATE. (a) During the period from the date of the most recent financial statements referred to in Section 3.04(a) to and including the Effective Date, (i) the business of the Borrower and its Subsidiaries has been conducted in the ordinary course in accordance with past practice and (ii) the Borrower and its Subsidiaries have not engaged in any transaction (other than the Split-Off) that would have violated Section 6.10 if this Agreement had been in effect during such period. (b) Schedule 3.19 identifies each agreement or other document to which the Borrower or any Subsidiary is a party or by which it is bound as of the Effective Date that will remain in effect after the Effective Date (i) that relates to the Split-Off or (ii) to which any Person (other than the Borrower or a Subsidiary of the Borrower) that is an Affiliate of the Borrower is a party. True and correct copies of all such agreements and documents have been delivered to the Lenders. ARTICLE IV CONDITIONS 86 SECTION 4.01. EFFECTIVE DATE. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder 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 each party hereto 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 shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of each of (i) Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Borrower, substantially in the form of Exhibit B-1, (ii) Van Cott, Bagley, Cornwall & McCarthy, Utah counsel for the Borrower, substantially in the form of Exhibit B-2, (iii) local counsel in each jurisdiction where a Mortgaged Property is located, substantially in the form of Exhibit B-3 with such changes as are approved by the Administrative Agent, and (iv) local counsel in Canada and the United Kingdom, substantially in the form of Exhibit B-4 with such changes as are approved 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 hereby requests such counsel to deliver such opinions. (c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its 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 87 relating 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 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 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 88 behalf of the Borrower and each Subsidiary Loan Party, together with the following: (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 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. (h) The Collateral Agent shall have received (i) counterparts of a Mortgage with respect to each Mortgaged Property signed on behalf of the record owner of such Mortgaged Property, (ii) 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, (iii) copies of all existing surveys and such other information and documents with respect to the Mortgaged Properties as shall be necessary for the aforesaid title insurance policies to be issued without a survey exception 89 and (iv) such other customary documentation with respect to the Mortgaged Properties as the Administrative Agent may reasonably require. (i) The Administrative Agent shall have received (i) counterparts of the Guarantee Agreement signed on behalf of 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. (j) The Administrative Agent shall have received evidence satisfactory to it that the insurance required by Section 5.07 is in effect. (k) All actions related to the Split-Off (other than consummating the Split-Off), to the extent completed at such time, shall have been completed on terms consistent in all material respects with the information, including pro forma financial statements and projections, furnished to the Lenders prior to the date of this Agreement. (l) The CT Film Acquisition and the transactions related thereto shall have been consummated for aggregate consideration consisting of $70,000,000 in cash and other consideration satisfactory to the Lenders, and otherwise on terms consistent in all material respects with the information, including pro forma financial statements and projections, furnished to the Lenders prior to the date of this Agreement. The Lenders shall have received copies of the CT Film Acquisition Agreement prior to the Effective Date and shall be reasonably satisfied with the terms thereof. (m) The Lenders shall have received (i) audited consolidated balance sheets and related statements of income, stockholders' equity and cash flows of the Borrower for the 1995 and 1996 fiscal years and (ii) unaudited consolidated balance sheets and related statements of income, stockholders' equity and cash flows of the Borrower for (A) the 1997 fiscal quarters preceding the 90 Effective Date for which financial statements are available and (B) each fiscal month after the most recent 1997 fiscal quarter for which financial statements were received by the Lenders as described above and ended 30 days before the Effective Date. (n) The Lenders shall be reasonably satisfied in all respects with the tax position and the contingent tax and other liabilities of, and with any tax sharing agreements involving, the Borrower and its Subsidiaries after giving effect to the Transactions and the other transactions contemplated hereby, and with the plans of the Borrower with respect thereto. (o) The Lenders shall have received appraisals, satisfactory in form and substance to the Administrative Agent (which may include copies of recent existing appraisals), from appraisers satisfactory to the Administrative Agent, of the material real property, personal property and other assets of the Borrower and its Subsidiaries. (p) The Lenders shall have received (i) copies of all existing environmental reports prepared with respect to the Mortgaged Property and any Environmental Liabilities that may be attributable to such properties or operations thereon and (ii) such other materials and reviews relating to the Borrower's compliance with Environmental Laws and actual or potential Environmental Liabilities as shall be reasonably specified by the Administrative Agent, all of which shall be satisfactory to the Administrative Agent. (q) There shall be no litigation or administrative proceeding that would reasonably be expected to 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 (other than the Split-off). 91 (r) The Administrative Agent shall be satisfied with the arrangements for the retention of existing management of the Borrower. (s) The Senior Subordinated Notes shall have been issued on terms and conditions (including but not limited to terms and conditions relating to the interest rate, fees, amortization, maturity, subordination, covenants, events of default and remedies) satisfactory to the Lenders in all respects, the Lenders shall have received copies of the Senior Subordinated Note Documents, which shall be satisfactory in form and substance to the Lenders, and the Borrower shall have received gross cash proceeds of not less than $100,000,000 from the issuance of the Senior Subordinated Notes. (t) The Lenders shall be reasonably satisfied with (i) the Split-off Documents and any waivers or amendments thereto, (ii) the capitalization, structure and equity ownership of the Borrower and the Subsidiaries after giving effect to the Transactions, to the extent inconsistent with that set forth in the Information Memorandum and (iii) all legal, tax and accounting matters relating to the Transactions. (u) The Lenders shall be reasonably satisfied with the sufficiency of amounts available under this Agreement to meet the ongoing working capital requirements of the Borrower and the Subsidiaries following consummation of the Transactions. (v) All consents and approvals required to be obtained from any Governmental Authority or other Person in connection with the Transactions (other than the Split-Off) shall have been obtained, all applicable waiting periods and appeal periods shall have expired, in each case without the imposition of any burdensome conditions and there shall be no action by any Governmental Authority, actual or threatened, that has a reasonable likelihood of restraining, preventing or imposing burdensome conditions on the Transactions or the other transactions contemplated hereby (other than the Split-Off). The Administrative Agent shall have 92 received copies of the Split-off Documents and any certificates, opinions and other documents delivered thereunder, certified by a Financial Officer as complete and correct. (w) The Lenders shall have received a pro forma consolidated balance sheet of the Borrower as of the Effective Date, reflecting all adjustments to give effect to the Transactions (including the Split-Off), and such pro forma consolidated balance sheet shall be in form and substance reasonably satisfactory to the Lenders. As of the Effective Date, after giving effect to the Financing Transactions, neither the Borrower nor any of its Subsidiaries shall have outstanding any shares of preferred stock or any Indebtedness, other than (i) Indebtedness incurred under the Loan Documents and the Senior Subordinated Notes and (ii) Indebtedness set forth on Schedule 6.01. The Lenders shall be satisfied with the terms and conditions of all Indebtedness set forth on Schedule 6.01. The aggregate amount of Transaction Costs (including underwriting discounts and commissions in respect of the Senior Subordinated Notes) shall not exceed $8,000,000. (x) The Administrative Agent shall have received a solvency certificate, in form and substance reasonably satisfactory to the Lenders, executed by a senior financial officer of the Borrower, with respect to the solvency of the Loan Parties on a consolidated basis after giving effect to the Financing Transactions. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on October 31, 1997 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). 93 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 shall be true and correct 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. (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. 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 94 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 Deloitte & Touche 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 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 6.13, 6.14, 6.15 and 6.16, (iii) setting forth a reasonably detailed calculation of the Borrower Amount, (iv) stating whether any change in GAAP or 95 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 periods, certified as true, correct and complete; (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) at least 30 days prior to 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. 96 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; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, 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 $5,000,000; 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 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, (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 is located (including the establishment of any such new office or facility), (iii) in any Loan Party's identity or corporate structure or (iv) in any Loan Party's Federal Taxpayer Identification Number. The Borrower agrees not to effect or permit any change 97 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 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 its Indebtedness and other obligations, including Tax liabilities, before the same shall become delinquent or in default, 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 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, 98 maintain, with financially sound and reputable insurers, 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 to 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 of 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. 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 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 aggregate fair market value of the Collateral so affected 99 in connection with casualty events or condemnations is, in the aggregate, at least $2,500,000. (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 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 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 100 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, 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, together with a portion of the net proceeds of the Senior Subordinated Notes, will be used solely to (a) repay in full the principal amount of, and all accrued interest with respect to, the Existing Intercompany Indebtedness and (b) pay a portion of the Transaction Costs. The proceeds of the Revolving Loans and Swingline Loans will be used solely for (a) general corporate purposes, (b) in an amount not to exceed $70,000,000, to finance the CT Film Acquisition and to pay related transaction costs and (c) to pay a portion of the Transaction Costs. 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 G, 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 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 101 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 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 102 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 $2,500,000, and (iii) other tangible personal property with an aggregate fair market value of less than $2,500,000. (c) Within 60 days after the Effective Date, the Administrative Agent shall have received counterparts of a Mortgage with respect to the Mortgaged Properties located in Chippewa Falls, Wisconsin and Harrington, Delaware signed on behalf of the record owner of such Mortgaged Property and all other documents required by Section 4.01(b)(iii) and clauses (ii), (iii) and (iv) of Section 4.10(h). (d) Within 60 days of the Effective Date, the Administrative Agent shall have received an as-built survey of each Mortgaged Property, in form and substance satisfactory to the Administrative Agent and endorsements to the title policies required by Section 4.01(h) or 5.13(c), as applicable, providing survey, access, ALTA 9, contiguity and tax lot coverage. 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: SECTION 6.01. INDEBTEDNESS. The Borrower will not, and will not permit any Restricted Subsidiary to, 103 create, incur, assume or permit to exist any Indebtedness, except: (i) Indebtedness created under the Loan Documents; (ii) Indebtedness existing on the date hereof 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, shall be given only by a Restricted Subsidiary that is a Subsidiary Loan Party; (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 and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to 104 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 or result in an earlier maturity date or decreased weighted average life thereof; PROVIDED that (A) such Indebtedness is incurred prior to or within 90 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 $15,000,000 at any time outstanding; (vi) Indebtedness of any Person that becomes a Restricted Subsidiary after the date hereof (other than pursuant to the CT Film Acquisition); 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 $15,000,000 at any time outstanding; (vii) the Senior Subordinated Notes in an aggregate principal amount not exceeding the principal amount thereof issued on or prior to the Effective Date; (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 Restricted Subsidiaries, taken as a whole, than, the equivalent such covenants and 105 terms contained in this Agreement and (c) the aggregate principal amount of Indebtedness permitted by this clause (ix) shall not exceed $10,000,000 at any time outstanding; and (ix) other Indebtedness (including borrowings under overdraft facilities) in an aggregate principal amount not exceeding $10,000,000 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 $5,000,000 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. SECTION 6.02. CERTAIN EQUITY SECURITIES. The Borrower will not, nor will it permit any Restricted Subsidiary to, issue any 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 actions otherwise permitted under Section 6.09. Notwithstanding the foregoing, the Borrower may issue preferred stock that is not subject to any mandatory right of redemption or any right to require the purchase thereof prior to September 30, 2006, and any Restricted Subsidiary may issue preferred stock to the Borrower or to any other Restricted Subsidiary. 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; (b) Permitted Encumbrances; (c) any Lien on any property or asset of the Borrower or any Restricted Subsidiary existing on 106 the date hereof 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 and (ii) such Lien shall secure only those obligations that it secures on the date hereof 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 date hereof 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 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 90 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 (iv) such security interests shall not apply to any other property or assets of the Borrower or any Restricted Subsidiary other than 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 (f) Liens securing Indebtedness under (i) the Borrower's domestic overdraft facilities in an amount not exceeding $5,000,000 and (ii) foreign overdraft facilities of Foreign Subsidiaries in an amount not exceeding $5,000,000; PROVIDED that Liens permitted by clause (ii) shall apply only to properties and assets of Foreign Subsidiaries. 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 and (iv) 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. (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 date of execution of this Agreement and businesses reasonably related 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 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 or any other interest 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 existing on the date hereof and 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 their respective Restricted Subsidiaries; PROVIDED that any such shares of capital stock 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 the amount of such investments by the Borrower 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; (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 of Restricted Subsidiaries that are not Loan Parties that is Guaranteed by any Loan Party shall not exceed $5,000,000 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 (h) below; (f) 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; (g) Permitted Acquisitions; PROVIDED that (i) the consideration for each Permitted Acquisition shall consist solely of cash, shares of common stock of the Borrower, the assumption of Indebtedness of the acquired Person or encumbering the acquired assets, Indebtedness referred to in clause (viii) of Section 6.01 or a combination thereof and (ii) 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 $20,000,000; (h) investments in joint ventures and Unrestricted Subsidiaries in an aggregate amount, on a cumulative basis during the term of this Agreement, not exceeding the sum of (i) $5,000,000, plus (ii) the aggregate amount of dividends, interest, principal payments and returns of capital received from time to time during the term of this Agreement by the Borrower and its Restricted Subsidiaries in respect of investments made under this clause (h), 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 during the term of this Agreement (excluding amounts invested in reliance upon clause (ii) above) shall not at any time exceed $10,000,000, (B) if an Unrestricted Subsidiary is declared to be a Restricted Subsidiary, compliance with the foregoing limitations shall thereafter be 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; (i) other loans, advances and investments not in excess of $5,000,000 outstanding at any time; and (j) 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 to, sell, transfer, lease or otherwise dispose of any asset, including any capital stock, nor will the Borrower permit any of it 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 equipment and Permitted Investments in the ordinary course of business; (b) sales, transfers 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) and (h) 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 $30,000,000 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 by clause (b) above) shall be made for fair value and for at least 80% cash consideration (except that those permitted by clause (a) above shall be made on terms that are customary in the ordinary course). 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 90 days after the date the Borrower or such Restricted Subsidiary acquires or finishes construction of such fixed or capital asset. 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 Restricted Payments, not exceeding $2,000,000 during any fiscal year, pursuant to and in accordance with stock option plans or other benefit plans for management or employees of the Borrower and its Restricted Subsidiaries, and (iii) the Borrower may, subject to Section 6.02, make dividends consisting solely of shares of its capital stock. (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 payment of regularly scheduled interest payments as and when due in respect of the Senior Subordinated Notes. 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, (b) transactions between or among the Borrower and the Subsidiary Loan Parties not involving any other Affiliate, (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 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 or to make or repay loans or advances to the Borrower or any other Restricted Subsidiary 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 date hereof identified on Schedule 6.11 (but shall apply to any extension, renewal, amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements 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, (iv) 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, (v) clause (a) of the foregoing shall not apply to customary provisions in contracts restricting the assignment thereof and (vi) 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. SECTION 6.12. AMENDMENT OF MATERIAL DOCUMENTS. The Borrower will not, and will not permit any Subsidiary to, amend, modify or waive any of its rights under (a) its certificate of incorporation, by-laws or other organizational documents (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), (b) the Senior Subordinated Notes or any Senior Subordinated Note Document, (c) any Split-Off Document (other than amendments and modifications made after the Split-Off that are not materially adverse to the interests of the Lenders) or (d) any agreement or document identified on Schedule 3.19 or relating to any transaction referred to on Schedule 6.10; PROVIDED that the Borrower or any Subsidiary may amend, modify or waive any of its rights under any agreement or document referred to in clause (d) above if such amendment, modification or waiver (i) is on terms no less favorable to the Borrower and its Subsidiaries than would be obtained on an arm's length basis from unrelated third parties and (ii) could not reasonably be expected to result in a Material Adverse Effect. SECTION 6.13. CAPITAL EXPENDITURES. The Borrower will not make, and will not permit its Restricted Subsidiaries to make, Capital Expenditures other than Capital Expenditures made by the Borrower and its Restricted Subsidiaries in any fiscal year of the Borrower in an amount greater than (a) $30,000,000 plus, for each fiscal year following the Effective Date (commencing with the 1998 fiscal year), an amount equal to the excess, if any, of $30,000,000 over the aggregate amount of Capital Expenditures made in the immediately preceding fiscal year (including, with respect to 1997, those capital expenditures of Huntsman Polymers Corporation's CT Film Division that would qualify as "Capital Expenditures" under this Agreement if made by the Borrower and its Restricted Subsidiaries), plus (b) amounts available from time to time to be invested in joint ventures and Unrestricted Subsidiaries under clause (h) of Section 6.05; PROVIDED that, 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 (h) of Section 6.02 shall be deemed utilized thereunder for purposes of determining compliance therewith. SECTION 6.14. LEVERAGE RATIO. The Borrower will not permit the Leverage Ratio as of any date 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 ------ ----- Effective Date-September 30, 1998 6.00 to 1.00 October 1, 1998-March 31, 1999 5.50 to 1.00 April 1, 1999-September 30, 1999 5.00 to 1.00 October 1, 1999-September 30, 2000 4.50 to 1.00 October 1, 2000-September 30, 2001 4.00 to 1.00 October 1, 2001-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 ------ ----- December 31, 1997-September 30, 1998 1.50 to 1.00 October 1, 1998-March 31, 1999 1.75 to 1.00 April 1, 1999-September 30, 1999 2.00 to 1.00 October 1, 1999-September 30, 2000 2.25 to 1.00 October 1, 2000-September 30, 2001 2.50 to 1.00 October 1, 2001-September 30, 2002 2.75 to 1.00 October 1, 2002-and thereafter 3.00 to 1.00
SECTION 6.16. MINIMUM NET WORTH. The Borrower will not permit its Adjusted Consolidated Net Worth at the end of any fiscal quarter to be less than the sum of (a) $60,400,000 plus (b) 50% of consolidated net income of the Borrower and its consolidated Restricted Subsidiaries for each fiscal quarter of the Borrower ending after the Effective Date and on or prior to such date for which such consolidated net income is positive plus (c) 50% of the amount by which Adjusted Consolidated Net Worth shall have been increased during the period from the Effective Date to such date as a result of the issuance by the Borrower of additional shares of its capital stock or any capital contribution to the Borrower. SECTION 6.17. 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 Senior Subordinated Note Documents. ARTICLE VII EVENTS OF DEFAULT If any of the following events ("EVENTS OF DEFAULT") shall occur: (a) the 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 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 prove to have been incorrect when made or deemed made in any material respect; (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) or 5.11 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 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 and following the expiration of 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 or transfer of the property or assets securing such Indebtedness; (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; (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 $5,000,000 (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 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 aggregate amount exceeding (i) $2,500,000 in any year or (ii) $5,000,000 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 applicable Security Document, 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 Collateral with an aggregate fair market value not exceeding $1,000,000; or (n) a Change in Control shall occur; then, and in every such event (other than an event with respect to the 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, 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 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 of the 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 in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal 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. 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 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 not 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), 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. 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 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, in consultation with the Borrower, 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 123 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. 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, to it at 500 Huntsman Way, Salt Lake City 84108, Attention of Richard P. Durham (Telecopy No. (801) 584-5783), with a copy to Ronald G. Moffitt (Telecopy No. (801) 584-5783); 124 (b) if to the Administrative Agent or the Collateral 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 10017, Attention of Robert Sacks (Telecopy No. (212) 270-1355); (c) if to the Issuing Bank, 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 Robert Sacks (Telecopy No. (212) 270-1355); (d) if to the Swingline Lender, 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 Robert Sacks (Telecopy No. (212) 270-1355); and (e) 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 125 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 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 126 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 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 and their respective Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and the Collateral Agent, in connection with the syndication of the credit facilities provided for herein, the 127 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 Bank or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, the Collateral Agent, the Issuing Bank 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 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 128 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 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). (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 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 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, the Borrower shall not 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. (e) All amounts due under this Section shall be payable promptly after written demand therefor. 129 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 the Borrower may not 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 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 an Affiliate of a Lender, each of the Borrower 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 an Affiliate of a Lender 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 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 130 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 Class 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, 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 and 9.03). 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. (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one 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 131 conclusive, and the 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 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 Administrative Agent, the Issuing 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. 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 132 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 agrees 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 the sale of the participation to such Participant is made with the Borrower's prior written consent. 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, 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 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 133 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 and 9.03 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 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. 134 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 against any of and all the obligations of the Borrower now or hereafter existing under this Agreement 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) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the 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 135 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 its properties in the courts of any jurisdiction. (c) The 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 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. 136 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 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' directors, officers, employees and agents, including accountants, legal counsel and other advisors (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), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) 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, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) 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. For the purposes of this Section, "INFORMATION" means all information received from the Borrower relating to the Borrower or its business, 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 137 Information as such Person would accord to its own confidential information. SECTION 9.13. 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 interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. 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/ Richard P. Durham ----------------------- Name: Richard P. Durham Title: President and Chief Executive Officer 138 THE CHASE MANHATTAN BANK, individually and as Administrative Agent, by /s/ Robert Anastasio ----------------------- Name: Robert Anastasio Title: Vice President BANK OF MONTREAL, by /s/ John K. Harele ----------------------- Name: John K. Harele Title: Director THE BANK OF NEW YORK, by /s/ Lisa Brown ----------------------- Name: Lisa Brown Title: Vice President THE BANK OF NOVA SCOTIA, by /s/ A.S. Norsworthy ----------------------- Name: A.S. Norsworthy Title: Sr. Team Leader -- Loan Operations BANK OF TOKYO MITSUBISHI TRUST COMPANY, by /s/ David C. McLaughlin ------------------------- Name: David C. McLaughlin Title: Vice President 139 BANK ONE, UTAH, N.A., by /s/ Stephen A. Cazier ------------------------- Name: Stephen A. Cazier Title: Vice President BANQUE PARIBAS, by /s/ Matthew C. Bishop ----------------------- Name: Matthew C. Bishop Title: Associate by /s/ Lynne A. Luedara ----------------------- Name: Lynne A. Luedara Title: Director BHF-BANK AKTIENGESELLSCHAFT, by /s/ Anthony Heyman ----------------------- Name: Anthony Heyman Title: Assistant Treasurer by /s/ John Symes ----------------------- Name: John Symes Title: Assistant Vice President CIBC INC., by /s/ Timothy E. Doyle ----------------------- Name: Timothy E. Doyle Title: Managing Director 140 CREDIT LYONNAIS LOS ANGELES BRANCH, by /s/ Dianne M. Scott ----------------------- Name: Dianne M. Scott Title: Vice President and Manager DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH, by /s/ John W. Sweeney ----------------------- Name: John W. Sweeney Title: Assistant Vice President by /s/ Brigitte Sacin ----------------------- Name: Brigitte Sacin Title: Assistant Treasurer THE FIRST NATIONAL BANK OF CHICAGO, by /s/ Albert G. Sterhac ----------------------- Name: Albert G. Sterhac Title: Vice President THE FUJI BANK, LIMITED, LOS ANGELES AGENCY, by /s/ Masahito Fukada ----------------------- Name: Masahito Fukada Title: Joint General Manager 141 HIBERNIA NATIONAL BANK, by /s/ Trudy W. Nelson ----------------------- Name: Trudy W. Nelson Title: Vice President KEYBANK NATIONAL ASSOCIATION, by /s/ J.T. Taylor ----------------------- Name: J.T. Taylor Title: Assistant Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY, by /s/ T. Morgan Edwards, II ------------------------- Name: T. Morgan Edwards, II Title: Deputy General Manager by /s/ Bryan Read ----------------------- Name: Bryan Read Title: Vice President MELLON BANK, N.A. by /s/ John K. Walsh ----------------------- Name: John K. Walsh Title: Vice President 142 THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY, by /s/ Yasushi Satomi ----------------------- Name: Yasushi Satomi Title: Senior Vice President NATEXIS BANQUE-BFCE, by /s/ Iain A. Whyte ----------------------- Name: Iain A. Whyte Title: Vice President by /s/ Daniel Touffo ----------------------- Name: Daniel Touffo Title: First VP and Regional Manager NATIONAL CITY BANK, by /s/ Robert C. Rowe ----------------------- Name: Robert C. Rowe Title: Vice President 143 NATIONSBANK OF TEXAS, N.A., by /s/ Frank Johnson ----------------------- Name: Frank Johnson Title: Senior Vice President PNC BANK, NATIONAL ASSOCIATION, by /s/ David J. Egan ----------------------- Name: David J. Egan Title: Senior Vice President THE SUMITOMO BANK, LIMITED, by /s/ Goro Hirai ----------------------- Name: Goro Hirai Title: Joint Central Manager C.S. BANK NATIONAL ASSOCIATION, by /s/ Danielle Lower ----------------------- Name: Danielle Lower Title: Vice President EX-99.(B)(2) 4 EXHIBIT 99(B)(2) EXHIBIT 99(b)(2) April 7, 1998 Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, UT 84108 Attention: Mr. Richard P. Durham President and Chief Executive Officer HUNTSMAN PACKAGING CORPORATION $285,000,000 ADDITIONAL FACILITIES COMMITMENT LETTER Ladies and Gentlemen: You have advised The Chase Manhattan Bank ("Chase") and Chase Securities Inc. ("CSI") that Huntsman Packaging Corporation, a Utah corporation (the "Borrower"), intends to offer to acquire (the "Acquisition") Blessings Corporation, a Delaware corporation (the "Target"), for cash consideration not exceeding $215,000,000 (excluding existing indebtedness of the Target to be refinanced) and, in connection therewith, the Borrower desires to amend and restate its existing Credit Agreement dated as of September 30, 1997 (the "Credit Agreement"), among the Borrower, the lenders party thereto and Chase, as Administrative Agent, in order to permit the Acquisition and to obtain additional credit facilities thereunder (the "Additional Facilities" and, together with the existing credit facilities under the Credit Agreement, the "Facilities"), as described in the Summary of Principal Terms and Conditions attached hereto as Exhibit A (the "Term Sheet"), the proceeds of which will be used to finance the consideration payable in connection with the Acquisition, to refinance certain existing indebtedness of the Target and to pay related fees and expenses. The amendment and restatement of the Credit Agreement contemplated hereby (the "Restatement"), the Acquisition and 2 the refinancing of existing indebtedness of the Target are collectively referred to herein as the "Transactions". Capitalized terms used and not otherwise defined herein are used as defined in the Credit Agreement. In connection with the foregoing, CSI is pleased to advise you of its agreement to act as arranger for the Additional Facilities and Chase is pleased to advise you of its commitment to provide the entire principal amount of the Additional Facilities and to serve as administrative agent in respect thereof, in each case upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Term Sheet. In addition, you have requested that Chase agree, and Chase hereby agrees, that, in the event that the Restatement is not approved by the Lenders required for approval under the Credit Agreement, Chase will enter into (or arrange for other assignees to enter into) Assignment and Acceptances with those Lenders that are not willing to approve the Restatement (the "Departing Lenders"), pursuant to which the Commitments and Loans of the Departing Lenders (the "Assigned Interests") are assigned to and assumed by Chase or one or more other assignees willing to approve the Restatement, upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Term Sheet. It is agreed that Chase will continue to act as the sole and exclusive administrative agent and collateral agent for all the credit facilities under the Credit Agreement (including the Additional Facilities), and that CSI will act as the sole and exclusive advisor and arranger for the Additional Facilities, and that each will, in such capacity, perform the duties and exercise the authority customarily associated with such roles. It is further agreed that no additional agents, co-agents or arrangers will be appointed and no Lender will receive compensation outside the terms contained herein and in the Fee Letter referred to below in order to obtain its commitment to participate in the Additional Facilities or to approve the Restatement (or, if applicable, to accept any Assigned Interest) in each case unless you and we mutually agree. Chase reserves the right, prior to or after the execution of definitive documentation for the Restatement, to syndicate all or a portion of its commitment in respect of the Additional Facilities (and, if applicable, the 3 Assigned Interests) to one or more financial institutions reasonably satisfactory to CSI, Chase and you. CSI intends to commence syndication efforts promptly upon the execution of this Commitment Letter, and you agree actively to assist Chase and CSI in achieving a syndication that is satisfactory to Chase and CSI. This will be accomplished by a variety of means, including (a) direct contact during the syndication (at times mutually agreed upon) between the senior officers, representatives and advisors of the Borrower (and senior officers of the Target), on the one hand, and existing and prospective Lenders, on the other hand, and (b) the hosting, with CSI, of a meeting of existing and prospective Lenders. Such assistance also shall include your using your reasonable best efforts to have CSI's syndication efforts benefit materially from your lending relationships. Chase's commitment hereunder will be reduced by the amount of any commitments to provide a portion of the Additional Facilities received from other prospective Lenders prior to the execution of definitive documentation for the Restatement. CSI will, in consultation with you, manage all aspects of the syndication, including selection of existing or prospective Lenders, determination of when CSI will approach existing and potential Lenders, any naming rights and the final allocations of the commitments in respect of the Additional Facilities (and, if applicable, the Assigned Interests) among existing and prospective Lenders. To assist CSI in its syndication efforts, you agree (a) promptly to provide, and to cause your affiliates and advisors to provide, CSI upon request with all financial and other information with respect to the Borrower, the Target, the Transactions and any other transactions contemplated hereby deemed reasonably necessary by CSI to complete successfully any syndication, including but not limited to financial projections (the "Projections") relating to the foregoing, and (b) to assist, and to cause your affiliates and advisors to assist, CSI in the preparation of a Confidential Information Memorandum and other marketing materials to be used in connection with the arrangement and syndication of the Additional Facilities (and, if applicable, the Assigned Interests). The commitment and agreements of Chase hereunder and the agreement of CSI to provide the services described herein are subject to the condition that (a) all information (other than the Projections) concerning the Borrower, the 4 Target and the Transactions and the other transactions contemplated hereby (the "Information") that has been or will be made available to Chase or CSI by you or any of your representatives in connection with the transactions contemplated hereby, when taken as a whole, is or will be complete and correct in all material respects and does not or will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to Chase or CSI by you or any of your representatives in connection with the transactions contemplated hereby have been and will be prepared in good faith based upon assumptions believed by you to be reasonable. You agree to supplement the Information and the Projections from time to time until the closing of the Restatement to correct any material misstatement in or material omission from the Information or if the assumptions underlying the Projections are not believed by you to be reasonable. In arranging the Restatement, including the syndication of the Additional Facilities (and, if applicable, the Assigned Interests), CSI and Chase will use and rely primarily on the Information and the Projections without independent verification thereof. As consideration for Chase's commitment and Chase's and CSI's agreements hereunder, you agree to pay to Chase the fees set forth in the Term Sheet and in the Fee Letter dated the date hereof and delivered herewith (the "Fee Letter"). Once paid, such fees shall not be refundable under any circumstances. Chase's commitment and Chase's and CSI's agreements hereunder are subject to (a) our satisfaction with the terms and conditions of the Acquisition and the other Transactions (including, without limitation, all agreements and arrangements relating thereto), (b) the absence of any materially adverse information, event, circumstance or other matter relating to the Borrower, the Target or the Transactions becoming known to Chase after the date of this Commitment Letter that was not disclosed to Chase prior to the date of this Commitment Letter, (c) there not having occurred any material adverse change since December 31, 1997, in the business, assets, results of operations, condition (financial or otherwise) or prospects of or relating to the Borrower, the Target and their 5 respective subsidiaries, taken as a whole, (d) there not having occurred and being continuing any material adverse change in financial, banking or capital markets that materially and adversely affects the syndication of bank credit facilities for transactions comparable to those contemplated hereby, (e) our satisfaction that, prior to and during the syndication of the Additional Facilities (and, if applicable, the Assigned Interests), there shall be no competing issues of debt securities or commercial bank facilities of the Borrower or any of its subsidiaries being offered, placed or arranged and (f) the other conditions set forth herein and in the Term Sheet. As indicated in the Term Sheet, Chase's commitment also is subject to the condition that the Indenture relating to the Borrower's existing Senior Subordinated Notes be amended to the extent necessary to permit the Additional Facilities. In the event that such condition is not satisfied, Chase will agree to eliminate such condition if (i) the Additional Facilities are reduced to an aggregate principal amount of $235,000,000, (ii) the current stockholders of the Borrower create a special purpose holding company to own all the outstanding capital stock of the Borrower and (iii) such holding company incurs $50,000,000 of indebtedness and contributes the proceeds of such indebtedness to the Borrower as equity, all as contemplated by the Commitment Letter among us dated March 20, 1998, and the term sheet attached thereto, in each case relating to Additional Facilities in an aggregate principal amount of $235,000,000 (the "March 20 Commitment Letter"). It is understood and agreed that Chase and CSI shall be entitled, after consultation with you, to change the pricing, terms and structure of the Facilities if Chase and CSI determine that such changes are reasonably necessary in order to ensure a successful syndication of the Additional Facilities (and, if applicable, the Assigned Interests); PROVIDED that the total amount of the Facilities provided to you shall remain unchanged. Chase's commitment and Chase's and CSI's agreements hereunder are subject to the agreements set forth in this paragraph. The terms and conditions of the Additional Facilities are not limited to those set forth herein and in the Term Sheet. Those matters that are not covered by the 6 provisions hereof and of the Term Sheet are subject to the approval and agreement of Chase, CSI and the Borrower. In addition, Chase's commitment hereunder is subject to the negotiation, execution and delivery of definitive documentation with respect to the Restatement and the Additional Facilities reasonably satisfactory to Chase. Such documentation shall be based upon and similar to the existing Credit Agreement and related documentation (except for changes to reflect the terms of the Additional Facilities and to contemplate the Acquisition) and otherwise shall be reasonably satisfactory to Chase and its counsel. You agree (a) to indemnify and hold harmless CSI, Chase and their respective officers, directors, employees, affiliates, agents and controlling persons from and against any and all losses, claims, damages, liabilities and expenses, joint or several, to which any such person may become subject arising out of or in connection with this Commitment Letter, the Term Sheet, the Fee Letter, the Transactions, the Additional Facilities, the use of proceeds thereof or any related transaction or any claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of whether any of such indemnified parties is a party thereto, and to reimburse each of such indemnified parties upon demand for any reasonable legal or other expenses incurred in connection with investigating or defending any of the foregoing, PROVIDED that the foregoing indemnity will not, as to any indemnified party, apply to losses, claims, damages, liabilities or related expenses to the extent they have resulted from the willful misconduct or gross negligence of such indemnified party, and (b) to reimburse CSI and Chase on demand for all reasonable out-of-pocket expenses (including but not limited to expenses of Chase's due diligence investigation, fees and expenses of consultants engaged in consultation with you, syndication expenses, travel expenses and fees, disbursements and other charges of counsel to Chase and CSI), in each case incurred in connection with the Additional Facilities and the preparation of this Commitment Letter, the Term Sheet, the Fee Letter, the definitive documentation for the Restatement and the security arrangements in connection therewith. No indemnified person shall be liable for any indirect or consequential damages in connection with its activities related to the Transactions. 7 You acknowledge that Chase and CSI may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests. Neither Chase nor CSI will use confidential information obtained from you by virtue of the transactions contemplated by this Commitment Letter or its other relationships with you in connection with the performance by Chase or CSI of services for other companies, and neither Chase nor CSI will furnish any such information to other companies. You also acknowledge that neither Chase nor CSI has any obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you, confidential information obtained by Chase or CSI from other companies. This Commitment Letter is delivered to you on the understanding that neither this Commitment Letter, the Fee Letter nor the Term Sheet nor any of their terms or substance shall be disclosed, directly or indirectly, to any other person except (a) on a confidential basis, to the Borrower and its affiliates and its officers, agents and advisors who are directly involved in the consideration of this matter or (b) as may be compelled in a judicial or administrative proceeding or as otherwise required by law (in which case you agree to inform us promptly thereof); PROVIDED that you may disclose this Commitment Letter and the Term Sheet, and their terms and substance (but not the Fee Letter or its terms and substance) to the Target after this Commitment Letter has been accepted by you. Except as otherwise contemplated herein or as permitted under Section 9.12 of the Credit Agreement, Chase and CSI agree that they will keep and cause their affiliates to keep as confidential in accordance with customary banking practices and in accordance with the confidentiality agreement dated January 22, 1998 and executed by the Borrower (the "Existing Confidentiality Agreement"), all non-public, confidential information of the Borrower and its subsidiaries. Chase and CSI agree that they will make each prospective syndicate member to which they deliver any such non-public, confidential information aware of the confidential nature thereof, including the limitations set forth in the Existing Confidentiality Agreement. This Commitment Letter and Chase's commitment and Chase's and CSI's agreements hereunder shall not be assignable by you without the prior written consent of Chase 8 and CSI, and any purported assignment without such consent shall be void. This Commitment Letter may not be amended or any provision hereof waived or modified except by an instrument in writing signed by Chase, CSI and you. The Borrower has the right to terminate Chase's commitment hereunder at any time subject to the provisions of the fourth sentence of the immediately succeeding paragraph. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Commitment Letter. This Commitment Letter is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York. Please indicate your acceptance of the terms hereof and of the Term Sheet and the Fee Letter by returning to us executed counterparts of this Commitment Letter and the Fee Letter not later than 5:00 p.m., New York City time, on April 8, 1998. Chase's commitment and Chase's and CSI's agreements hereunder will expire at such time in the event that Chase has not received such executed counterparts in accordance with the immediately preceding sentence. In the event that the Restatement is not effective on or before June 30, 1998, then this Commitment Letter and Chase's commitment and Chase's and CSI's agreements hereunder shall automatically terminate unless Chase and CSI shall, in their discretion, agree to an extension. The compensation, reimbursement and indemnification provisions contained herein shall remain in full force and effect regardless of whether definitive documentation shall be executed and delivered and notwithstanding the termination of this Commitment Letter or Chase's commitment and Chase's and CSI's agreements hereunder, provided that the compensation, reimbursement and indemnification provisions contained herein shall be superseded by the provisions of the definitive financing documentation upon the effectiveness thereof. Upon your execution and delivery of this Commitment Letter and the Fee Letter as provided above, the 9 March 20 Commitment Letter, and the Fee Letter referred to therein, shall be superseded and replaced hereby and shall terminate. Chase and CSI are pleased to have been given the opportunity to assist you in connection with the Transactions. Very truly yours, THE CHASE MANHATTAN BANK, by /s/ ROBERT ANASTASIO ----------------------- Name: Robert Anastasio Title: Vice President CHASE SECURITIES INC., by /s/ MERCEDES TECH ----------------------- Name: L. Mercedes Tech Title: Managing Director Accepted and agreed to as of the date first above written: HUNTSMAN PACKAGING CORPORATION, by /s/ RONALD G. MOFFITT --------------------------- Name: Ronald G. Moffitt Title: Senior Vice President EXHIBIT A CONFIDENTIAL April 7, 1998 HUNTSMAN PACKAGING CORPORATION $285,000,000 ADDITIONAL FACILITIES SUMMARY OF PRINCIPAL TERMS AND CONDITIONS BORROWER: Huntsman Packaging Corporation, a Utah corporation (the "Borrower"). TRANSACTIONS: The Borrower intends to offer to acquire (the "Acquisition") Blessings Corporation, a Delaware corporation (the "Target"), for cash consideration not exceeding $215,000,000 in the aggregate (the "Purchase Price"). It is contemplated that the Acquisition will be consummated pursuant to (a) a tender offer (the "Tender Offer") by the Borrower or a wholly-owned subsidiary thereof for all outstanding shares of the Target's capital stock, followed by (b) a merger (the "Merger") of the Target with and into the Borrower pursuant to which all holders of shares of capital stock of the Target (other than those acquired pursuant to the Tender Offer) are entitled to receive cash consideration for their shares. The Acquisition will be effected in accordance with a definitive agreement (the "Acquisition Agreement") to be entered into by the Borrower, the Target and one or more affiliates thereof. In connection with the Acquisition, all existing indebtedness of the Target (the "Target Indebtedness") will be repaid, subject to limited exceptions to be agreed upon. The Acquisition, the repayment of the Target Indebtedness, the Restatement (as defined below) and all related transactions are 2 referred to herein collectively as the "Transactions". SOURCES AND USES: The approximate sources and uses of funds necessary to consummate the Transactions are set forth on Annex II attached hereto. ADMINISTRATIVE AGENT The Chase Manhattan Bank ("Chase") will act as sole and AND COLLATERAL exclusive administrative agent and collateral agent AGENT: (collectively, the "Agent") for a syndicate of financial institutions reasonably satisfactory to Chase and the Borrower (the "Lenders"), and will perform the duties customarily associated with such roles. ARRANGER: Chase Securities Inc. will act as sole and exclusive advisor and arranger (the "Arranger") for the Additional Facilities (as defined herein) and will perform the duties customarily associated with such roles. RESTATEMENT OF In connection with the Transactions, the Borrower's EXISTING CREDIT existing Credit Agreement dated as of September 30, AGREEMENT: 1997 (the "Existing Credit Agreement"), will be amended and restated (the "Restatement") in order to permit the Acquisition and to provide for the Additional Facilities (as defined below), subject to the terms and conditions contemplated hereby. The existing term loan facility (the "Existing Term Loan Facility") and revolving facility (the "Existing Revolving Facility" and, together with the Existing Term Loan Facility, the "Existing Facilities") under the Existing Credit Agreement will remain in place. 3 ADDITIONAL In addition to the Existing Facilities, the Restatement FACILITIES: will provide for: (A) A Senior Secured Tranche A Term Loan Facility in an aggregate principal amount of up to $185,000,000 (the "Tranche A Facility"). (B) A Senior Secured Tranche B Term Loan Facility in an aggregate principal amount of up to $100,000,000 (the "Tranche B Facility" and, together with the Tranche A Facility, the "Additional Facilities"). The Existing Term Loan Facility, the Tranche A Facility and the Tranche B Facility are collectively referred to as the "Term Facilities" and, together with the Existing Revolving Facility, the "Facilities". PURPOSE: The proceeds of loans made under the Additional Facilities will be used by the Borrower to pay the Purchase Price, to repay Target Indebtedness and to pay fees and expenses incurred in connection with the Transactions. AVAILABILITY: The full amount of the Tranche B Facility must be drawn in a single drawing on the date (the "Closing Date") on which the Restatement becomes effective. The full amount of the Tranche A Facility also must be drawn in a single drawing on the Closing Date; PROVIDED that, if the Merger does not occur on the Closing Date, then an amount of the Tranche A Facility equal to the sum of (a) the portion of the Purchase Price allocable to the Target's shares that are not being purchased pursuant 4 to the Tender Offer and (b) the amount of the Target Indebtedness to be repaid in connection with the Transactions that is not required to be repaid prior to the Merger, shall be available after the Closing Date (and such portion of the Tranche A Facility shall be available in a limited number of drawings during a period to be determined). Amounts borrowed under the Additional Facilities that are repaid or prepaid may not be reborrowed. INTEREST RATES As set forth on Annex I hereto. AND FEES: DEFAULT RATE: The applicable interest rate plus 2% per annum shall be charged on all overdue amounts. FINAL MATURITY AND (A) The maturity of the Existing Facilities and the AMORTIZATION: amortization of the Existing Term Loan Facility will not be changed. (B) The Tranche A Facility will mature on the same date as the Existing Term Loan Facility (September 30, 2005) and will amortize on a quarterly basis to be determined. (C) The Tranche B Facility will mature on June 30, 2006, and will amortize on a quarterly basis in nominal amounts during the first seven years and in amounts to be determined thereafter. GUARANTEES: All obligations of the Borrower under the Facilities, under the related security documentation and under any interest protection or other hedging arrangements entered into by the Borrower with a Lender (or any affiliate thereof) (collectively, the "Obligations") 5 will be unconditionally guaranteed (the "Guarantees") by each existing and subsequently acquired or organized domestic (and, to the extent no adverse tax consequences to the Borrower would result therefrom, foreign) subsidiary of the Borrower on the same basis as under the Existing Credit Agreement. The Target and its subsidiaries will not be required to enter into Guarantees prior to the Merger but, upon the Merger, each subsidiary of the Target that meets the requirements set forth above shall be required to enter into a Guarantee. SECURITY: The Obligations will be secured by substantially all the assets of the Borrower and each existing and subsequently acquired or organized domestic (and, to the extent no adverse tax consequences to the Borrower would result therefrom, foreign) subsidiary of the Borrower (collectively, the "Collateral") on the same basis as under the Existing Credit Agreement, including but not limited to (a) a first-priority pledge of all capital stock held by the Borrower or any other domestic (and, subject to the foregoing limitation, foreign) subsidiary of the Borrower of each existing and subsequently acquired or organized subsidiary of the Borrower (which pledge, in the case of any foreign subsidiary, shall be 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 the Borrower), including capital stock of the Target acquired pursuant to the Tender Offer, and (b) perfected first-priority security interests in, and mortgages on, substantially all tangible and intangible assets of the Borrower and each 6 existing or subsequently acquired or organized domestic (and, subject to the foregoing limitation, foreign) subsidiary of the Borrower (including but not limited to accounts receivable, inventory, equipment, trademarks, other intellectual property, licensing agreements, cash and proceeds of the foregoing). The assets of the Target and its subsidiaries will not be required to be pledged to secure the Obligations prior to the Merger but, upon the Merger, the Obligations will be secured by substantially all the assets of the Target and the Target's subsidiaries to the extent required by the preceding paragraph. All the above-described pledges, security interests and mortgages shall be created on terms, and pursuant to documentation, reasonably satisfactory to the Lenders, and none of the Collateral shall be subject to any other pledges, security interests or mortgages, subject to limited exceptions to be agreed upon. MANDATORY Loans under the Term Facilities shall be prepaid with PREPAYMENTS: (a) 50% of Excess Cash Flow (as defined in the Existing Credit Agreement) for each fiscal year, (b) 100% of the net cash proceeds of all asset sales or other dispositions of property by the Borrower and its subsidiaries (including insurance and condemnation proceeds in excess of an agreed-upon amount but subject to certain exceptions to be negotiated in the final documentation); PROVIDED, HOWEVER, that the foreign subsidiaries of the Borrower may retain the net cash proceeds of any such asset sales or other dispositions 7 in an aggregate amount not to exceed $40,000,000, (c) 100% of the net proceeds of issuances of debt obligations of the Borrower and its subsidiaries (subject to exceptions to be agreed upon) and (d) 50% of the net proceeds of issuances of equity of the Borrower and its subsidiaries; PROVIDED, HOWEVER, that if the Borrower issues equity in order to finance a Permitted Acquisition (to be defined), no amount of such net proceeds to the extent such net proceeds are used to finance such Permitted Acquisition will be required to be applied as a prepayment; PROVIDED, FURTHER, that if the debt/EBITDA ratio of the Borrower and its subsidiaries is less than 2.00 to 1.00 as of the end of the immediately preceding four fiscal quarters for which financial statements are available, no amount of net proceeds will be required to be applied as a prepayment under this clause (d). Subject to the "Special Application Provisions" described below, all mandatory prepayments of loans under the Term Facilities shall be applied pro rata among the Term Facilities. Within each such Term Facility, mandatory prepayments will be applied pro rata to reduce the remaining amortization payments. When there are no longer outstanding loans under the Term Facilities, mandatory prepayments will be applied to permanently reduce commitments under the Revolving Facility. SPECIAL APPLICATION Holders of loans under the Tranche B Facility may, so PROVISIONS: long as loans are outstanding under either of the other Term Loan Facilities, decline to accept any mandatory prepayment described above and, under such 8 circumstances, all amounts that would otherwise be used to prepay loans under the Tranche B Facility shall be used to prepay loans under the other Term Facilities pro rata. VOLUNTARY Voluntary prepayments of borrowings under the PREPAYMENTS/ Facilities, and voluntary reductions of the unutilized REDUCTIONS IN portion of the Revolving Facility commitments, will be COMMITMENTS: permitted at any time, in minimum principal amounts to be agreed upon, without premium or penalty, subject to reimbursement of the Lenders' redeployment costs in the case of a prepayment of Adjusted LIBOR borrowings other than on the last day of the relevant interest period. All voluntary prepayments of Term Facilities must be made pro rata among the Term Facilities and shall be applied, first, to reduce the next four scheduled quarterly payments under the relevant Facility and, second, pro rata to the remaining amortization payments under such Facility. REPRESENTATIONS AND Substantially the same as representations and WARRANTIES: warranties set forth in the Existing Credit Agreement and others to be reasonably specified by the Agent. CONDITIONS PRECEDENT Usual for facilities and transactions of this type, TO RESTATEMENT AND those specified below and others to be reasonably INITIAL BORROWING: specified by the Agent, including, without limitation: delivery of satisfactory legal opinions and financial information to be agreed upon; first-priority perfected security interests in the Collateral; execution of the Guarantees, which shall be in full force and effect; accuracy of representations and warranties; absence of defaults, prepayment events or creation of liens under debt instruments or other agreements as a result of the 9 transactions contemplated hereby; evidence of authority; compliance with applicable laws and regulations (including but not limited to ERISA, margin regulations and environmental laws); absence of material adverse change in the business, assets, results of operations, condition (financial or otherwise) or prospects of the Borrower, the Target and their respective subsidiaries, taken as a whole, since December 31, 1997; payment of fees and expenses; delivery of borrowing certificates; and obtaining of satisfactory insurance. The Indenture relating to the Borrower's existing Senior Subordinated Notes shall have been amended to the extent necessary to permit the Additional Facilities, and such amendment shall be reasonably satisfactory to the Lenders in form and substance; PROVIDED that the foregoing condition shall not apply if the aggregate amount of the Additional Facilities is reduced to an amount that does not require any amendment to such Indenture and the balance of the financing is raised by the incurrence of indebtedness by a special purpose holding company that will be formed to hold all the common stock of the Borrower, all on terms reasonably satisfactory in all material respects to the Lenders. The Lenders shall be satisfied with the material terms of the Acquisition, including the material terms and conditions of (a) the Tender Offer, (b) the Merger and (c) the Acquisition Agreement and any other agreements 10 entered into in connection with the Transactions (it being agreed that the Lenders are satisfied with the terms and conditions set forth in the draft of the Acquisition Agreement delivered to the Administrative Agent and its counsel on April 5, 1998. All conditions to the acceptance of shares of the Target's capital stock pursuant to the Tender Offer shall have been satisfied (without giving effect to any material amendment or waiver thereof that has not been approved by the Lenders) and sufficient shares shall have been validly tendered and accepted for purchase pursuant to and in accordance with the Tender Offer to permit the Borrower to cause the Merger to occur without the approval of any other shareholders. Either (a) the Merger shall be consummated on the Closing Date or (b) there shall not be any further consent, approval, waiver, condition or other material impediment to the consummation of the Merger, other than (i) approval of the Merger by vote of the stockholders (which shall be within the control of the Borrower) of the Target at a meeting of stockholders, (ii) customary filings in the State of Delaware to effect the Merger and (iii) the other conditions to the Merger set forth in the Acquisition Agreement. The Lenders shall be satisfied in all material respects with the proposed capital structure of the Borrower and its subsidiaries after consummation of the Transactions (it being agreed that the Lenders are satisfied as of the date hereof with the proposed capital structure 11 described in this Term Sheet, including the estimated sources and uses on Annex II hereto). After giving effect to the Transactions and the other transactions contemplated hereby, the Borrower and its subsidiaries shall have outstanding no indebtedness or preferred stock other than (a) the loans and other extensions of credit under the Facilities, (b) the Borrower's existing Senior Subordinated Notes and (c) other limited indebtedness to be agreed upon. The terms and conditions of any indebtedness of the Target to remain outstanding after the Closing Date shall be reasonably satisfactory in all respects to the Lenders. The Lenders shall have received a pro forma consolidated balance sheet of the Borrower as of the Closing Date, after giving effect to the Transactions and the other transactions contemplated hereby, which balance sheet shall be in form and substance reasonably satisfactory to the Lenders. The Lenders shall be reasonably satisfied in all respects with the tax position and the contingent tax and other liabilities of, and with any tax sharing agreements involving, the Borrower and its subsidiaries after giving effect to the Transactions and the other transactions contemplated hereby, and with the plans of the Borrower with respect thereto (it being understood that the information disclosed by the Borrower to the Administrative Agent prior to the date hereof with respect to the foregoing tax matters shall be deemed satisfactory). The consummation of the Transactions and the other transactions contemplated hereby shall not (a) violate 12 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, the Target or any of their respective subsidiaries (other than those relating to Target Indebtedness being repaid on the Closing Date), and the Agent shall have received one or more legal opinions to such effect, reasonably satisfactory to the Agent, from counsel to the Borrower reasonably satisfactory to the Agent. All requisite material governmental authorities and third parties shall have approved or consented to the Transactions (including the Merger) and the other transactions contemplated hereby to the extent required, all applicable appeal periods shall have expired and there shall be no governmental or judicial action, actual or threatened, that would restrain, prevent or impose burdensome conditions on the Transactions or the other transactions contemplated hereby. The Lenders shall have received (a) copies of all existing environmental reports prepared with respect to the properties of the Target and its subsidiaries and any environmental liabilities that may be attributable to such properties or operations thereon and (b) such other materials relating to the Target's compliance with environmental laws and actual or potential environmental liabilities as shall be reasonably specified by the Agent, all of which shall be satisfactory to the Agent (it being understood that the 13 condition set forth in clause (b) has been satisfied, PROVIDED that the phase I reports to be delivered to the Lenders by the Borrower shall not contain any materially adverse information that has not been disclosed by the persons preparing such reports pursuant to or in connection with their discussions with the Agent's counsel prior to the date hereof). There shall be no litigation or administrative proceeding that would have a material adverse effect on the business, assets, results of operations, condition (financial or otherwise) or prospects of the Borrower, the Target and their respective subsidiaries, taken as a whole, or on the ability of the parties to consummate the Transactions or the other transactions contemplated hereby. CONDITIONS PRECEDENT Accuracy of representations and warranties and absence TO SUBSEQUENT of defaults. In addition, if the Merger is not BORROWINGS: consummated on the Closing Date, any subsequent borrowing under the Tranche A Facility will be subject to consummation of the Merger in accordance with the Acquisition Agreement. AFFIRMATIVE Substantially the same as the affirmative covenants set COVENANTS: forth in the Existing Credit Agreement and others to be reasonably specified by the Agent. The Borrower will agree that, if the Merger is not consummated on the Closing Date, then the Merger will be consummated within 90 days thereafter. NEGATIVE COVENANTS: Substantially the same as the negative covenants set forth in the Existing Credit Agreement and others to be reasonably specified by the Agent. 14 SELECTED FINANCIAL Substantially the same as the financial covenants set COVENANTS: forth in the Existing Credit Agreement with respect to: (a) a maximum ratio of debt/EBITDA, (b) a minimum interest coverage ratio, (c) minimum net worth and (d) maximum capital expenditures. Covenant levels are to be determined. Definitions in respect of the financial covenants shall be substantially the same as those in the Existing Credit Agreement. EVENTS OF DEFAULT: Substantially the same as the events of default set forth in the Existing Credit Agreement and others to be reasonably specified by the Agent. VOTING: Amendments and waivers of the restated Credit Agreement and the other definitive credit documentation will require the approval of Lenders holding more than 50% of the aggregate amount of the loans and commitments under the Facilities, except that the consent of each Lender affected thereby shall be required with respect to those matters that require such consent under the Existing Credit Agreement. COST AND YIELD Usual for facilities and transactions of this type. PROTECTION: ASSIGNMENTS AND The Lenders will be permitted to assign loans and PARTICIPATIONS: commitments to other financial institutions with the consent of the Borrower and the Agent, in each case not to be unreasonably withheld. Each assignment (except to other Lenders or their affiliates) will be in a minimum amount of $5,000,000. Assignments will be by novation and will not be required to be pro rata among the Facilities. 15 The Lenders will be permitted to participate loans and commitments without restriction to other financial institutions. Voting rights of participants shall be limited to customary matters. EXPENSES AND All reasonable out-of-pocket expenses (including, INDEMNIFICATION: without limitation, expenses incurred in connection with due diligence) of the Arranger and the Agent associated with the Restatement, the syndication of the Facilities and the preparation, execution and delivery, administration, waiver or modification and enforcement of the Credit Agreement and the other documentation contemplated hereby and thereby (including the reasonable fees, disbursements and other charges of counsel) are to be paid by the Borrower. In addition, all reasonable out-of-pocket expenses of the Lenders for enforcement costs and documentary taxes associated with the Facilities are to be paid by the Borrower. The Borrower will indemnify the Arranger, the Agent and the other Lenders and hold them harmless from and against all costs, expenses (including reasonable fees, disbursements and other charges of counsel) and liabilities of the Arranger, the Agent and the other Lenders arising out of or relating to any claim or any litigation or other proceedings (regardless of whether the Arranger, the Agent or any other Lender is a party thereto) that relate to the proposed transactions, including the financing contemplated hereby, the Transactions or any transactions connected therewith, provided that none of the Arranger, the Agent or any 16 other Lender will be indemnified for its gross negligence or willful misconduct. GOVERNING LAW AND New York. FORUM: COUNSEL TO AGENT AND Cravath, Swaine & Moore. ARRANGER: ANNEX I INTEREST RATES: The interest rates under the Existing Facilities will remain the same as under the Existing Credit Agreement. The interest rates under the Tranche A Facility will be determined by reference to the pricing grid set forth below under the caption "Adjustments to Interest Rates", which are the same as those applicable to the Existing Facilities. The interest rates under the Tranche B Facility will be Adjusted LIBOR plus 2.25% or ABR plus 1.00%; PROVIDED that if the Borrower's ratio set forth below under "Adjustments to Interest Rates" is less than 4.00 to 1.00, then the interest rates under the Tranche B Facility will be Adjusted LIBOR plus 2.00% or ABR plus .75%. The Borrower may elect interest periods of 1, 2, 3 or 6 months for Adjusted LIBOR borrowings. Calculation of interest shall be 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 shall be payable at the end of each interest period and, in any event, at least every 3 months. ABR is the Alternate Base Rate, which is the highest of Chase's Prime Rate, the Federal Funds Effective Rate plus 1/2 of 1% and the Base CD Rate plus 1%. Adjusted LIBOR and the Base CD Rate will at all times include statutory reserves (and, in the case of the Base CD Rate, FDIC assessment rates). 2 COMMITMENT FEES: Commitment fees under the Existing Revolving Facility will remain the same as under the Existing Credit Agreement. If the entire amount of the Tranche A Facility is not funded on the Closing Date, commitment fees will accrue on unfunded commitments thereunder at the rate of 0.50% per annum. ADJUSTMENTS TO INTEREST RATES: The interest rates under the Tranche A Facility will be determined as follows by reference to the Borrower's ratio of (a) Total Debt (as defined in the Existing Credit Agreement) as of the date of determination to (b) Consolidated EBITDA (as defined in the Existing Credit Agreement) for the period of four consecutive fiscal quarters ended as of such date of determination, as set forth below:
Ratio of Debt to EBITDA Adjusted LIBOR plus ABR plus ----------------------- ------------------- -------- Greater than or equal to 4.00 to 1.00 2.00% .75% Less than 4.00 to 1.00 1.75% .50% Less than or equal to 3.50 to 1.00 1.50% .25% Less than or equal to 3.00 to 1.00 1.25% .0% Less than or equal to 2.50 to 1.00 1.00% .0%
The ratio of debt to EBITDA shall be determined as at the last day of each fiscal quarter; changes in interest rates resulting from changes in such ratio shall become effective on the first day on which the financial statements covering the quarter-end date as of which such ratio is computed are delivered to the Agent. ANNEX II Estimated Sources and Uses of Funds (in millions of dollars) For Consolidated Entity USES OF FUNDS SOURCES OF FUNDS - ------------- ----------------- Purchase Price $215 Tranche A Facility $185 Repay Target Tranche B Facility 100 Indebtedness 55 Fees and expenses 15 ---- ---- Total Uses $285 Total Sources $285 ---- ---- ---- ---- EX-99.(C)(1) 5 EXHIBIT 99(C)(1) EXHIBIT 99(c)(1) AGREEMENT AND PLAN OF MERGER AMONG BLESSINGS CORPORATION HUNTSMAN PACKAGING CORPORATION AND VA ACQUISITION CORP. DATED AS OF APRIL 7, 1998 TABLE OF CONTENTS ARTICLE 1 THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.1 The Offer. . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.2 Company Action . . . . . . . . . . . . . . . . . . . . . 3 Section 1.3 Directors. . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE 2 THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2.2 Effective Time . . . . . . . . . . . . . . . . . . . . . 6 Section 2.3 Closing of the Merger. . . . . . . . . . . . . . . . . . 6 Section 2.4 Effects of the Merger. . . . . . . . . . . . . . . . . . 6 Section 2.5 Certificate of Incorporation and Bylaws. . . . . . . . . 6 Section 2.6 Directors. . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.7 Officers . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.8 Conversion of Shares.. . . . . . . . . . . . . . . . . . 7 Section 2.9 Appraisal Rights.. . . . . . . . . . . . . . . . . . . . 7 Section 2.10 Exchange of Certificates. . . . . . . . . . . . . . . . 7 Section 2.11 Company Stock Options . . . . . . . . . . . . . . . . . 9 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . 9 Section 3.1 Organization and Qualification; Subsidiaries . . . . . . 10 Section 3.2 Capitalization of the Company and its Subsidiaries . . . 10 Section 3.3 Authority Relative to this Agreement; Consents and Approvals. . . . . . . . . . . . . . . . 12 Section 3.4 SEC Reports; Financial Statements. . . . . . . . . . . . 12 Section 3.5 Information Supplied . . . . . . . . . . . . . . . . . . 13 Section 3.6 Consents and Approvals; No Violations. . . . . . . . . . 13 Section 3.7 No Default . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.8 No Undisclosed Liabilities; Absence of Changes . . . . . 15 Section 3.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3.10 Compliance with Applicable Law. . . . . . . . . . . . . 15 Section 3.11 Employee Plans. . . . . . . . . . . . . . . . . . . . . 16 Section 3.12 Environmental Laws and Regulations. . . . . . . . . . . 17 Section 3.13 Tax Matters . . . . . . . . . . . . . . . . . . . . . . 18 Section 3.14 Affiliate Transactions. . . . . . . . . . . . . . . . . 19 Section 3.15 Labor Matters . . . . . . . . . . . . . . . . . . . . . 19 Section 3.16 Relationships with Customers, Suppliers, Distributors and Sales Representatives . . . . . . . . . . . . . . 19 i Section 3.17 Contracts . . . . . . . . . . . . . . . . . . . . . . . 19 Section 3.18 Tangible Property; Real Property and Leases . . . . . . 20 Section 3.19 Trademarks, Patents and Copyrights. . . . . . . . . . . 20 Section 3.20 Brokers . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 3.21 No Other Representations or Warranties. . . . . . . . . 21 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION. . . . . . . 21 Section 4.1 Organization . . . . . . . . . . . . . . . . . . . . . . 21 Section 4.2 Authority Relative to this Agreement . . . . . . . . . . 22 Section 4.3 Information Supplied . . . . . . . . . . . . . . . . . . 22 Section 4.4 Consents and Approvals; No Violations. . . . . . . . . . 22 Section 4.5 No Default . . . . . . . . . . . . . . . . . . . . . . . 23 Section 4.6 Availability of Financing. . . . . . . . . . . . . . . . 23 Section 4.7 No Prior Activities. . . . . . . . . . . . . . . . . . . 23 Section 4.8 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 4.9 No Other Representations or Warranties . . . . . . . . . 23 ARTICLE 5 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 5.1 Conduct of Business of the Company . . . . . . . . . . . 24 Section 5.2 Acquisition Proposals. . . . . . . . . . . . . . . . . . 26 Section 5.3 Access to Information. . . . . . . . . . . . . . . . . . 27 Section 5.4 Shareholders Meeting . . . . . . . . . . . . . . . . . . 27 Section 5.5 Additional Agreements; Reasonable Efforts. . . . . . . . 28 Section 5.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 5.7 Public Announcements . . . . . . . . . . . . . . . . . . 29 Section 5.8 Indemnification; Directors' and Officers' Insurance. . . 29 Section 5.9 Notification of Certain Matters. . . . . . . . . . . . . 30 Section 5.10 Employee Matters . . . . . . . . . . . . . . . . . . . . 30 Section 5.11 SEC Filings. . . . . . . . . . . . . . . . . . . . . . . 30 Section 5.12 Guarantee of Performance . . . . . . . . . . . . . . . . 31 Section 5.13 Notice of Certain Events . . . . . . . . . . . . . . . . 31 ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE MERGER. . . . . . . . . . . . . . . 31 Section 6.1 Conditions to Each Party's Obligations to Effect the Merger. . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE 7 TERMINATION; AMENDMENT; WAIVER. . . . . . . . . . . . . . . . . . . . 32 Section 7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . 32 Section 7.2 Effect of Termination. . . . . . . . . . . . . . . . . . 33 Section 7.3 Fees and Expenses. . . . . . . . . . . . . . . . . . . . 34 ii Section 7.4 Amendment. . . . . . . . . . . . . . . . . . . . . . . . 35 Section 7.5 Extension; Waiver. . . . . . . . . . . . . . . . . . . . 35 ARTICLE 8 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 8.1 Nonsurvival of Representations and Warranties. . . . . . 35 Section 8.2 Entire Agreement; Assignment . . . . . . . . . . . . . . 36 Section 8.3 Validity . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 8.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 8.5 Governing Law; Jurisdiction. . . . . . . . . . . . . . . 37 Section 8.6 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . 37 Section 8.7 Construction; Interpretation . . . . . . . . . . . . . . 37 Section 8.8 Parties in Interest. . . . . . . . . . . . . . . . . . . 38 Section 8.9 Severability . . . . . . . . . . . . . . . . . . . . . . 38 Section 8.10 Specific Performance. . . . . . . . . . . . . . . . . . 38 Section 8.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . 38
iii AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER, dated as of the 7th day of April, 1998 (this "Agreement") is made by and among BLESSINGS CORPORATION, a Delaware corporation (the "Company"), HUNTSMAN PACKAGING CORPORATION, a Utah corporation ("Parent"), and VA ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of Parent ("Acquisition"). RECITALS WHEREAS, the Board of Directors of the Company (the "Company Board") has, in light of and subject to the terms and conditions set forth herein, unanimously (i) determined that each of the Offer (as defined in the recitals) and the Merger (as defined in Section 2.1) is fair to, and in the best interests of, its shareholders and (ii) approved and adopted this Agreement and the transactions contemplated hereby and resolved to recommend acceptance of the Offer and approval and adoption of this Agreement by the shareholders of the Company; and WHEREAS, in furtherance thereof, it is proposed that, subject to the terms and conditions set forth herein, Acquisition shall commence a tender offer (the "Offer") to acquire all of the issued and outstanding shares of Company Common Stock (as defined in Section 2.8) at a price equal to Twenty-One Dollars ($21.00) per share (such amount, or any greater amount per share paid pursuant to the Offer, being hereinafter referred to as the "Per Share Amount"), net to the seller in cash, in accordance with the terms and subject to the conditions provided herein. WHEREAS, Parent and Acquisition are unwilling to enter into this Agreement (and effect the transactions contemplated hereby) unless, contemporaneously with the execution and delivery hereof, certain beneficial and record holders of Company Common Stock identified on Exhibit A hereto enter into agreements (collectively, the "Tender Agreement") providing for certain matters with respect to their Shares, including the tender of their Shares and certain other actions relating to the Offer and the other transactions contemplated by this Agreement, and in order to induce the Parent and Acquisition to enter into this Agreement, the Board of Directors of the Company has approved the execution and delivery of the Tender Agreement so that the restrictions on "business combinations" set forth in Section 203 of the DGCL (as hereafter defined) do not and will not apply to Parent, Acquisition or affiliates or associates of Parent as a result of the execution and delivery of the Tender Agreement or the consummation of the transactions contemplated thereby or by this Agreement, and such stockholders have executed and delivered the Tender Agreement. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, Parent and Acquisition hereby agree as follows: ARTICLE 1 THE OFFER SECTION 1.1 THE OFFER. (a) Provided that this Agreement shall not have been terminated in accordance with Section 7.1 and none of the events or conditions set forth in Annex A (the "Offer Conditions") shall have occurred and be existing, as promptly as practicable, but in no event later than five (5) Business Days after the public announcement of the execution of this Agreement, Acquisition shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), the Offer for all the issued and outstanding shares of Company Common Stock, at the Per Share Amount. Acquisition shall accept for payment all outstanding shares of Company Common Stock which have been validly tendered and not withdrawn pursuant to the Offer at the earliest time following the expiration of the Offer that all conditions to the Offer shall have been satisfied or waived by Acquisition. The obligation of Acquisition to accept for payment, purchase and pay for shares of Company Common Stock tendered pursuant to the Offer shall be subject only to the Offer Conditions, including the condition that a number of shares of Company Common Stock representing that number of shares of Company Common Stock which would equal more than fifty percent (50%) of the shares of Company Common Stock then issued and outstanding on a fully-diluted basis shall have been validly tendered and not withdrawn prior to the expiration date of the Offer (the "Minimum Condition"). Acquisition expressly reserves the right to increase the price per share of Company Common Stock payable in the Offer, to waive any of the conditions of the Offer or to make any other changes in the terms and conditions of the Offer (PROVIDED that, unless previously approved by the Company (such approval to be obtained from the Company Board) in writing, no change may be made which decreases the Per Share Amount payable in the Offer, which changes the form of consideration to be paid in the Offer, which reduces the maximum number of shares of Company Common Stock to be purchased in the Offer, which imposes conditions to the Offer in addition to the Offer Conditions or which broadens the scope thereof). The Per Share Amount shall be paid net to the seller in cash, LESS any required withholding of taxes, upon the terms and subject to such conditions of the Offer. The Company agrees that no shares of Company Common Stock held by the Company or any of its subsidiaries will be tendered in the Offer. "Business Day" means any day other than Saturday, Sunday or a federal holiday. (b) Subject to the terms and conditions hereof, the Offer shall remain open until midnight, New York City time, on the date that is twenty (20) Business Days after the Offer is commenced (within the meaning of Rule 14d-2 under the Exchange Act); PROVIDED, HOWEVER, that without the consent of the Company Board, Acquisition may (i) extend the Offer, if at the scheduled expiration date of the Offer any of the Offer Conditions shall not have been satisfied or waived for one (1) or more periods (none of which shall exceed ten (10) Business Days) not to exceed sixty (60) days in the aggregate, until such time as such conditions are satisfied or waived, (ii) extend the Offer for one (1) or more periods, not to exceed thirty (30) days, if required by any rule, regulation, interpretation or position of the Securities and Exchange Commission ("SEC") or the staff thereof applicable to the Offer or (iii) extend the Offer on one (1) occasion for an aggregate period of not more than ten (10) Business Days beyond the latest expiration date that would otherwise be 2 permitted under clause (i) or (ii) of this sentence if on such expiration date there shall not have been tendered that number of shares of Company Common Stock which would equal more than ninety percent (90%) of the issued and outstanding shares of Company Common Stock. Acquisition agrees that if all of the Offer Conditions are not satisfied on any expiration date of the Offer, then, PROVIDED that all such conditions are then reasonably capable of being satisfied within ten (10) Business Days, Acquisition shall extend the Offer for a period or periods of not less than ten (10) days in the aggregate if requested to do so by the Company; provided that the Company shall be entitled to make only one (1) such request. Subject to the terms and conditions of the Offer and this Agreement, Acquisition shall accept for payment, and pay for, all shares of Company Common Stock validly tendered and not withdrawn pursuant to the Offer that Acquisition becomes obligated to accept for payment and pay for pursuant to the Offer, as promptly as practicable after the expiration of the Offer. (c) CONTEMPORANEOUSLY WITH COMMENCEMENT OF THE OFFER, Acquisition shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer which will reflect the existence of this Agreement (together with any supplements or amendments thereto, collectively the "Offer Documents"). The Offer Documents will comply in all material respects with the provisions of applicable federal securities laws, including, without limitation, Rule 14D-1 of the Exchange Act. The information provided and to be provided by the Company, Parent and Acquisition for use in the Offer Documents shall not, on the date filed with the SEC and on the date first published or sent or given to the Company's shareholders, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Parent or Acquisition with respect to information supplied by the Company or its Subsidiaries in writing for inclusion in the Offer Documents. Parent, Acquisition and the Company each agrees to correct promptly any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect and Acquisition further agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of shares of Company Common Stock, in each case as and to the extent required by applicable federal securities laws and the securities laws of the State of Delaware. The Company and its counsel shall be given the opportunity to review the Offer Documents (including any amendments or supplements thereto) prior to their filing with the SEC. In addition, Parent and Acquisition agree to provide the Company and its counsel with any comments, whether written or oral, that Parent or Acquisition or its counsel receives from time to time from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments or other communications. SECTION 1.2 COMPANY ACTION. (a) The Company hereby approves of and consents to the Offer and represents and warrants that the Company Board, at a meeting duly called and held, has, subject to the terms and conditions set forth herein, unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are fair to, and in the best interests of, the shareholders of the Company, (ii) approved the execution and delivery of this 3 Agreement and the consummation of the transactions contemplated hereby, including, without limitation, the Offer and the Merger, in all respects, and that such approval constitutes approval of the Offer, this Agreement and the Merger for purposes of Section 203 of the Delaware General Corporation Law ("DGCL") and (iii) resolved to recommend that the shareholders of the Company accept the Offer, tender their shares of Company Common Stock thereunder to Acquisition and approve and adopt this Agreement and the Merger. The Company consents to the inclusion of such recommendation and approval in the Offer Documents. The Company further represents and warrants that Bowles Hollowell Conner & Co. ("BHC") (the "Financial Advisor") has delivered to the Company Board its written opinion dated April 7, 1998, that the cash consideration to be received by the shareholders of the Company pursuant to the Offer and the Merger is fair from a financial point of view to such shareholders. The Company has been authorized by the Financial Advisor to permit the inclusion of the fairness opinion (or a reference thereto) in the Offer Documents and the Schedule 14D-9 (as defined in Section 1.2(b)). (b) Contemporaneously with the commencement of the Offer as provided in Section 1.1, the Company hereby agrees to file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 pertaining to the Offer (together with any amendments or supplements thereto, the "Schedule 14D-9") containing the recommendations described in Section 1.2(a), and to mail promptly the Schedule 14D-9 to the shareholders of the Company. The Schedule 14D-9 will comply in all material respects with the provisions of applicable federal securities laws (including, without limitation, Rule 14D-9 of the Exchange Act) and, on the date filed with the SEC and on the date first published, sent or given to the Company's shareholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information supplied by Parent or Acquisition in writing for inclusion in the Schedule 14D-9. The Company, Parent and Acquisition each agrees to correct promptly any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to the holders of shares of Company Common Stock, in each case as and to the extent required by applicable federal securities laws. Parent shall be given a reasonable opportunity to review the Schedule 14D-9 (including any amendments or supplements thereto) prior to their filing with the SEC. In addition, the Company agrees to provide Parent and its counsel with any comments, whether written or oral, that the Company or its counsel receives from time to time from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments or other communications. (c) In connection with the Offer, the Company will promptly furnish to Parent and Acquisition mailing labels, security position listings and any available listing or computer files containing the names and addresses of the record holders of shares of Company Common Stock as of a recent date and shall furnish Acquisition with such additional information and assistance (including, without limitation, updated lists of shareholders, mailing labels and lists of securities positions) as Acquisition or its agents may reasonably request in communicating the Offer to the record and beneficial holders of shares of Company Common Stock. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents 4 and any other documents necessary to consummate the Merger, Parent, Acquisition and their affiliates, associates, agents and advisors shall use the information contained in any such labels, listings and files only in connection with the Offer and the Merger and, if this Agreement shall be terminated, will deliver to the Company all copies of such information then in their possession. SECTION 1.3 DIRECTORS. (a) Promptly upon the purchase by Acquisition of Company Common Stock pursuant to the Offer, and from time to time thereafter, Parent or Acquisition shall be entitled to designate such number of directors, rounded up to the next whole number (but in no event more than one less than the total number of directors on the Company Board) as will give Parent, subject to compliance with Section 14(f) of the Exchange Act, representation on the Company Board equal to the product of (x) the number of directors on the Company Board (giving effect to any increase in the number of directors pursuant to this Section 1.3) and (y) the percentage that such number of shares of Company Common Stock so purchased bears to the aggregate number of shares of Company Common Stock outstanding (such number being, the "Board Percentage"), and the Company shall, upon request by Parent, promptly satisfy the Board Percentage by (i) increasing the size of the Company Board or (ii) using its best efforts to secure the resignations of such number of directors as is necessary to enable Purchaser's designees to be elected to the Company Board, and in each case shall cause Parent's designees promptly to be so elected. At the request of Parent, the Company shall take, at the Company's expense, all lawful action necessary to effect any such election. In addition, the Company shall mail to its stockholders the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder with the Schedule 14D-9. Parent will supply to the Company in writing and will be solely responsible for any information with respect to it and its designees, officers, directors and affiliates required by Section 14(f) of the Exchange Act and Rule 14f-1. Prior to the Effective Time, Acquisition will not take any action to cause its designees to constitute a greater number of directors than the Board Percentage. (b) Following the election or appointment of Parent's designees pursuant to this Section 1.3 and prior to the Effective Time, any amendment or termination of this Agreement, extension for the performance or waiver of the obligations or other acts of Parent or Acquisition or waiver of the Company's rights hereunder, shall require the concurrence of a majority of directors of the Company then in office who are directors on the date hereof and who voted to approve this Agreement. ARTICLE 2 THE MERGER SECTION 2.1 THE MERGER. At the Effective Time (as defined below) and upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, Acquisition shall be merged with and into the Company (the "Merger"). Following the Merger, the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation") and the separate corporate existence of Acquisition shall cease and the Surviving Corporation shall be a wholly-owned subsidiary of Parent. At the option of Parent and provided that such amendment does not delay the Effective Time, the Merger may be structured so that, and the parties hereby agree to 5 amend this Agreement to provide that, the Company shall be merged with and into Acquisition or another direct or indirect wholly-owned subsidiary of Parent, with Acquisition or such other subsidiary of Parent continuing as the Surviving Corporation; PROVIDED, HOWEVER, that the Company shall be deemed not to have breached any of its representations and warranties herein if and to the extent such breach would have been attributable to the exercise by Parent of the foregoing option. SECTION 2.2 EFFECTIVE TIME. Subject to the terms and conditions set forth in this Agreement, on the Closing Date (as defined in Section 2.3), the Company will file a Certificate of Merger (or, if permitted, Acquisition will file a Certificate of Ownership and Merger) in such form as required by the DGCL with the Secretary of State of the State of Delaware, and the parties shall take such other actions and make all other filings as may be required by law to effectuate the Merger. The Merger shall become effective at the time of such filings or such later time as is set forth in the Certificate of Merger (the time the Merger becomes effective being referred to herein as the "Effective Time"). SECTION 2.3 CLOSING OF THE MERGER. The closing of the Merger (the "Closing") shall take place at a time and on a date to be specified by the parties, which shall be no later than the fifth (5th) Business Day after satisfaction (or waiver) of the latest to occur of the conditions precedent set forth in Article 6 (the "Closing Date"), at the offices of Winston & Strawn, 35 W. Wacker Drive, Chicago, Illinois 60601, unless another time, date or place is agreed to in writing by the parties. SECTION 2.4 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and Acquisition shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Acquisition shall become the debts, liabilities and duties of the Surviving Corporation. SECTION 2.5 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of Incorporation of the Company shall be amended in its entirety at the Effective Time to read as provided in the attached Exhibit B. The Bylaws of Acquisition in effect at the Effective Time shall be the Bylaws of the Surviving Corporation until amended in accordance with applicable law. SECTION 2.6 DIRECTORS. The directors of Acquisition at the Effective Time shall be the directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation until such director's successor is duly elected or appointed and qualified. SECTION 2.7 OFFICERS. The individuals specified by Parent prior to the Effective Time shall be the initial officers of the Surviving Corporation from and after the Effective Time, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation until such officer's successor is duly elected or appointed and qualified. 6 SECTION 2.8 CONVERSION OF SHARES. (a) Except as provided in Section 2.9, at the Effective Time, each share of common stock, par value $.71 per share, of the Company ("Company Common Stock") issued and outstanding immediately prior to the Effective Time (individually a "Share" and, collectively, the "Shares") (other than (i) Shares held by the Company or any wholly-owned direct or indirect subsidiaries of the Company, and (ii) Shares held by Parent, Acquisition or any other wholly-owned direct or indirect subsidiary of Parent), shall, by virtue of the Merger and without any further action on the part of Parent, Acquisition, the Company or the holder thereof, be converted into and shall become the right to receive a cash payment per Share, without interest, equal to the Per Share Amount (the "Merger Consideration") upon the surrender of the certificate representing such Share. (b) At the Effective Time, each issued and outstanding share of the common stock, par value $.01 per share, of Acquisition shall, by virtue of the Merger and without any further action on the part of Parent, Acquisition or the Company or any holder thereof, be converted into one (1) validly issued, fully-paid and non-assessable share of common stock, par value $.01 per share, of the Surviving Corporation and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. (c) At the Effective Time, each Share held by the Company (as treasury stock or otherwise) or held by Parent, Acquisition or any wholly-owned direct or indirect subsidiary of Parent, Acquisition or the Company immediately prior to the Effective Time shall, by virtue of the Merger and without any further action on the part of Parent, Acquisition, the Company or the holder thereof, be canceled, retired and cease to exist, and no consideration shall be delivered with respect thereto. SECTION 2.9 APPRAISAL RIGHTS. Notwithstanding any other provision of this Agreement to the contrary, Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Shares in accordance with the DGCL shall not be converted into a right to receive the Merger Consideration, unless such holder fails to perfect or withdraws or otherwise loses his right to appraisal. If, after the Effective Time, such holder fails to perfect or withdraws or loses his right to appraisal, such Shares shall be treated as if they had been converted as of the Effective Time into a right to receive the Merger Consideration payable in respect of such Shares pursuant to Section 2.8(a). The Company shall give Parent prompt notice of any demands received by the Company for appraisal of Shares, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands. SECTION 2.10 EXCHANGE OF CERTIFICATES. (a) Chase Mellon Shareholder Services, or another bank or trust company designated by Parent and reasonably acceptable to the Company, shall act as the exchange agent (in such capacity, the "Exchange Agent") for the benefit of the holders of Shares, for the exchange of a certificate or certificates which, immediately prior to the Effective Time, represented Shares (the 7 "Certificates") that were converted into the right to receive the Per Share Amount pursuant to Section 2.8(a), all in accordance with this Article 2. Parent will make available to the Exchange Agent from time to time the Merger Consideration to be paid in respect of the Shares. (b) As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of Certificates (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Parent and the Company may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for a cash payment of the Merger Consideration pursuant to Section 2.8(a). Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Parent and Acquisition, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor by check an amount equal to (A) the Per Share Amount, MULTIPLIED BY (B) the number of Shares represented by such Certificate, which such holder has the right to receive pursuant to the provisions of this Article 2, and the Certificate so surrendered shall forthwith be canceled. No interest shall be paid or accrued on any Merger Consideration upon the surrender of any Certificates. In the event of a transfer of ownership of Shares which is not registered in the transfer records of the Company, payment of the proper Merger Consideration may be paid to a transferee if the Certificate representing such Shares is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer or other taxes required as a result of such payment to a person other than the record holder of such Shares have been paid. Until surrendered and exchanged as contemplated by this Section 2.10, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender an amount equal to (A) the Per Share Amount, MULTIPLIED BY (B) the number of Shares represented by such Certificate, as contemplated by this Section 2.10. (c) In the event that any Certificate shall have been lost, stolen or destroyed, the Exchange Agent shall pay in exchange therefor, upon the making of an affidavit of that fact by the holder thereof, the proper Merger Consideration as may be required pursuant to this Section 2.9, PROVIDED, HOWEVER, that Parent may, in its discretion, require the delivery of a suitable bond and/or indemnity. (d) The Merger Consideration paid upon the surrender for exchange of Shares in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such Shares, SUBJECT, HOWEVER, to the Surviving Corporation's obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by the Company on such Shares in accordance with the terms of this Agreement or prior to the date hereof and which remain unpaid at the Effective Time, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article 2. 8 (e) Any portion of the Merger Consideration which remains undistributed to the shareholders of the Company for one year after the Effective Time shall be delivered to Parent, upon demand, and any shareholders of the Company who have not theretofore complied with this Article 2 shall thereafter look only to Parent for payment of their claim for any Merger Consideration. (f) Neither Parent nor the Company shall be liable to any holder of Shares for any Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (g) Acquisition shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts as Acquisition is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Acquisition, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by Acquisition. SECTION 2.11 COMPANY STOCK OPTIONS. The Company hereby advises and confirms that the applicable plans and instruments (collectively, the "Option Plans") governing all outstanding options to purchase shares of Company Common Stock (each a "Company Stock Option") provide for the acceleration of the exercisability of each such option in connection with the transactions contemplated herein. The Company shall take all actions necessary prior to the Effective Time to assure that, at the Effective Time: (i) each Company Stock Option shall be canceled in exchange for an amount (the "Option Payment") in cash equal to the Per Share Amount less the applicable exercise price of such Company Stock Option, subject to applicable withholding taxes; and (ii) each stock appreciation right will be canceled in exchange for an amount in cash (the "SAR Payment") equal to the Per Share Amount less the exercise price of the Company Stock Option to which it is linked, subject to applicable withholding taxes. The surrender of a Company Stock Option in exchange for the Option Payment and of a stock appreciation right in exchange for the SAR Payment shall be deemed a release of any and all rights the holder had or may have had in such Company Stock Option or under such Option Plan. Effective as of the Effective Time, the Company shall take all action as is necessary prior to the Effective Time to terminate all Option Plans so that on and after the Effective Time no current or former employee director, consultant or other person shall have any option to purchase Shares or any other equity interests in the Company under any Option Plan. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent and Acquisition that all of the statements contained in Article 3 are true and correct as of the date of this Agreement (or if made as of a specified date, as of such date), except as set forth in the applicable section of the schedule attached to this Agreement (the "Company Disclosure Schedule") or as specifically set forth in the Company's SEC Reports (as defined in Section 3.4): 9 SECTION 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its businesses as now being conducted. (b) The Company has no equity interests in any corporations, partnerships, limited liability companies, trusts or similar business entities. Each of the Company's subsidiaries (each a "Subsidiary" and, collectively, "Subsidiaries") is a corporation or a limited liability company, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its businesses as now being conducted, except where the failure to be so organized, existing and in good standing could not have a Material Adverse Effect (as defined below). When used in this Agreement, the term "Material Adverse Effect" means any effect, change or event that is or is reasonably likely to have a material adverse effect on the business, assets, prospects, results of operations or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole. (c) Each of the Company and its Subsidiaries is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have, individually or in the aggregate, a Material Adverse Effect. (d) The Company has heretofore delivered to Acquisition or Parent accurate and complete copies of the Certificate of Incorporation and Bylaws, as currently in effect, of the Company and each Subsidiary. SECTION 3.2 CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES. (a) The authorized capital stock of the Company consists of Twenty-Five Million (25,000,000) shares of Company Common Stock, of which, as of March 31, 1998, (i) Ten Million One Hundred Twenty-Six Thousand Eight Hundred Fifty-Seven (10,126,857) shares of Company Common Stock were issued and outstanding, and (ii) Two Hundred Fifty-Nine (259) shares of preferred stock, Ten Dollars ($10.00) par value per share, no shares of which have been issued or are outstanding. All of the shares of Company Common Stock have been validly issued and are fully paid, non assessable and free of preemptive rights. As of the date hereof, Two Hundred Sixteen Thousand Four Hundred Fifty (216,450) shares of Company Common Stock were reserved for issuance and issuable upon or otherwise deliverable in connection with the exercise of outstanding Company Common Stock Options all of which were issued pursuant to the Option Plans (as herein defined). Since December 31, 1997, no shares of the Company's capital stock have been issued other than pursuant to Company Stock Options already issued and outstanding on such date and other than 9,057 shares of Common Stock issued pursuant to the Company's 1993 Annual Incentive Plan for Key Employees (the "1993 Annual Incentive Plan") which are outstanding on the 10 date hereof. Since December 31, 1997, no stock options have been granted. Except as set forth above, there are outstanding (i) no shares of capital stock or other voting securities of the Company, (ii) no securities of the Company or its Subsidiaries convertible into or exchangeable for shares of capital stock or voting securities of the Company, (iii) no options, warrants, calls, subscriptions, or other rights, arrangements, agreements or commitments to acquire from the Company or its Subsidiaries, and no obligations, arrangements, agreements or commitments of the Company or its Subsidiaries to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company, and (iv) no equity equivalents, interests in the ownership or earnings of the Company or its Subsidiaries or other similar rights (collectively, "Company Securities"). There are no outstanding obligations, arrangements, agreements or commitments of the Company or its Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities. As of the date hereof, no employees, directors, consultants and others have exercised the right to purchase shares of Common Stock which have yet to be issued under the Option Plans. (b) All of the outstanding capital stock of each Subsidiary has been validly issued and are fully paid and non-assessable and is owned by the Company, directly or indirectly, free and clear of any Lien (as hereinafter defined) or any other limitation or restriction (including any restriction on the right to vote or sell the same, except as may be provided as a matter of law). There are no securities of the Company or its Subsidiaries convertible into or exchangeable for, no options, warrants, calls, subscriptions, or other rights to acquire from the Company or its Subsidiaries, and no other contract, agreement, understanding, arrangement or obligation (whether or not contingent) providing for the issuance or sale, directly or indirectly, of any capital stock or other interests in, or any other securities of the Company or any Subsidiary. There are no outstanding obligations, arrangements, agreements or commitments of the Company or its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding shares of capital stock or other interests in the Company or any Subsidiary. To the knowledge of the Company, other than the Tender Agreement, there are no outstanding proxies with respect to the Company Common Stock and there are no agreements, arrangements or understandings by or among any persons which affect or relate to the voting of, or giving of written consents with respect to, the Company Common Stock. For purposes of this Agreement, "Lien" means, with respect to any asset (including, without limitation, any security) any mortgage, lien, claim, pledge, charge, security interest or encumbrance of any kind in respect of such asset. (c) The Company Common Stock constitutes the only class of equity securities of the Company registered or required to be registered under the Exchange Act. (d) Without limiting the foregoing, the Company's 1993 Restricted Stock Plan for Non-Employee and Certain Other Directors of Blessings Corporation (the "1993 Directors Plan"), 1993 Restricted Stock Plan for Key Employees, the 1993 Annual Incentive Plan, the Key Executive Stock Supplement, and each other stock purchase plan of the Company or any Subsidiary (each a "Stock Plan") will have been terminated on or prior to the Effective Time; provided that all recipients of awards under the Stock Plans outstanding on the date hereof shall remain entitled to the benefits of such awards, except that on and after the Effective Time such awards shall entitle such recipients to receive the cash value of such awards and not Company Common Stock. No 11 further awards will be made under any Stock Plan on or after the date hereof. In lieu of making the awards heretofore intended to be made at the time of the Company's scheduled annual meeting of stockholders in May of 1998 under the 1993 Directors Plan at the earlier of May 20, 1998 or the Effective Time, the Company will pay to the participants in such plan (not individually but in the aggregate) an aggregate amount in cash equal to the Per Share Amount multiplied by the 5,800 shares of Company Common Stock, in the aggregate, that were to have been awarded to the participants in such plan at the Company's May 1998 annual meeting of stockholders, subject to applicable withholding taxes. SECTION 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT; CONSENTS AND APPROVALS. (a) The Company has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the Company Board and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby or thereby (other than, with respect to the Merger if required by the DGCL, the approval and adoption of this Agreement by the holders of a majority of the then issued and outstanding shares of Company Common Stock). This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid, legal and binding agreement of the Company, enforceable against the Company in accordance with its terms. (b) The Company Board has duly and validly approved, and taken all corporate actions required to be taken by the Company Board for the consummation of, the transactions, including the Offer, the Merger and the Tender Agreement, contemplated hereby, and resolved to recommend that the shareholders of the Company approve and adopt this Agreement. The Company Board, at a meeting duly called and held, has taken all actions necessary under the DGCL, including approving the transactions contemplated by this Agreement, to ensure that the restrictions on "business combinations" set forth in Section 203 of the DGCL do not, and will not, apply to the transactions contemplated by this Agreement, including, without limitation, the Offer, the Merger and the Tender Agreement. SECTION 3.4 SEC REPORTS; FINANCIAL STATEMENTS. (a) The Company has timely filed all required forms, reports, schedules and registration statements and documents with the SEC since December 31, 1996 (the "SEC Reports"), each of which has complied in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the "Securities Act") and the Exchange Act (and the rules and regulations promulgated thereunder), each as in effect on the dates the SEC Reports were filed. The Company has delivered to Acquisition or Parent, in the form filed with the SEC (including any amendments thereto), (i) its Annual Report on Form 10-K for the fiscal years ended December 31, 1996 and 1997, (ii) all definitive proxy statements relating to the Company's meetings of shareholders (whether annual or special) held since December 31, 1996 and (iii) all other SEC Reports filed by the Company with the SEC since December 31, 1996. None of the SEC Reports, including, without limitation, any financial statements or schedules included or incorporated by 12 reference therein, contained, when filed, any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements and unaudited consolidated interim financial statements of the Company and its Subsidiaries included in the Annual Report on Form 10-K referred to in the second sentence of this Section 3.4(a) and the Company's filings on Form 10-Q for the fiscal quarters ended March 31, 1997, and June 30, 1997, and September 30, 1997, (a) fairly present, in conformity with generally accepted accounting principles applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of the Company and its Subsidiaries as of the dates thereof and their consolidated results of operations and changes in financial position for the periods then ended (subject, in the case of the unaudited interim financial statements, to normal year-end adjustments), (b) contain and reflect all necessary adjustments and accruals for a fair presentation of the Company's consolidated financial position and the consolidated results of its operations for the periods covered by such financial statements, and (c) with respect to contracts and commitments for the sale of goods or the provision of services by the Company and its Subsidiaries, contain and reflect adequate reserves for all reasonably anticipated material losses, returns and allowances and costs in excess of anticipated receipts. (b) The Company has delivered to Acquisition or Parent a complete and correct copy of any amendments or modifications, which have not yet been filed with the SEC, to agreements, documents or other instruments which previously had been filed by the Company with the SEC pursuant to the Exchange Act. SECTION 3.5 INFORMATION SUPPLIED. None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in (i) the Offer Documents, (ii) any Schedule 13E-3 (as defined in Section 5.5), (iii) the Proxy Statement (as defined in Section 5.4), (iv) the Schedule 14D-9, or (v) any other document filed or to be filed with the SEC or any other Governmental Entity (as defined herein) in connection with the Offer will, at the respective times that they or any amendments or supplements thereto are filed with the SEC and are first published or sent or given to holders of Shares, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. SECTION 3.6 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Securities Act, the Exchange Act, state securities or "blue sky" laws, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the Mexican Federal Law of Economic Competition (the "FLEC") and except for the filing and recordation of a Certificate of Merger as required by the DGCL, no filing with or notice to, and no permit, authorization, consent or approval of, any court or tribunal or administrative, governmental or regulatory body, agency or authority, whether foreign, federal, state or local (a "Governmental Entity") is necessary for the execution and delivery by the Company of this Agreement or the consummation by the Company of the transactions contemplated hereby or thereby, except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings or give such notice would not have a Material Adverse Effect. Neither the execution, deliver and performance of this Agreement by the 13 Company nor the consummation by the Company of the transactions contemplated hereby or thereby will (a) conflict with or result in any breach of any provision of the Certificate of Incorporation or Bylaws (or similar governing documents) of the Company or its Subsidiaries, (b) except as set forth on Schedule 3.6 of the Disclosure Schedule, result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their respective properties or assets may be bound, (c) violate any order, writ, injunction, ordinance, decree, law, statute, rule, regulation or injunction binding on or applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, except in the case of (b) or (c) for violations, breaches or defaults which would not have a Material Adverse Effect, or (d) except as set forth on Schedule 3.6 of the Disclosure Schedule, result in a breach or violation of, a default under, or the triggering of any payment or other material obligations pursuant to, any of the Company's or a Subsidiary's existing Employee Plans (as hereinafter defined) or any grant or award made under any of the foregoing. Except as disclosed on Schedule 3.6 of the Disclosure Schedule, the transactions contemplated by this Agreement will not constitute a "change of control" under, require the consent from or the giving of notice to a third party pursuant to, permit a third party to terminate or accelerate vesting or repurchase rights or create any other detriment under the terms, conditions or provisions of any note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation to which the Company or any Subsidiary is a party or by which any of them or any of their properties or assets may be bound, except where the adverse consequences resulting from such change of control or where the failure to obtain such consents or provide such notices could not have a Material Adverse Effect; provided, however, that the foregoing exception will not be applicable to any (i) note, bond, mortgage, indenture, contract, agreement or other instrument or obligation relating to (x) indebtedness of the Company or any Subsidiary with an outstanding principal amount of more than $100,000 or (y) annual revenues to the Company of more than $150,000 or (ii) employment, compensation, termination or severance agreement, instrument or obligation of the Company or any Subsidiary. The total amounts payable to the executives identified in Schedule 3.6 of the Disclosure Schedule, as a result of the transactions contemplated by this Agreement and/or any subsequent employment termination (including any cash-out or acceleration of options and restricted stock and any "gross-up" payments with respect to any of the foregoing), based on compensation data applicable as of the date hereof will not exceed the amount set forth on such schedule. SECTION 3.7 NO DEFAULT. None of the Company or its Subsidiaries are in default or violation (and no event has occurred which, with notice or the lapse of time or both, would constitute a default or violation) of any term, condition or provision of (a) its Certificate of Incorporation or Bylaws (or similar governing documents), (b) any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is now a party or by which any of them or any of their respective properties or assets may be bound or (c) any order, writ, injunction, decree, law, statute, rule, regulation or injunction binding on or applicable to the Company, its Subsidiaries or any of their respective properties or assets, except in the case of (b) or (c) for violations, breaches or defaults that would not have a Material Adverse Effect. 14 SECTION 3.8 NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES. As of December 31, 1997, none of the Company or its Subsidiaries had any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that would be required by generally accepted accounting principles to be reflected on a consolidated balance sheet of the Company and its Subsidiaries (including the notes thereto) or which would have a Material Adverse Effect. Except as set forth on Schedule 3.8 of the Disclosure Schedule and for the Agreement of March 23, 1998 with John W. McMackin, the eleven Key Employee Retention Benefit Agreements, the revised Termination of Employment Policies described on Schedule 3.8 and the Early Retirement Pension Benefit Incentive Program described on Schedule 3.8 (copies of which have been provided to Acquisition or Parent), the revisions of the 1993 Directors Plan described on Schedule 3.8 and the revisions to the Company's 1993 Annual Incentive Plan described on Schedule 3.8 (collectively, the "1998 Revisions"), since December 31, 1997, none of the Company or its Subsidiaries have incurred any liabilities of any nature, whether or not accrued, contingent or otherwise, which would have a Material Adverse Effect. Since December 31, 1997, there have been no events, changes or effects with respect to the Company or its Subsidiaries having a Material Adverse Effect. Except with respect to (a) the 1998 Revisions, (b) the amendments to the severance packages of Elwood M. Miller, James P. Luke and John W. McMackin limiting the amounts payable thereunder, and (c) the acquisition by the Company of the minority interest of its NEPSA subsidiary in Mexico, since December 31, 1997, the Company and each of its Subsidiaries has conducted its business in the ordinary course consistent with past practice and there has not been any event, occurrence or development or state of circumstances or facts as described in Sections 5.1(a) through 5.1(n). SECTION 3.9 LITIGATION. There is no suit, claim, action, proceeding or investigation pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or any of their respective properties or assets which would have a Material Adverse Effect or would prevent or delay the consummation of the transactions contemplated by this Agreement. None of the Company or its Subsidiaries are subject to any outstanding order, writ, injunction, ordinance, judgment or decree which would have a Material Adverse Effect or would prevent or delay the consummation of the transactions contemplated hereby. SECTION 3.10 COMPLIANCE WITH APPLICABLE LAW. The Company and its Subsidiaries hold all permits, licenses, variances, exceptions, orders and approvals of all Governmental Entities necessary for the lawful conduct of their respective businesses (the "Company Permits") except for failures to hold such permits, licenses, variances, exemptions, orders and approvals which would not have a Material Adverse Effect. The Company and its Subsidiaries are in compliance with the terms of the Company Permits, except where the failure so to comply would not have a Material Adverse Effect. The businesses of the Company and its Subsidiaries are not being conducted in violation of any law, ordinance, statute, rule or regulation of any Governmental Entity except for violations or possible violations which would not have a Material Adverse Effect. No investigation or review by any Governmental Entity with respect to the Company or its Subsidiaries is pending or, to the best knowledge of the Company, threatened, nor, to the best knowledge of the Company, has any Governmental Entity indicated an intention to conduct the same, other than, in each case, those which the Company reasonably believes will not have a Material Adverse Effect. 15 SECTION 3.11 EMPLOYEE PLANS. Schedule 3.11 contains a complete and correct list of all agreements, plans and programs relating to the compensation and benefits of present and former officers, directors and employees (or their beneficiaries) of the Company, its Subsidiaries and all corporations, partnerships, trades or businesses under common control with the Company within the meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the "Code") (each an "ERISA Affiliate"), or to which the Company or any Subsidiary or ERISA Affiliate is or may be required to contribute (each an "Employee Plan"), including all pension, retirement, bonus, stock option, severance, termination and other customary Company paid benefits (medical/major medical, disability, welfare, life insurance, etc.). Without limiting the generality of the foregoing, the term "Employee Plans" includes all employee welfare benefit plans within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and all employee pension benefit plans within the meaning of Section 3(2) of ERISA to which the Company, a Subsidiary or any ERISA Affiliate contributes or is or may be required to contribute, or under which any of them has or may have any current or future liability. On or after the date hereof, neither the Company nor any Subsidiary or ERISA Affiliate will establish, amend, modify or terminate any Employee Plan in any manner, except as may be required by this Agreement or with the written consent of Acquisition. (a) With respect to each Employee Plan, the Company has made available to Acquisition a true, correct and complete copy of: (i) all plan documents and amendments, benefit schedules, trust agreements, insurance contracts and other funding vehicles; (ii) the most recent Annual Report (Form 5500 Series) and accompanying schedules, if any; (iii) the current summary plan description, effective summaries of material modification, or employee handbook or manual; (iv) the most recent annual financial report; (v) the most recent actuarial report; and (vi) the most recent determination letter from the Internal Revenue Service ("IRS"), if any. (b) The Company, each Subsidiary and each ERISA Affiliate have complied and are now in compliance, in all material respects, with all provisions of ERISA, the Code and all laws and regulations, including laws and regulations of any non-U.S. government or agency, applicable to the Employee Plans. With respect to each Employee Plan that is intended to be a "qualified plan" within the meaning of Section 401(a) of the Code (a "Qualified Plan"), the IRS has issued a current favorable determination letter. No claims are pending against the Employee Plans, the Company, any Subsidiary or any ERISA Affiliate with respect to the Employee Plans, except for claims for benefit payments in the ordinary course of business, and no employee, beneficiary, dependent or governmental agency (including any non-U.S. agency) has threatened any appeal or litigation regarding any matter with respect to the Employee Plans. (c) All contributions required to be made to any Employee Plan by any applicable law or regulation (including laws and regulations of any non-U.S. government or agency) or by any plan document or other contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Employee Plan, for any period through the date hereof, have been fully reflected in the financial statements of the Company included in the SEC Reports to the extent required under generally accepted accounting principles. 16 (d) As to each Employee Plan that is subject to Title IV or Section 302 of ERISA or Section 412 or 4791 of the Code, there does not now exist, nor do any circumstances exist that could result in, any liability under any of those cited sections, and no reportable event has occurred or will occur (except to the extent the consummation of the Offer or Merger may itself be a reportable event). (e) As to each Employee Plan, there does not now exist, nor do any circumstances exist that could result in, any liability for failure properly to comply with the continuation coverage requirements of Section 601 ET SEQ. of ERISA and Section 4980B of the Code, and none of the Employee Plans provides for post-employment medical benefits, except to the extent required by those continuation coverage requirements. (f) No Employee Plan is a multiemployer plan, as defined in Section 3(37) of ERISA. SECTION 3.12 ENVIRONMENTAL LAWS AND REGULATIONS. (a) To the knowledge of the Company and except as set forth on Schedule 3.12 of the Disclosure Schedule, (i) each of the Company and its Subsidiaries is in compliance with all applicable foreign, federal, state and local laws, regulations and permits relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) (collectively, "Environmental Laws"), except for non-compliance that would not have a Material Adverse Effect, which compliance includes, but is not limited to, the possession by the Company and its Subsidiaries of all material permits and other governmental authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof, (ii) since July 1, 1995, none of the Company or its Subsidiaries have received written notice of, or, to the best knowledge of the Company, are the subject of, any material action, cause of action, claim, investigation, demand or notice by any person or entity alleging liability under or non-compliance with any Environmental Law (an "Environmental Claim") and (iii) to the best knowledge of the Company, there are no circumstances that are reasonably likely to prevent or interfere with such material compliance in the future. (b) Except as set forth on Schedule 3.12, to the knowledge of the Company, there are no Environmental Claims which would have a Material Adverse Effect that are pending or, to the best knowledge of the Company, threatened against the Company or its Subsidiaries or, to the best knowledge of the Company, against any person or entity whose liability for any Environmental Claim the Company or any of its Subsidiaries has or may have retained or assumed either contractually or by operation of law. (c) Except as set forth on Schedule 3.12 of the Disclosure Schedule, there are not, and to the best knowledge of the Company, there never have been, any underground or above ground storage tanks, or any ponds, pits, lagoons or impoundments containing hazardous substances on any real property currently or formerly owned or operated by the Company or any Subsidiary. 17 (d) Except as set forth on Schedule 3.12 of the Disclosure Schedule, no hazardous substances have ever been disposed of, buried, spilled, leaked, discharged, emitted, or released at levels requiring reporting, investigation, removal, or remediation under any Environmental Law, in, on, from or under real property currently or formerly owned or operated by the Company or any Subsidiary, including such real property for which the Company or any Subsidiary has retained or assumed liability either contractually or by operation of law. SECTION 3.13 TAX MATTERS. (a) The Company and its Subsidiaries have accurately prepared and duly filed with the appropriate federal, state, local and foreign taxing authorities all tax returns, information returns and reports required to be filed with respect to the Company and its Subsidiaries and have paid in full or made adequate provision for the payment of all Taxes (as defined below). Neither the Company nor any of its Subsidiaries is delinquent in the payment of any Taxes. As used herein, the term "Taxes" means all federal, state, local and foreign taxes, including, without limitation, income, profits, franchise, employment, transfer, withholding, property, excise, sales and use taxes (including interest and penalties thereon and additions thereto). (b) Except as set forth on Schedule 3.13, (i) neither the Company nor its Subsidiaries (A) have ever been a member of any group of companies that files a consolidated, combined, or unitary return for federal, state, local, or foreign Tax purposes (except for any group that has the Company as its common parent); (B) have ever been a party to a joint venture, partnership, or other arrangement that could be treated as a partnership for tax purposes, (C) have ever executed or filed with any taxing authority any agreement or other document extending or having the effect of extending the period for assessment, reassessment, or collection for any Taxes or have ever executed a power of attorney with respect to Taxes that is currently in force; (D) have any tax audits or other administrative proceedings presently pending with regard to any Taxes or tax returns; (E) have any issues being asserted against it by any taxing authority; (F) have ever entered into any agreement with respect to Taxes that affects any taxable year ending after the closing of the Offer; (G) have been required to make, or have agreed to or have an application pending to make, any adjustment by reason of a change in accounting methods that affects any taxable year after the closing of the Offer; (H) have any permanent establishment in any foreign country (apart from Mexico) or are engaged in a trade or business in any foreign country (apart from Mexico); or (I) are party to any contract, agreement, plan, or arrangement covering any employee of the Company or any Subsidiary that, individually or collectively, could give rise to a payment that would not be deductible by reason of either Section 280G or Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"); and (ii) No asset of the Company or any Subsidiary is tax-exempt use property under Code Section 168(h), is required to be treated as owned by any other person pursuant to the safe harbor lease provisions of former Code Section 168(f)(8), or been financed (directly or indirectly) from proceeds of any tax-exempt state of local government obligation described in Code Section 103(a). 18 SECTION 3.14 AFFILIATE TRANSACTIONS. Neither the Company nor any of its Subsidiaries is a party to any transaction (including, without limitation, the purchase or sale of any property or service) with, or involving the making of any payment or transfer to, any Affiliate (as defined below) other than the Company or any of its wholly-owned Subsidiaries. "AFFILIATE" of any person means any other person directly or indirectly controlling, controlled by or under common control with such person. A person shall be deemed to control another person if the controlling person owns 10% or more of any class of voting securities (or other ownership interest) of the controlled person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled person, whether through ownership of stock, by contract or otherwise. SECTION 3.15 LABOR MATTERS. Except as set forth on Schedule 3.15 to the Disclosure Schedule, no employee of the Company or of any of its Subsidiaries are represented by any labor union or any collective bargaining organization. No labor organization or group of employees of the Company or any of its Subsidiaries has made a pending demand for recognition or certifications, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the best knowledge of the Company, threatened to be brought or filed, with the National Labor Relations Board or any other labor relations tribunal or authority. SECTION 3.16 RELATIONSHIPS WITH CUSTOMERS, SUPPLIERS, DISTRIBUTORS AND SALES REPRESENTATIVES. Except with respect to reduced purchases or order cancellations by the material customers listed on Schedule 3.16 which have been disclosed by the Company to Parent, and subject to the last sentence of Section 3.21, neither the Company nor any Subsidiary has received notice that any customer, supplier, distributor or sales representative intends to cancel, terminate or otherwise modify its relationship or any contract or agreement with the Company or any of its Subsidiaries which existed on December 31, 1997 and which would have a Material Adverse Effect. SECTION 3.17 CONTRACTS. Schedule 3.17 of the Disclosure Schedule lists all written or oral contracts, agreements, guarantees, leases (each a "Contract") to which the Company or any of its Subsidiaries is a party and which fall within any of the following categories: (i) Contracts not entered into in the ordinary course of business, (ii) joint venture, partnership and like agreements, (iii) Contracts containing covenants purporting to limit the ability of the Company or any of its Subsidiaries to compete in any line of business in any geographic area or to hire or solicit any individual or group of individuals, (iv) Contracts which after the Effective Time would have the effect of limiting the ability of Parent or its subsidiaries (other than the Company and its Subsidiaries) to complete in any line of business in any geographic area or to hire any individual or group of individuals, (v) Contracts which contain minimum purchase conditions or requirements or other terms that restrict or limit the purchasing relationships of the Company or any of its Subsidiaries, (vi) Contracts relating to any outstanding commitment for capital expenditures in excess of $250,000, (viii) indentures, mortgages, promissory notes, loan agreements, guarantees of amounts in excess of $250,000, letter of credit or other agreements or instruments of the Company or any of its Subsidiaries or commitments for the borrowing or the lending of amounts in excess of $250,000 by the Company or any of its Subsidiaries or providing for the creation of any lien upon any of the assets of the Company or any of its Subsidiaries and (viii) Contracts with or for the benefit of any Affiliate of the Company (other than Subsidiaries). All of the Contracts required to be disclosed by this Section 3.17 are valid and binding obligations of the Company or a Subsidiary 19 and the valid and binding obligation of each other party thereto, except such Contracts which if not so valid and binding would not have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any other party thereto is in violation of or in default in respect of, nor has there occurred an event or condition which with the passage of time or giving of notice (or both) could constitute a default under, any such Contract except such violations or defaults under such Contracts which would not have a Material Adverse Effect. SECTION 3.18 TANGIBLE PROPERTY; REAL PROPERTY AND LEASES. (a) The Company and each Subsidiary have sufficient title to all their tangible properties and assets necessary to conduct their respective businesses as currently conducted or as contemplated to be conducted, with only such exceptions as, individually or in the aggregate, would not have a Material Adverse Effect. (b) Each parcel of real property owned or leased by the Company or any Subsidiary (i) is owned or leased free and clear of all Liens, other than (A) Liens for current taxes and assessments not yet past due, (B) workmen's, repairmen's, warehousemen's and carriers' Liens arising in the ordinary course of business of the Company or such Subsidiary consistent with past practice, and (C) all Liens which, individually or in the aggregate, would not have a Material Adverse Effect, and (ii) no material portion of which is either subject to any governmental decree or order to be sold or is being condemned, expropriated or otherwise taken by any Governmental Entity with or without payment of compensation therefor, nor, to the best knowledge of the Company, has any such condemnation, expropriation or taking been proposed. (c) All leases of real property leased for the use or benefit of the Company or any Subsidiary to which the Company or any Subsidiary is a party requiring annual rental payments in excess of $100,000 during the period of the lease and all amendments and modifications thereto are in full force and effect and have not been otherwise modified or amended, the Company is in possession of such leased real property, and there exists no default under any such lease by the Company or any Subsidiary, nor any event which with notice or lapse of time or both would constitute a default thereunder by the Company or any Subsidiary, except as, individually or in the aggregate, would not have a Material Adverse Effect. SECTION 3.19 TRADEMARKS, PATENTS AND COPYRIGHTS. The Company and the Subsidiaries own or possess adequate licenses or other valid rights to use all patents, trademarks, trade names, trade dress, copyrights, service marks, trade secrets, applications for trademarks and for service marks, mask works, know-how and other proprietary rights and information used or held for use in connection with the business of the Company and the Subsidiaries as currently conducted or as contemplated to be conducted and the Company is unaware of any assertion or claim challenging the validity of any of the foregoing, which, individually or in the aggregate, could have a Material Adverse Effect. The conduct of the business of the Company and the Subsidiaries as currently conducted and as contemplated to be conducted did not, does not and will not infringe in any way with any patent, license, trademark, trade dress, trade name, service mark, mask work or copyright of any third party that, individually or in the aggregate, could have a Material Adverse Effect. There are no infringements of any proprietary rights owned by or licensed by or to the Company or any 20 Subsidiary which, individually or in the aggregate, could have a Material Adverse Effect. Neither the Company nor any Subsidiary has licensed or otherwise authorized the use by any third party of any proprietary information on terms or in a manner which, individually or in the aggregate, could have a Material Adverse Effect. SECTION 3.20 BROKERS. No broker, finder, financial advisor or investment banker other than BHC is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement. The aggregate Merger Fees (as defined herein) owed or which will be owing by the Company and its Subsidiaries in connection with the Offer, the Merger and the other transactions contemplated by this Agreement will not exceed $3,500,000. "Merger Fees" means all fees and expenses paid since March 1, 1998 or payable by or on behalf of the Company or any of its Subsidiaries to all attorneys, accountants, investment bankers, financial advisors and other experts and advisors incident to the negotiation, preparation, execution and consummation of this Agreement and the transactions contemplated hereby. SECTION 3.21 NO OTHER REPRESENTATIONS OR WARRANTIES. No representations or warranties have been made by or on behalf of the Company or any of its Subsidiaries in connection with the Merger and the transactions contemplated by this Agreement other than those expressly set forth in this Agreement. Without limiting the generality of the foregoing, no representations or warranties are being made with respect to financial projections or the future financial performance of the Company, its Subsidiaries or their respective businesses. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION Parent and Acquisition hereby represent and warrant to the Company that all of the statements contained in Article 4 are true and correct as of the date of this Agreement (or if made as of a specified date, as of such date): SECTION 4.1 ORGANIZATION. (a) Each of Parent and Acquisition is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has all requisite power and authority to own, lease and operate its properties and to carry on its businesses as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power and authority would not have a Parent Material Adverse Effect (as defined below). When used in connection with Parent or Acquisition, the term "Parent Material Adverse Effect" means any effect, change or event that is or is reasonably likely to be materially adverse to the business, assets, prospects, results of operations or condition (financial or otherwise) of Parent and its subsidiaries, taken as a whole. (b) Parent has heretofore delivered to the Company accurate and complete copies of the Articles of Incorporation or Certificate of Incorporation and Bylaws, as applicable, as currently in effect, of Parent and Acquisition. Each of Parent and its subsidiaries is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property is owned, 21 leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have a Parent Material Adverse Effect. SECTION 4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Acquisition has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by Parent and Acquisition and by Parent as the sole shareholder of Acquisition, and no other corporate proceedings on the part of Parent or Acquisition are necessary to authorize this Agreement or to consummate the transactions contemplated hereby or thereby, except that the approval of Parent's shareholders of this Agreement and the Merger and the transactions contemplated hereby and thereby may be required. This Agreement has been duly and validly executed and delivered by each of Parent and Acquisition and constitutes a valid, legal and binding agreement of each of Parent and Acquisition, enforceable against each of Parent and Acquisition in accordance with its terms. SECTION 4.3 INFORMATION SUPPLIED. None of the information supplied or to be supplied by Parent or Acquisition for inclusion or incorporation by reference in (i) the Offer Documents, (ii) any Schedule 13E-3, (iii) the Schedule 14D-9, (iv) the Proxy Statement or (v) any other documents filed or to be filed with the SEC or any other Governmental Entity in connection with the Offer will, at the respective times that they or any amendments or supplements thereto are filed with the SEC and are first published or sent or given to holders of Shares, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. SECTION 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Assuming the truth and accuracy of the Company's representations and warranties contained in Section 3.6, except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Securities Act, the Exchange Act, state securities or "blue sky" laws, the HSR Act and the filing of a Certificate of Merger as required by the DGCL, no filing with or notice to, and no permit, authorization, consent or approval of, any Governmental Entity is necessary for the execution and delivery by Parent or Acquisition of this Agreement or the consummation by Parent or Acquisition of the transactions contemplated hereby or thereby, except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings or give such notice would not have a Parent Material Adverse Effect. Neither the execution, delivery and performance of this Agreement by Parent or Acquisition nor the consummation by Parent or Acquisition of the transactions contemplated hereby or thereby will (a) conflict with or result in any breach of any provision of the respective certificate or Articles/Certificate of Incorporation or Bylaws (or similar governing documents of Parent or Acquisition, (b) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which Parent or Acquisition is a party or by which any of them or any of their respective 22 properties or assets may be bound or (c) violate any order, writ, injunction, decree, law, statute, rule, ordinance regulation or injunction binding on or applicable to Parent or Acquisition or any of their respective properties or assets, except in the case of (b) or (c) for violations, breaches or defaults which would not have a Parent Material Adverse Effect or on the ability of Parent or Acquisition to consummate the Offer or the Merger. SECTION 4.5 NO DEFAULT. Neither Parent or Acquisition are in default or violation (and no event has occurred which, with notice or the lapse of time or both, would constitute a default or violation) of any term, condition or provision of (a) its certificate or Articles/Certificate of Incorporation or Bylaws (or similar governing documents), (b) any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which Parent or Acquisition is now a party or by which any of them or any of their respective properties or assets may be bound or (c) any order, writ, injunction, decree, law, statute, rule or regulation applicable to Parent, Acquisition or any of their respective properties or assets, except in the case of (b) or (c) for violations, breaches or defaults that would not have a Parent Material Adverse Effect. SECTION 4.6 AVAILABILITY OF FINANCING. Parent and Acquisition have received financing commitments from The Chase Manhattan Bank and Chase Securities, Inc. (the "Commitments") and will have the necessary funds to purchase all of the shares of the Company Common Stock in the Offer and the Merger and to pay any and all of the costs and expenses incurred and to be incurred by Parent and Acquisition in connection with the transactions contemplated by the Agreement. Parent hereby guaranties the payment and the performance by Acquisition of its obligations under the Agreement. SECTION 4.7 NO PRIOR ACTIVITIES. Except for obligations incurred in connection with its incorporation or organization, the making of the Offer or the negotiation and consummation of this Agreement and the transactions contemplated hereby, Acquisition has neither incurred any obligation or liability nor engaged in any business or activity of any type or kind whatsoever nor entered into any agreement or arrangement with any person or entity. SECTION 4.8 BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by and on behalf of Parent or Acquisition. SECTION 4.9 NO OTHER REPRESENTATIONS OR WARRANTIES. No representations or warranties are made by or on behalf of Parent or Acquisition in connection with the transactions contemplated by this Agreement other than those expressly set forth in this Agreement. Without limiting the generality of the foregoing, no representations or warranties are being made with respect to financial projections or the future financial performance of Parent, Acquisition or their businesses. 23 ARTICLE 5 COVENANTS SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by this Agreement, during the period from the date hereof to the Effective Time, the Company and its Subsidiaries (i) shall not conduct their operations otherwise than in the ordinary course of business consistent with past practice and (ii) shall use their commercially reasonable efforts to preserve the business organization of the Company and each Subsidiary. Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement, prior to the Effective Time, the Company will not, without the prior written consent of Parent or Acquisition, and will not permit any of its Subsidiaries to: (a) amend its Certificate of Incorporation or Bylaws (or other similar governing instrument); (b) amend or modify (except as contemplated herein) the terms of any benefit or stock option plan or authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitment, subscriptions, rights to purchase or otherwise) any stock of any class or any other securities or equity equivalents (including, without limitation, any stock options or stock appreciation rights), except for the issuance or sale of shares of Company Common Stock pursuant to the exercise of Company Stock Options issued and outstanding on the date hereof; (c) split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, or redeem or otherwise acquire any Company Securities or any securities of the Company's Subsidiaries; (d) (i) incur or assume any long-term or short-term debt or issue any debt securities, except for borrowings under existing lines of credit in the ordinary course of business; (ii) except as described in Schedule 5.1 of the Disclosure Schedule, assume, guarantee, endorse or otherwise become liable or responsible for (whether directly, contingently or otherwise) the obligations of any other person, except in the ordinary course of business consistent with past practice; (iii) except for short-term investments in the ordinary course of business, make any loans, advances or capital contributions to, or investments in, any other person other than intercompany loans between any wholly-owned Subsidiary and the Company and the Company or another wholly-owned Subsidiary; (iv) pledge or otherwise encumber shares of capital stock of the Company or its Subsidiaries; or (v) mortgage or pledge any of its assets, tangible or intangible, or create or suffer to exist any Lien thereupon except for Liens securing indebtedness not exceeding One Million Dollars ($1,000,000.00) in the aggregate; (e) except as described in Section 3.8 herein or as contemplated by this Agreement enter into, adopt or amend or terminate any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit, stock equivalent, stock purchase agreement, pension, retirement, deferred compensation, 24 employment, severance or other employee benefit agreement, trust, plan, fund or other arrangement for the benefit or welfare of any director, officer or employee in any manner, or (except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits or compensation expense to the Company or its Subsidiaries), increase in any manner the compensation or fringe benefits of any director, officer or employee or pay any benefit not required by any plan and arrangement as in effect as of the date hereof (including, without limitation, the granting of stock appreciation rights or performance units); (f) except with the consent of Parent or Acquisition, which consent will not be unreasonably withheld, acquire, sell, lease, license, transfer or dispose of any assets outside the ordinary course of business; (g) except as may be required as a result of a change in law or in generally accepted accounting principles, change any of the accounting principles or practices used by it, including tax accounting policies and procedures; (h) except as described in the draft of the Joint Venture Agreement between the Company and Canguru Embalagens Criciuma Ltda., a subsidiary of Servinec Industria e Servicos Mecanicos Ltda., a limited liability corporation, under the laws of Brazil (which the Company agrees not to execute without the prior consent of Parent), (i) acquire (by merger, consolidation or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof or any equity interest therein; (ii) authorize or make any new capital expenditure or expenditures other than those already included in the Company's 1998 capital expenditure budget previously provided to Parent or Acquisition; or (iii) enter into or amend any contract, agreement, commitment or arrangement providing for the taking of any action that would be prohibited hereunder; (i) make any tax election or settle or compromise any material income tax liability; (j) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) other than the payment, discharge or satisfaction of liabilities in the ordinary course of business consistent with past practice reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company and its Subsidiaries at December 31, 1997; (k) settle or compromise any suit, action or claim or threatened suit, action or claim where the amount involved is greater than $500,000; (l) other than the ordinary course of business and consistent with past practice, (i) waive any rights of substantial value, (ii) cancel or forgive any material indebtedness owed to the Company or any of its Subsidiaries, or (iii) make any payment, direct or indirect, of any material liability of the Company or any of its Subsidiaries before the same come due in accordance with its terms; or 25 (m) permit any insurance policy naming the Company or any of its Subsidiaries as a beneficiary or a loss payee to be canceled or terminated, except in the ordinary course of business consistent with past practice; or (n) take, or agree in writing or otherwise to take, any of the actions described in Sections 5.1(a) through 5.1(m) or any action which would make any of the representations or warranties of the Company contained in this Agreement untrue or incorrect as of the date when made. SECTION 5.2 ACQUISITION PROPOSALS. (a) The Company agrees that neither it nor any of its Subsidiaries nor any of the officers, directors, employees, agents or representatives of it or its Subsidiaries (collectively, the "Representatives") shall, directly or indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries or the making of any proposal or offer with respect to a merger, liquidation, recapitalization, reorganization, share exchange, consolidation or similar transaction involving it, or any purchase of, or tender offer for, any equity securities of it or any of its Subsidiaries or 15% or more of its and its Subsidiaries' assets (based on the fair market value thereof) taken as a whole (any such proposal or offer being hereinafter referred to as an "Acquisition Proposal"). The Company further agrees that neither it nor any of its Subsidiaries nor any of the Representatives or Subsidiaries shall, directly or indirectly, have any discussions with or provide any non-public information or data to any Person relating to an Acquisition Proposal or engage in any negotiations concerning an Acquisition Proposal, or otherwise facilitate any effort to attempt to make or implement an Acquisition Proposal or enter into any agreement or understanding requiring it to abandon, terminate, delay or fail to consummate the Merger or any other transactions contemplated by the Agreement; provided, however, that nothing contained in this Agreement shall prevent the Company or its board of directors from complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal; and further provided, however, that nothing contained in Section 5.2 shall prohibit the Company or any Representative from furnishing information to, or entering into discussions or negotiations with, any person or entity that makes an unsolicited written, bona fide Acquisition Proposal (i) that involves all cash consideration and contains no express financing contingency; and (ii) that the Board of Directors of the Company concludes in good faith is reasonably capable of being completed, taking into account all legal, financial, regulatory and other aspects of the Acquisition Proposal and the Person making the Acquisition Proposal, and that would, if consummated, result in a transaction more favorable to the Company's shareholders from a financial point of view than the transaction contemplated by this Agreement (any such more favorable Acquisition Proposal being referred to herein as a "Superior Proposal") if, and only to the extent that, (A) prior to taking such action, the Company (x) provides reasonable notice to Parent to the effect that it is taking such action, and (y) receives from such person or entity an executed confidentiality agreement in reasonably customary from, and (B) the Company promptly advises Parent as to all of the relevant details relating to, and all material aspects, of any such discussions or negotiations. (b) At any time after 48 hours following notification to Parent of the Company's intent to do so (which notification shall include the identity of the bidder and the 26 material terms and conditions of the proposal) and if the Company has otherwise complied with the terms of this Section 5.2, the Board of Directors may withdraw or modify its approval or recommendation of the Offer, terminate the Agreement and cause the Company to enter into any agreement with respect to a Superior Proposal, provided it shall concurrently with entering into such agreement pay or cause to be paid to Purchaser the Termination Fee (as defined below). If the Company shall have notified Parent of its intent to enter into an agreement with respect to a Superior Proposal in compliance with the preceding sentence and has otherwise complied with such sentence, the Company may enter into an agreement with respect to such Superior Proposal (with the bidder and on terms no less favorable than those specified in such notification to Parent) after the expiration of such 48 hour period. (c) The Company agrees that it, its Subsidiaries and their respective officers, directors, employees, representatives and agents will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. The Company also agrees that it will promptly request each Person that has heretofore executed a confidentiality agreement in connection with its consideration of any Acquisition Proposal to return all confidential information heretofore furnished to such Person by or on behalf of it or any of its Subsidiaries. SECTION 5.3 ACCESS TO INFORMATION. (a) Between the date hereof and the Effective Time, the Company will provide and will cause its Subsidiaries and each of their respective officers, directors, employees, agents and representatives to provide to Parent and Acquisition and their authorized representatives full access to all employees, plants, offices, warehouses and other facilities and to all books and records of the Company and its Subsidiaries, will permit Parent and Acquisition to make such inspections as Parent and Acquisition may reasonably require and will cause the Company's officers and those of its Subsidiaries to furnish Parent and Acquisition with such financial and operating data and other information with respect to the business, operations and properties of the Company and its Subsidiaries as Parent or Acquisition may from time to time reasonably request. (b) Each of Parent and Acquisition will hold and will cause its consultants and advisors to hold in confidence all documents and information concerning the Company and its Subsidiaries furnished to Parent or Acquisition in connection with the transactions contemplated by this Agreement pursuant to the terms of that certain Confidentiality Agreement entered into between the Company and Parent dated January 22, 1998; provided, that upon consummation of the Offer, the parties agree that such Confidentiality Agreement will terminate. SECTION 5.4 SHAREHOLDERS MEETING. (a) If a vote of the Company's shareholders is required by law, the Company will, as promptly as practicable following the acceptance for payment of Shares by Acquisition pursuant to the Offer, take, in accordance with applicable law and its Certificate of Incorporation and Bylaws, all action necessary to convene a meeting of holders of Shares (the "Shareholders Meeting") to consider and vote upon the approval of this Agreement. In connection 27 with such shareholders meeting, the Company will prepare and file with the SEC a proxy statement for the solicitation of a vote of holders of Shares approving the Merger (the "Proxy Statement"), which shall include the recommendation of the Company Board that shareholders of the Company vote in favor of the approval and adoption of this Agreement and the written opinion of the Financial Advisor referred to in Section 1.2(a) that the cash consideration to be received by the shareholders of the Company pursuant to the Merger is fair to such shareholders from a financial point of view. The Company shall use all reasonable efforts to have the Proxy Statement cleared by the SEC as promptly as practicable after such filing, and promptly thereafter mail the Proxy Statement to the shareholders of the Company. The Company shall also use its best efforts to obtain all necessary state securities law or "blue sky" permits and approvals required in connection with the Merger and to consummate the other transactions contemplated by this Agreement and will pay all expenses incidental thereto. Notwithstanding the foregoing, if Parent, Acquisition and/or any other subsidiary of Parent shall acquire at least ninety percent (90%) of the issued and outstanding shares of Company Common Stock pursuant to the Offer, the parties shall take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a Shareholders Meeting in accordance with the DGCL. (b) Parent and Acquisition agree to cause all shares of Company Common Stock purchased pursuant to the Offer and all other shares of Company Common Stock owned by Parent, Acquisition or any subsidiary of Parent to be voted in favor of the Merger. SECTION 5.5 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Subject to the terms and conditions herein provided, each of the Company, Parent and Acquisition shall, and the Company shall cause its Subsidiaries to use all commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, (a) cooperation in the preparation and filing of the Offer Documents, the Schedule 14D-9, any Schedule 13E-3 required by the Exchange Act (the "Schedule 13E-3"), the Proxy Statement and any filings that may be required under the HSR Act and the FLEC and any amendments thereto; (b) the taking of all action reasonably necessary, proper or advisable to consummate the financing contemplated by the Commitments, to secure any necessary consents under existing debt obligations of the Company and its Subsidiaries or to amend the notes, indentures or agreements relating thereto to the extent required by such notes, indentures or agreements or redeem or repurchase such debt obligations; (c) contesting any legal proceeding relating to the Offer or the Merger and (d) the execution of any additional instruments necessary to consummate the transactions contemplated hereby. Subject to the terms and conditions of this Agreement, Parent and Acquisition agree to use all reasonable efforts to cause the Effective Time to occur as soon as reasonably practicable after the shareholder vote with respect to the Merger. In case at any time after the Effective Time any further action is necessary to carry out the purposes of this Agreement, the parties shall use their best efforts to cause the appropriate officers and directors to take all such necessary action. SECTION 5.6 CONSENTS. Parent, Acquisition and the Company each will, and the Company will cause each of its Subsidiaries to, use all commercially reasonable efforts to obtain consents or 28 waivers of all third parties and Governmental Entities necessary, proper or advisable for the consummation of the transactions contemplated by this Agreement. SECTION 5.7 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, Parent, Acquisition and the Company and its Subsidiaries, as the case may be, will consult with one another before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by this Agreement, including, without limitation, the Offer or the Merger, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law or by obligations pursuant to any listing agreement with the New York Stock Exchange, Inc., AMEX, or the Nasdaq Stock Market, as determined in good faith by Parent, Acquisition or the Company, as the case may be. SECTION 5.8 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. (a) Parent and Acquisition agree that all rights to indemnification or exculpation now existing in favor of the directors, officers, employees and agents of the Company and its Subsidiaries as provided in their respective charters or bylaws (or other similar governing instruments) or otherwise in effect as of the date hereof with respect to matters occurring prior to the Effective Time shall survive the Merger and shall continue in full force and effect for a period of not less than six (6) years following the Effective Time. To the maximum extent permitted by the DGCL, such indemnification shall be mandatory rather than permissive and the Surviving Corporation shall advance expenses as incurred to the fullest extent permitted under applicable law in connection with such indemnification (subject to the Surviving Corporation's receipt of an undertaking (if required by law) by the indemnified party to return such advanced expenses to the Surviving Corporation if it is determined by a final, non-appealable order of a court of competent jurisdiction that such indemnified party is not entitled to retain such advanced expenses). (b) Parent shall cause the Surviving Corporation to maintain in effect for not less than six (6) years from the Effective Time the policies of the directors' and officers' liability and fiduciary insurance most recently maintained by the Company with respect to matters occurring prior to the Effective Time; provided, that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are no less beneficial to the beneficiaries of the existing policies in effect on the date hereof; provided, further, that during the last three years of the six (6) year period following the Effective Time, the Surviving Corporation shall not be obligated to pay an annual premium in excess of 200% of the most recent annual premium paid by Company prior to the date hereof (which the Company represents to have been $80,000). (c) In the event the Company or its successor (i) is consolidated with or merges into another person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any other person in a single transaction or a series of related transactions, then in each such case Parent shall make or cause to be made proper provision so that the successor or transferee of the Company shall comply in all material respects with the terms of this Section 5.8. 29 (d) The provisions of this Section 5.8 are intended to be for the benefit of, and shall be enforceable by, each of the directors, officers, employees and agents of the Company and its Subsidiaries, their heirs and their representatives. SECTION 5.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice to Parent and Acquisition, and Parent and Acquisition shall give prompt notice to the Company, of (a) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be likely to cause any representation or warranty of the notifying party contained in this Agreement to be untrue or inaccurate in any material respect as if made at any time from the date hereof to the Effective Time and (b) any material failure of the notifying party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 5.9 shall not cure any such breach or non-compliance or limit or otherwise affect the remedies available hereunder to the party receiving such notice. SECTION 5.10 EMPLOYEE MATTERS. (a) Employees of the Company and its Subsidiaries shall be treated after the Merger no less favorably under Parent ERISA Plans than other similarly situated employees of Parent and its subsidiaries. (b) For a period of one (1) year following the Merger, Parent shall and shall cause its subsidiaries to maintain, with respect to their employees who had been employed by the Company or any of its Subsidiaries prior to the Effective Time and who remain employed following the Effective Time ("Transferred Employees") employee benefits (as defined for purposes of Section 3(3) of ERISA), other than stock option plans, which are substantially comparable in the aggregate to such employee benefits provided by the Company and its Subsidiaries immediately prior to the Merger. Parent shall and shall cause its subsidiaries (i) to maintain with respect to the Transferred Employees, for a period of one (1) year following the Merger, base salary or regular hourly wage rates at not less than the amount or rate applicable to such employees immediately prior to the Merger and (ii) continue the Company's severance program through December 31, 1998. (c) To the extent they participate under such plans, Parent and its subsidiaries shall credit employees of the Company and its Subsidiaries for purposes of determining eligibility to participate or vesting under Parent ERISA Plans with their service prior to the Merger with the Company and its Subsidiaries to the same extent such service was counted under similar benefit plans of the Company prior to the Merger. (d) Nothing contained herein shall be construed as requiring Parent or the Surviving Corporation to continue any specific plans or to continue the employment of any specific person, except Elwood M. Miller, who shall be guaranteed employment at his current salary and cash bonus levels through July 1, 1998. SECTION 5.11 SEC FILINGS. Each of Parent and the Company shall promptly provide the other party (or its counsel) with copies of all filings made by the other party or any of its subsidiaries with 30 the SEC or any other state or federal Governmental Entity in connection with this Agreement and the transactions contemplated hereby. SECTION 5.12 GUARANTEE OF PERFORMANCE. Parent hereby guarantees the payment and performance by Acquisition of its obligations under this Agreement and the indemnification and other obligations of the Surviving Corporation provided for in Section 5.8. SECTION 5.13 NOTICE OF CERTAIN EVENTS. The Company shall promptly notify Acquisition, and Acquisition shall promptly notify the Company, of: (a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (b) any notice or other communication from any Governmental Entity in connection with the transactions contemplated by this Agreement; and (c) with respect only to the Company and its Subsidiaries, any actions, suits, claims, investigations or proceedings commenced or, to the best of its knowledge, threatened which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.9 or which relate to the consummation of the transactions contemplated by this Agreement or which could result in a Material Adverse Effect. ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE MERGER SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The respective obligations of each party to effect the Merger are subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) if required by law in order to effect the Merger, this Agreement shall have been approved and adopted by the requisite vote of the shareholders of the Company; (b) no applicable statute, rule, regulation, judgment, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits, restrains, enjoins or restricts the consummation of the Merger or has the effect of making the purchase of the Shares illegal; (c) any waiting period applicable to the Merger and the other transactions described in the recitals to this Agreement under the HSR Act shall have terminated or expired, and any other governmental or regulatory notices or approvals required with respect to the transactions contemplated hereby shall have been either filed or received; and (d) Acquisition shall have purchased the Shares pursuant to the Offer. 31 ARTICLE 7 TERMINATION; AMENDMENT; WAIVER SECTION 7.1 TERMINATION. This Agreement may be terminated and the Offer and the Merger may be abandoned at any time prior to the Effective Time: (a) by mutual written consent of Parent, Acquisition and the Company; (b) by Parent or Acquisition or the Company if any Governmental Entity shall have issued, enacted, entered, promulgated or enforced any final order, judgment, decree or ruling or taken any other final action restraining, enjoining or otherwise prohibiting the Offer or the Merger and such order, judgment, decree, ruling or other action is or shall have become nonappealable; (c) by Parent and Acquisition if (A) due to an occurrence or circumstance which would result in a failure to satisfy any of the Offer Conditions (it being understood that if such occurrence or circumstance is curable by the Company through the exercise of its reasonable best efforts prior to the next scheduled expiration date of the Offer, and for so long as the Company continues to exercise such reasonable best efforts prior to such expiration date, Acquisition may not terminate the Offer prior to such expiration date, Acquisition shall have (i) terminated the Offer or (ii) failed to pay for shares of Company Common Stock pursuant to the Offer (but only following the expiration of the 10-day extension contemplated by the proviso to the last sentence of Section 1.1(b)) or (B) the Offer shall not have been consummated on or before July 31, 1998; PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant to this clause (c) shall not be available to Parent or Acquisition if (X) either of them has breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed to the failure referenced in this clause (c) or (Y) during any extension of the Offer made pursuant to Section 1.1(b)(iii) of this Agreement; (d) by the Company (i) if Acquisition shall have failed to commence the Offer pursuant to Section 1.1 of this Agreement, or (ii) if the Offer shall not have been consummated by July 31, 1998; PROVIDED, HOWEVER, that the right to terminate the Agreement pursuant to this clause (d) shall not be available to the Company if it has breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed to the failure referenced in this clause (d); (e) by the Company prior to the purchase of Shares pursuant to the Offer (i) if there shall have been a breach of any representation or warranty on the part of Parent or Acquisition set forth in this Agreement, or if any representation or warranty of Parent or Acquisition shall have become untrue, in either case which materially adversely affects (or materially delays) the consummation of the Offer; (ii) if there shall have been a breach on the part of Parent or Acquisition of any of their respective covenants or agreements hereunder or materially adversely affecting (or materially delaying) the consummation of the Offer (including the payment for Shares), and Parent or Acquisition, as the case may be, has not cured such breach prior to the earlier of (A) ten (10) days following notice by the Company thereof and (B) two (2) Business Days prior to 32 the date on which the Offer expires, provided that with respect to clauses (i) and (ii) the Company has not breached in any material respect any of its obligations under this Agreement in any manner that shall have proximately contributed to the breaches referenced in this clause (e) or (iii) pursuant to Section 5.2(b); or (f) by Parent or Acquisition prior to the purchase of shares of Company Common Stock pursuant to the Offer if (i) the Company Board or any committee thereof (A) withdraws or modifies in a manner adverse to Parent or Acquisition its approval or favorable recommendation of the Offer or the approval or recommendation of the Merger or (B) approves or recommends an Acquisition Proposal by a person other than Parent or Acquisition or (C) resolves to do any of the foregoing; (ii) (X) the Company enters into an agreement with respect to an Acquisition Proposal or a Third Party Acquisition (as defined below), (Y) except for a transaction described in the following clause (Z), a transaction contemplated by an Acquisition Proposal (other than such a transaction without the consent or approval of the Company which results in a Third Party (as defined below) acquiring less than ten percent (10%) of the outstanding Shares and does not otherwise constitute an Acquisition Proposal) or a Third Party Acquisition occurs or (Z) a transaction contemplated by an Acquisition Proposal occurs without the consent or approval of the Company which results in a Third Party acquiring from ten percent (10%) to twenty percent (20%) of the outstanding Shares that does not otherwise constitute an Acquisition Proposal (excluding for purposes of this clause (f)(ii) an acquisition of Shares by a wholly-owned subsidiary of the Williamson-Dickie Manufacturing Company permitted by Section 4(a)(i) of the Tender Agreement); (iii) there shall have been a breach of any representation or warranty on the part of the Company set forth in this Agreement, or any representation or warranty of the Company shall have become untrue, in either case if the respects in which the representations and warranties made by the Company are inaccurate would in the aggregate have a Material Adverse Effect or materially adversely affect (or delay) the consummation of the Offer or the Merger; or (iv) there shall have been a breach on the part of the Company of its covenants or agreements hereunder having a Material Adverse Effect or materially adversely affecting (or materially delaying) the consummation of the Offer and, with respect to clauses (iii) and (iv) above (other than with respect to a breach of Section 5.2 or the first sentence of 1.2(b)), the Company has not cured such breach prior to the earlier of (A) ten (10) days following notice by Parent or Acquisition thereof and (B) two (2) Business Days prior to the date on which the Offer expires, PROVIDED that, with respect to clauses (iii) and (iv) above, neither Parent nor Acquisition has breached in any material respect any of their respective obligations under this Agreement in any manner that shall have proximately contributed to the breaches referenced in this clause (f); SECTION 7.2 EFFECT OF TERMINATION. In the event of the termination and abandonment of this Agreement pursuant to Section 7.1, this Agreement shall forthwith become void and have no effect, without any liability on the part of any party or its affiliates, directors, officers or shareholders, other than the provisions of this Section 7.2 and Sections 5.3(b) and 7.3. Nothing contained in this Section 7.2 shall relieve any party from liability for any breach of this Agreement. 33 SECTION 7.3 FEES AND EXPENSES. (a) In the event that this Agreement shall have been terminated pursuant to: (i) Section 7.1(e)(iii) or Section 7.1(c) as a result or the failure to satisfy any of the conditions set forth in paragraphs (c) or (e) of Annex A; (ii) Section 7.1(f)(i) or (ii) (other than (f)(ii)(Z)); or (iii) Sections 7.1(f)(iii) or (iv) as a result of a willful breach of any representation, warranty, covenant or agreement of the Company and, within twelve (12) months thereafter, the Company enters into an agreement with respect to a Third Party Acquisition (as defined below) or a Third Party Acquisition occurs involving any party (or any affiliate thereof) (x) with whom the Company (or its agents) had discussions with a view to a Third Party Acquisition, (y) to whom the Company (or its agents) furnished information with a view to a Third Party Acquisition or (z) who had submitted a proposal or expressed an interest in a Third Party Acquisition, in the case of each of clauses (x), (y) and (z) after the date hereof and prior to such termination; the Company shall pay to Parent in the case of (i) and (ii) not later than two Business Days after termination of this Agreement and in the case of (iii), upon the consummation of the Third Party Acquisition referred to therein, a fee equal to $13,000,000 (the "Termination Fee") immediately upon such a termination. "Third Party Acquisition" means the occurrence of any of the following events: (i) the acquisition of the Company by merger or otherwise by any person (which includes a "person" as such term is defined in Section 13(d)(3) of the Exchange Act) or entity other than Parent, Acquisition or any affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of thirty percent (30%) of the total assets of the Company and its Subsidiaries, taken as a whole; or (iii) the acquisition by a Third Party of thirty percent (30%) or more of the outstanding Shares (excluding an acquisition of Shares by a wholly-owned subsidiary of the Williamson-Dickie Manufacturing Company permitted by Section 4(a)(i) of the Tender Agreement). (b) Upon the termination of this Agreement prior to the purchase of Shares by Acquisition pursuant to the Offer pursuant to Section 7.1(f) (unless such termination is also covered by Section 7.3(a)) or 7.1(e)(iii), the Company shall reimburse Parent, Acquisition and their affiliates (not later than ten (10) Business Days after submission of statements therefor) for all actual documented out-of-pocket fees and expenses, not to exceed Five Hundred Thousand Dollars ($500,000.00), actually and reasonably incurred by any of them or on their behalf in connection with the Merger and the consummation of all transactions contemplated by this Agreement (including, without limitation, filing fees, printing and mailing costs, fees payable to investment bankers, counsel to any of the foregoing and accountants). If Parent or Acquisition shall have submitted a request for reimbursement hereunder, Parent will provide the Company in due course with invoices or other reasonable evidence of such expenses upon request. The Company shall in any event pay 34 the amount requested (not to exceed Five Hundred Thousand Dollars ($500,000.00)) within ten (10) Business Days of such request, subject to the Company's right to demand a return of any portion as to which invoices are not received in due course. Nothing in this Section 7.3(c) shall relieve any party from any liability for breach of this Agreement. (c) Upon the termination of this Agreement pursuant to Sections 7.1(d)(i), (e)(i) or (e)(ii), Parent shall reimburse the Company and its affiliates (not later than ten (10) Business Days after submission of statements therefor) for all actual documented out-of-pocket fees and expenses, not to exceed Five Hundred Thousand Dollars ($500,000.00), actually and reasonably incurred by any of them or on their behalf in connection with the Merger and the consummation of all transactions contemplated by this Agreement (including, without limitation, filing fees, printing and mailing costs, fees payable to investment bankers, counsel to any of the foregoing and accountants). If the Company shall have submitted a request for reimbursement hereunder, the Company will provide Parent in due course with invoices or other reasonable evidence of such expenses upon request. Parent shall in any event pay the amount requested (not to exceed Five Hundred Thousand Dollars ($500,000.00)) within ten (10) Business Days of such request, subject to Parent's right to demand a return of any portion as to which invoices are not received in due course. Nothing in this Section 7.3(c) shall relieve any party from any liability for breach of this Agreement. (d) Except as specifically provided in this Section 7.3, each party shall bear its own expenses in connection with this Agreement and the transactions contemplated hereby. SECTION 7.4 AMENDMENT. Subject to Section 1.3(b), this Agreement may be amended by action taken by the Company, Parent and Acquisition at any time before or after any required approval of the Merger by the shareholders of the Company but, after any such approval, no amendment shall be made which requires the approval of such shareholders under applicable law without such approval. This Agreement may not be amended except by an instrument in writing signed on behalf of the parties. SECTION 7.5 EXTENSION; WAIVER. At any time prior to the Effective Time, each party may (a) extend the time for the performance of any of the obligations or other acts of the other party or parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained herein or in any document, certificate or writing delivered pursuant hereto or (c) waive compliance by the other parties with any of the agreements or conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of such rights. ARTICLE 8 MISCELLANEOUS SECTION 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties made herein shall not survive beyond the Effective Time or a termination of this Agreement. 35 SECTION 8.2 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a) constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (b) without the consent of the parties shall not be assigned by operation of law or otherwise; PROVIDED, HOWEVER, that Acquisition may assign any or all of its rights and obligations under this Agreement to any wholly owned subsidiary of Parent, but no such assignment shall relieve Acquisition of its obligations hereunder if such assignee does not perform such obligations; provided further, that the obligation of any party hereto under Section 5.8 shall not be assigned without the consent of the person whom such obligations are for the benefit of. SECTION 8.3 VALIDITY. If any provision of this Agreement, or the application thereof to any person or circumstance, is held invalid or unenforceable, the remainder of this Agreement, and the application of such provision to other persons or circumstances, shall not be affected thereby and, to such end, the provisions of this Agreement are agreed to be severable. SECTION 8.4 NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by cable, telegram, facsimile or telex, or by registered or certified mail (postage prepaid, return receipt requested), to the other party as follows: IF TO PARENT OR ACQUISITION: Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, UT 84108 Attention: Richard P. Durham, President and Chief Executive Officer Ronald G. Moffitt, General Counsel WITH A COPY TO: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Attention: John L. MacCarthy IF TO THE COMPANY: Blessings Corporation 200 Enterprise Drive Newport News, Virginia 23603 Attention: Elwood M. Miller, President and CEO 36 WITH A COPY TO: Patten, Wornom & Watkins, L.C. 12350 Jefferson Avenue, Suite 360 Newport News, Virginia 23602 Attention: Joseph H. Latchum, Jr., Esq. or to such other address as the person to whom notice is given may have previously furnished to the other in writing in the manner set forth above. SECTION 8.5 GOVERNING LAW; JURISDICTION. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof. (b) In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, and consent to service of process by notice as provided in this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated hereby in any court other than a federal or state court sitting in the State of Delaware. SECTION 8.6 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) 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, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS OF THIS SECTION 8.6. SECTION 8.7 CONSTRUCTION; INTERPRETATION. The headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. Article, section, exhibit, schedule, annex, party, preamble and recital references are to this Agreement unless otherwise stated. No party, or its respective counsel, shall be deemed the drafter of this Agreement for purposes of construing the provisions hereof, and all provisions of this 37 Agreement shall be construed according to their fair meaning and not strictly for or against any party. SECTION 8.8 PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of each party and its successors and permitted assigns and, except as provided in Section 8.2, nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. SECTION 8.9 SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or unenforceable, all other provisions of this Agreement shall remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. SECTION 8.10 SPECIFIC PERFORMANCE. The parties acknowledge that irreparable damage would result if this Agreement were not specifically enforced, and they therefore consent that the rights and obligations of the parties under this Agreement may be enforced by a decree of specific performance issued by a court of competent jurisdiction. Such remedy shall, however, not be exclusive and shall be in addition to any other remedies, including arbitration, which any party may have under this Agreement or otherwise. SECTION 8.11 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 38 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed on its behalf as of the day and year first above written. BLESSINGS CORPORATION, a Delaware corporation By: /S/ ELWOOD M. MILLER ------------------------------------------- Name: Elwood M. Miller Title: President and Chief Executive Officer HUNTSMAN PACKAGING CORPORATION, a Utah corporation By: /S/ RICHARD P. DURHAM ------------------------------------------- Name: Richard P. Durham Title: President and Chief Executive Officer VA ACQUISITION CORP., a Delaware corporation By: /S/ RICHARD P. DURHAM ------------------------------------------- Name: Richard P. Durham Title: President and Chief Executive Officer ANNEX A THE CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE AGREEMENT AND PLAN OF MERGER TO WHICH THIS ANNEX A IS ATTACHED. Notwithstanding any other provisions of the Offer, Acquisition shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC or the Exchange Act (including Rule 14e-1(c) thereof), pay for, and may delay the acceptance for payment of, or the payment for, any Shares (and, if required pursuant to Section 1.1(b) of the Agreement, shall extend the Offer for a period of at least ten (10) days and may otherwise, subject to the terms of the Agreement, amend, extend, or terminate the Offer) if (i) immediately prior to the expiration of the Offer (as extended in accordance with the Offer), the Minimum Condition shall not have been satisfied, (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated, (iii) any applicable waiting period under the FLEC shall not have expired or been terminated without objection from the Mexican Federal Competition Commission or (iv) at any time prior to the acceptance for payment of Shares, Acquisition makes a good faith determination that any of the following conditions exist: (a) there shall have been any action taken, or any statute, rule, regulation, judgment, order or injunction (whether permanent or temporary) promulgated, enacted, entered, enforced or deemed applicable to the Offer, or any other action shall have been taken, by any Governmental Entity, other than the routine application to the Offer or the Merger of waiting periods under the HSR Act, that (i) directly or indirectly prohibits, materially delays, or makes illegal the acceptance for payment of, or the payment for, some or all of the Shares or otherwise prohibits consummation of the Offer or the Merger; (ii) directly or indirectly prohibits, materially delays, or imposes material limitations on the ability of Acquisition to acquire or hold or to exercise effectively all rights of ownership of the Shares, including, without limitation, the right to vote any Shares purchased by Acquisition on all matters properly presented to the shareholders of the Company, or effectively to control in any material respect the business, assets or operations of the Company, its Subsidiaries, Acquisition or any of their respective affiliates; or (iii) otherwise has a Material Adverse Effect; or (b) (i) the representation and warranties of the Company as set forth in the Agreement (when read without any exception or qualification as to knowledge, materiality or Material Adverse Effect) shall not be true and correct as of the date of the Agreement and as of consummation of the Offer as though made on or as of such date, but only if the respects in which the representations and warranties made by the Company are inaccurate would in the aggregate have a Material Adverse Effect or would materially increase the amount paid to the Company's stockholders in the Offer and the Merger; (ii) the Company shall have breached or failed to comply in any material respect with any of its obligations, covenants or agreements under the Agreement; or (iii) any change or event shall have occurred that has a Material Adverse Effect; or (c) any person (which includes a "person" as such term is defined in Section 13(d)(3) of the Exchange Act) other than Parent, Acquisition, or any of their affiliates or any group of which any of them is a member, shall have entered into a definitive agreement or an agreement A-1 in principle with the Company or any Subsidiary with respect to an Acquisition Proposal or the Company Board (or any committee thereof) shall have adopted a resolution approving any of the foregoing; or (d) the Company, Parent and Acquisition shall have reached an agreement that the Offer or the Agreement be terminated, or the Agreement shall have been terminated in accordance with its terms; or (e) the Company Board (or any committee thereof) shall have withdrawn or modified (including by amendment of the Schedule 14D-9) in a manner adverse to Parent or Acquisition its approval or recommendation of the Offer, this Agreement or the Merger or shall have recommended another Acquisition Proposal, or shall have adopted any resolution to effect any of the foregoing which, in the good faith judgment of Acquisition in any such case, and regardless of the circumstances (including any action or omission by Acquisition) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment; or (f) there shall have occurred (i) any general suspension of, or limitation on prices for trading in securities on the American Stock Exchange, any national securities exchange or on the Nasdaq National Market System for a period in excess of 24 hours (excluding suspension or limit resulting solely from physical damage or interference with such exchanges not related to market conditions), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) a commencement of a war, armed hostilities or other national or international crisis directly involving the United States (other than an action involving United Nations' personnel or support of United Nations' personnel), (iv) a change in the general financial, bank or capital markets which materially and adversely affects the ability of financial institutions in the United States to extend credit or syndicate loans or (v) in the case of any of the foregoing clauses (i) through (iv) existing at the time of the commencement of the Offer, a material acceleration or worsening thereof. The foregoing conditions are for the benefit of Parent and Acquisition and may be asserted by Parent or Acquisition regardless of the circumstances giving rise to any such conditions and may be waived by Parent or Acquisition in whole or in part at any time and from time to time in its reasonable discretion, in each case, subject to the terms of the Agreement. The failure by Parent or Acquisition at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. A-2 EXHIBIT A
Stockholder Shares - ----------- ---------- Williamson-Dickie 5,496,096 Leonard Birnbaum 79,238 Michael C. Carlson 10,000 Wayne A. Durboraw 13,147 Joseph J. Harkins 12,134 James P. Luke 69,490 John W. McMackin 24,542 Elwood M. Miller 87,812 Manuel G. Villareal 120,613 Robert E. Weber 12,000 --------- --------- Total ....................... 5,925,072
EXHIBIT B CERTIFICATE OF INCORPORATION OF [__________________] A DELAWARE CORPORATION FIRST. The name of the corporation is [________________], (hereinafter, the "CORPORATION"). SECOND. The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, State of Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD. The nature of the business of or purpose to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the "GENERAL CORPORATION LAW"). FOURTH. The total number of shares of capital stock which the Corporation shall have authority to issue is 1,000 shares of common stock, par value $.01 per share. FIFTH. The Board of Directors shall have concurrent power with the stockholders to make, alter, amend or repeal the By-Laws of the Corporation. Election of directors need not be by written ballot unless the By-Laws so provide. SIXTH: The names and places of residence of the incorporators are as follows: Names: Residence: ------ ---------- L.E. Grey Wilmington, Delaware L.H. Herman Wilmington, Delaware S.M. Brown Wilmington, Delaware SEVENTH. a) No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, except that a director shall be liable to the extent provided by applicable law (i) for breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of the provisions of Article SEVENTH shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. b) The Corporation shall have the power to indemnify any and all of its officers or directors, or former officers or directors, or any person who may serve or has served at its request as an officer or director of another corporation in which it owns shares of capital stock, to the full extent and in the manner permitted by applicable law. Such indemnification shall not be exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders, or disinterested directors, or otherwise. EIGHTH. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed herein and by the General Corporation Law, and all rights conferred upon stockholders herein are granted subject to this reservation. Exhibit B-2 EX-99.(C)(2) 6 EXHIBIT 99(C)(2) EXHIBIT 99(c)(2) TENDER AGREEMENT AND IRREVOCABLE PROXY TENDER AGREEMENT AND IRREVOCABLE PROXY ("Agreement") dated as of April 7, 1998 among HUNTSMAN PACKAGING CORPORATION, a Utah corporation ("Parent"), VA ACQUISITION CORPORATION, a Delaware corporation (the "Purchaser"), and the persons listed on SCHEDULE 1 hereto (each a "Stockholder", and, collectively, the "Stockholders"). WHEREAS, Parent, the Purchaser and Blessings Corporation, a Delaware corporation (the "Company"), propose to enter into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement") providing for the making of a cash tender offer (the "Offer") by the Purchaser for shares of Common Stock, par value $0.71 per share, of the Company (the "Company Common Stock"), and the merger of the Company with and into the Purchaser (the "Merger"); WHEREAS, the Stockholders own in the aggregate 5,925,072 shares (as such shares may be adjusted by conversion, dividend, stock split, recapitalization, exchange, merger or similar transaction, the "Shares") of Company Common Stock; and WHEREAS, as a condition to their willingness to enter into the Merger Agreement, Parent and the Purchaser have requested that the Stockholders agree to tender the shares, as set forth herein; NOW, THEREFORE, to induce Parent and the Purchaser to enter into, and in consideration of their entering into, the Merger Agreement, and in consideration of the premises and the representations, warranties and agreements herein contained, the parties agree as follows: 1. TENDER OF SHARES. (a) Each Stockholder hereby agrees to validly tender and sell, (and not withdraw), pursuant to and in accordance with the terms of the Offer, (i) not later than the seventh day after the commencement of the Offer pursuant to Section 1.1(a) of the Merger Agreement, the number of Shares set forth opposite such Stockholder's name on Schedule I hereto (the "Existing Shares"), and (ii) any shares of Company Common Stock acquired by such Stockholder after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise (each Stockholder shall promptly provide written notice to the Purchaser upon consummation of any such acquisition, and the term "Shares" shall include such shares), provided that the price per Share pursuant to the Offer shall be no less than the Per Share Price, as that term is defined in the Merger Agreement. Each Stockholder hereby acknowledges and agrees that Parent's and the Purchaser's obligation to accept for payment and pay for shares of Company Common Stock in the Offer, including the Shares owned by such Stockholder, is subject to the terms and conditions of the Offer. (b) Each Stockholder hereby agrees to permit Parent, the Purchaser and the Company to publish and disclose in the documents relating to the Offer and the Merger (including all documents, schedules and proxy statements filed with the Securities and Exchange Commission) its, his or her identity and ownership of Shares and the nature of its, his or her commitments, arrangements and understandings under this Agreement. 2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. Each of the Stockholders, with respect to itself only, hereby severally represents and warrants to Parent and the Purchaser as follows: (a) AUTHORITY. Each such Stockholder has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by such Stockholder and the consummation by such Stockholder of the transactions contemplated hereby have been duly authorized by all necessary action on the part of such Stockholder. This Agreement has been duly executed and delivered by such Stockholder and constitutes a valid and binding obligation of such Stockholder, enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, and other similar laws affecting the enforcement of creditors' right generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to such Stockholder or to such Stockholder's property or assets. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, is required by or with respect to such Stockholder in connection with the execution and delivery of this Agreement or the consummation by such Stockholder of the transactions contemplated hereby. (b) THE SHARES. Such Stockholder has, and the transfer by such Stockholder of its, his or her Shares hereunder will pass to the Purchaser, good and marketable title to the number of Existing Shares set forth opposite such Stockholder's name in SCHEDULE I hereto, free and clear of any claims, liens, encumbrances and security interests whatsoever. Such Stockholder owns of record no shares of Company Common Stock other than the Existing Shares. Except pursuant to this Agreement, the Existing Shares are not subject to any voting trust agreement or other contract, agreement, arrangement, commitment or understanding 2 restricting or otherwise relating to the voting, dividend rights or disposition of the Existing Shares. Such Stockholder has sole power with respect to the matters set forth in this Agreement with respect to all of the Existing Shares set forth opposite such Stockholder's name on Schedule I hereto, with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement. 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER. Parent and the Purchaser hereby represent and warrant to each Stockholder as follows: AUTHORITY. Each of Parent and the Purchaser has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and the Purchaser and the consummation by Parent and the Purchaser of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and the Purchaser. This Agreement has been duly executed and delivered by Parent and the Purchaser and constitutes a valid and binding obligation of Parent and the Purchaser enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby and thereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Parent or Purchaser or to the property or assets of the Parent or Purchaser. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, is required by or with respect to the Parent or Purchaser in connection with the execution and delivery of this Agreement or, except as set forth in the Merger Agreement, the consummation by the Parent or Purchaser of the transactions contemplated hereby. 4. COVENANTS OF THE STOCKHOLDERS. (a) Each Stockholder severally agrees not to: (i) sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option or other arrangement with respect to the sale, transfer, pledge, assignment or other disposition of, any of the Shares to any person other than the Purchaser or the Purchaser's designee; provided, however, that (x) a Stockholder may transfer its Shares to a charitable organization, provided that such charitable organization agrees to be bound by the terms and provisions of this Agreement 3 applicable to such Stockholder and (y) the Williamson-Dickie Manufacturing Company ("Williamson-Dickie") may transfer its Shares to a wholly-owned subsidiary of Williamson-Dickie, provided that such subsidiary agrees to be bound by the terms and provisions of this Agreement applicable to Williamson-Dickie and, provided, further, in the case of clauses (x) and (y) above the transferring Stockholder shall continue to be bound by the terms and provisions of this Agreement; (ii) deposit any Shares into a voting trust or grant a proxy or enter into a voting agreement with respect to any Shares except as provided in this Agreement; or (iii) solicit, facilitate, initiate, encourage or take any other action to facilitate (including by way of furnishing information) any Acquisition Proposal (as defined in the Merger Agreement), the acquisition of any shares of Company Common Stock or the acquisition of all or substantially all the assets of the Company by any person other than Parent or the Purchaser, except in connection with any actions permitted under Section 5.2 of the Merger Agreement. (b) Each Stockholder agrees to notify the Purchaser promptly and to provide all details requested by the Purchaser if such Stockholder shall be approached or solicited, directly or indirectly, by any person with respect to any matter described in Section 4(a)(iii). (c) Each Stockholder agrees that at any annual or special meeting of the stockholders of the Company and in any action by written consent of the stockholders of the Company, such Stockholder will (i) vote the Shares in favor of the Merger and the Merger Agreement and (ii) vote the Shares against any action or agreement which could result in a breach of any representation, warranty or covenant of the Company in the Merger Agreement or which could otherwise impede, delay, prevent, interfere with or discourage the Offer or the Merger including, without limitation, any Acquisition Proposal. 5. IRREVOCABLE PROXY. Each Stockholder hereby irrevocably appoints the Purchaser as the attorney and proxy of such Stockholder, with full power of substitution, to vote, and otherwise act (by written consent or otherwise) with respect to all Shares that such Stockholder is entitled to vote at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting) or consent in lieu of any such meeting or otherwise, to vote such Shares as set forth in Section 4(c) hereof; PROVIDED, that in any such vote or other action pursuant to such proxy, the Purchaser shall not have the right (and such proxy shall not confer the right) to vote to reduce the Per Share Price or the Merger Consideration (as defined in the Merger Agreement) or to otherwise modify or amend the Merger Agreement to reduce the rights or benefits of the Company or any stockholders of the Company (including the Stockholders) under the Offer or the Merger Agreement or to reduce the obligations of Purchaser thereunder; and PROVIDED FURTHER, that this proxy shall irrevocably cease to be in effect at any time that (x) the Offer shall have expired or terminated without any shares of Company Common Stock being purchased thereunder in 4 violation of the terms of the Offer, (y) the Purchaser shall be in violation of the terms of this Agreement or (z) the Merger Agreement shall have been terminated in accordance with its terms. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. Each Stockholder hereby revokes, effective upon the execution and delivery of the Merger Agreement by the parties thereto all other proxies and powers of attorney with respect to the Shares that such Stockholder may have heretofore appointed or granted, and no subsequent proxy or power of attorney (except in furtherance of such Stockholder's obligations under Section 4(c) hereof) shall be given or written consent executed (and if given or executed, shall not be effective) by such Stockholder with respect thereto so long as this Agreement remains in effect. Each Stockholder shall forward to the Purchaser any proxy cards that such Stockholder receives with respect to the Offer or the Merger Agreement. 6. NO BROKERS. Each of the Stockholders, Parent and the Purchaser represents, as to itself and its affiliates, that no agent, broker, investment banker or other firm or person is or will be entitled to any broker's or finder's fees or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement and respectively agrees to indemnify and hold the others harmless from and against any and all claims, liabilities or obligations with respect to any such fees, commissions or expenses asserted by any person on the basis of any act or statement alleged to have occurred or been made by such party or its affiliates. 7. SURVIVAL OF REPRESENTATIONS. All representations, warranties and agreements made by the parties to this Agreement shall survive the purchase of Shares pursuant to the Offer notwithstanding any investigation at any time made by or on behalf of any party hereto. 8. FURTHER ASSURANCES. If the Purchaser purchases Shares pursuant to the Offer, each Stockholder will execute and deliver, or cause to be executed and delivered, such additional or further transfers, assignments, endorsements, consents and other instruments as the Purchaser may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement, including the transfer of the Shares to the Purchaser and the release of any and all claims, liens, encumbrances and security interests with respect thereto. 9. ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties without the prior written consent of the other parties, except that (i) the Purchaser may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to Parent or to any direct or indirect wholly-owned subsidiary of Parent and (ii) a stockholder may assign its rights, interests and obligations to the extent permitted by Section 4(a)(i) in connection with a transfer of Shares permitted by Section 4(a)(i). This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns. 10. GUARANTEE OF PERFORMANCE. Parent hereby guarantees the payment and performance by the Purchaser of its obligations under this Agreement. 5 11. GENERAL PROVISIONS. (a) SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages would be an inadequate remedy for any breach of the provisions of this Agreement and agree that the obligations of the parties hereunder shall be specifically enforceable. (b) EXPENSES. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense. (c) AMENDMENTS. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto to which such amendment applies. (d) NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by reputable overnight courier or mailed by registered or certified mail (return receipt requested) or sent by confirmed telecopy to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to Parent or the Purchaser, to Huntsman Packaging Corporation 500 Huntsman Way Salt Lake City, Utah 84108 Attention: Ronald G. Moffitt Telecopier No.: 801/584-5783 with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Attention: John L. MacCarthy Telecopier No.: 312/558-5700 (ii) if to the Stockholders, to the addresses set forth opposite their names on SCHEDULE 1 hereto. (e) INTERPRETATION. When a reference is made in this Agreement to Sections or Exhibits, such reference shall be to a Section or Exhibit to this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Wherever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". 6 (f) 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 effective when one or more of the counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. (g) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement (including the documents and instruments referred to herein) (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (ii) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) GOVERNING LAW; JURISDICTION (i) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof. (ii) In addition, each of the parties hereto (A) consents to submit itself to the personal jurisdiction of any federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, and consents to service of process by notice as provided in this Agreement, (B) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (C) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated hereby in any court other than a federal or state court sitting in the State of Delaware. (i) TERMINATION. The obligations of the parties hereunder shall terminate upon the termination of the Merger Agreement in accordance with its terms. (j) WAIVER OF APPRAISAL RIGHTS. To the extent applicable, each Stockholder hereby waives any rights of appraisal or rights to dissent from the Merger that such Stockholder may have on the terms set forth in the Merger Agreement as in effect on the date hereof with such changes which do not adversely affect such Stockholder. [signature page follows] 7 IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholders have signed or caused their respective officers thereunto duly authorized, to sign this Agreement, all as of the date first written above. HUNTSMAN PACKAGING CORPORATION By: /s/ Richard P. Dunham ------------------------------------------ Name: Richard P. Dunham Title: President and Chief Executive Officer VA ACQUISITION CORPORATION By: /s/ Richard P. Dunham ------------------------------------------ Name: Richard P. Dunham Title: President and Chief Executive Officer WILLIAMSON-DICKIE MANUFACTURING COMPANY By /s/ Philip C. Williamson ------------------------------------------ Name: Philip C. Williamson Title: Chairman President and CEO /s/ Leonard Birnbaum --------------------------------------------- Leonard Birnbaum /s/ Michael C. Carlson --------------------------------------------- Michael C. Carlson /s/ Wayne A. Durboraw --------------------------------------------- Wayne A. Durboraw /s/ Joseph J. Harkins --------------------------------------------- Joseph J. Harkins /s/ James P. Luke --------------------------------------------- James P. Luke /s/ John W. McMackin --------------------------------------------- John W. McMackin /s/ Elwood M. Miller --------------------------------------------- Elwood M. Miller /s/ Manuel G. Villareal --------------------------------------------- Manuel G. Villareal /s/ Robert E. Weber --------------------------------------------- Robert E. Weber SCHEDULE I
STOCKHOLDER SHARES ------------- --------- Williamson-Dickie Manufacturing Company 5,496,096 319 Lipscomb Street Fort Worth, Texas 71602 Leonard Birnbaum 79,238 c/o Blessings Corporation 200 Enterprise Drive Newport News, Virginia 23603 Michael C. Carlson 10,000 c/o Blessings Corporation 200 Enterprise Drive Newport News, Virginia 23603 Wayne A. Durboraw 13,147 c/o Blessings Corporation 200 Enterprise Drive Newport News, Virginia 23603 Joseph J. Harkins 12,134 c/o Blessings Corporation 200 Enterprise Drive Newport News, Virginia 23603 James P. Luke 69,490 c/o Blessings Corporation 200 Enterprise Drive Newport News, Virginia 23603 John W. McMackin 24,542 c/o Blessings Corporation 200 Enterprise Drive Newport News, Virginia 23603 Elwood M. Miller 87,812 c/o Blessings Corporation 200 Enterprise Drive Newport News, Virginia 23603
STOCKHOLDER SHARES ----------- -------- Manuel G. Villareal 120,613 c/o Blessings Corporation 200 Enterprise Drive Newport News, Virginia 23603 Robert E. Weber 12,000 c/o Blessings Corporation 200 Enterprise Drive Newport News, Virginia 23603 ----------- Total 5,925,072
2 EX-99.(C)(3) 7 EXHIBIT 99(C)(3) EXHIBIT 99(c)(3) CONFIDENTIALITY AGREEMENT Bowles Hollowell Conner & Co. 227 West Trade Street, Suite 2400 Charlotte, North Carolina 28202 Ladies and Gentlemen: You have advised us that you are acting on behalf of Blessings Corporation (together with its subsidiaries, "Blessings" or the "Company") in its consideration of a possible sale, and you have agreed to discuss with us the possible purchase of Blessings. As a condition to such discussions, you have required that we agree to keep strictly confidential all information conveyed to us regarding this matter. This letter will confirm our agreement with you and Blessings to retain in strict confidence all information (whether oral or written) conveyed to us by Blessings, its agents, or you regarding the Company ("Confidential Information"), unless such information (i) is or hereafter becomes publicly available, (ii) was known to us, without any direct or indirect obligation of confidentiality, prior to your disclosure, (iii) is or becomes available to us on a nonconfidential basis from a source other than you, Blessings or its agents, provided that, to our knowledge, such other source is not bound by a confidentiality agreement with you or Blessings, or (iv) is independently developed or created by us without use of Confidential Information. We will use such Confidential Information only in connection with our consideration of whether to purchase Blessings and will not otherwise use it in our business or disclose it to others, except that we shall have the right to communicate the Confidential Information to such of our directors, officers, employees, legal, accounting, and financial advisors and potential financing sources (including, without limitation, potential sources of equity financing) who need to have knowledge thereof, provided that each such person is informed that such information is strictly confidential and subject to this agreement and agrees not to disclose or use such information except as provided herein. We hereby agree to be jointly and severally responsible for any breach of this agreement by our officers, directors, advisors and/or employees or any of our representatives. In the event that we become legally compelled by deposition, subpoena, or other court or governmental action to disclose any of the Confidential Information covered by this agreement, we shall provide Blessings with prompt prior written notice to that effect, and we will cooperate reasonably with Blessings if it seeks to obtain a protective order concerning such confidential information. We agree not to initiate contact, or engage in discussion, with any employee, customer, or supplier of Blessings without the express prior consent of you or the Company with regard to this transaction, provided, however, contact with customers or suppliers for the ordinary course of business shall not be within the scope of this agreement. Unless we purchase Blessings, we agree not to solicit for employment any employees of Blessings whom we learn of or come in contact with in the course of our review of the Company in connection with the possible purchase of Blessings, without the written consent of the Company, for a period of two years from the date of this letter. You and Blessings agree that the foregoing restrictions shall not apply to (i) any solicitation by us directed CONFIDENTIALITY AGREEMENT Page 2 to the general public, whether or not the individuals responding to such solicitation were also employees introduced to us in the course of our review of Blessings and (ii) our employment of Blessings employees not involving an initial solicitation by us. Until the earlier of eighteen months from the date of this letter or the consummation of a sale of Blessings as contemplated by this letter, we will not (and will insure that our officers, directors, advisors, and employees will not) without the prior written approval of the Board of Directors of the Company, (i) acquire or agree to acquire to make any proposal to acquire directly or indirectly any securities or property of the Company, or (ii) otherwise act alone or in concert with others to seek to control or influence the management, Board of Directors, or policies of the Company. We acknowledge that neither Blessings nor any of its directors, officers, employees, stockholders, or agents makes any representation or warranty, express or implied, as to the accuracy or completeness of such information and that neither Blessings nor any of its directors, officers, employees, stockholders, or agents shall have any liability to us as a result of our use of such information. We agree that unless and until a definitive agreement between the Company and us with respect to the acquisition of the Company has been executed and delivered, neither we nor the Company shall have any legal obligation of any kind whatsoever with respect to the purchase and sale of the Company by virtue of this agreement or by virtue of any other written or oral expression with respect to such transaction. The term "definitive agreement" does not include an executed letter of intent or other preliminary written agreement. Neither this provision or any other provision of this agreement can be waived or amended except by written consent of the Company and us, which consent shall specifically refer to the provision to be waived or amended. We also agree that without the prior consent of Blessings, we and our officers, directors, advisors, and employees will not disclose to any other person that we have received such information, that we are in discussions or negotiations with you and Blessings as to a possible purchase of Blessings or that the Stockholders are contemplating a possible sale of Blessings. We will advise all of our directors, officers, employees and other representatives who are informed of the matters which are the subject of this letter that U.S. securities laws prohibit any person who has material, nonpublic information concerning an issuer of publicly held securities from purchasing or selling such securities. We acknowledge that Blessings reserves the right to reject any or all offers to acquire the Company. We further acknowledge that the Company reserves the right to discontinue discussions at any time and to conduct the process for the sale of the Company as in its sole discretion it shall determine (including, without limitation, negotiating with any prospective purchasers, and entering into a definitive agreement without prior notice to us or any other person or to change any procedures relating to such sale without notice to us or any other person). We shall have no claim against the Company or any of its directors, officer, representatives, affiliates, or agents arising out CONFIDENTIALITY AGREEMENT Page 3 of or relating to the sale of the Company other than as against them as named parties to a definitive agreement and only in accordance with the express terms and conditions thereof. In the event that we do not purchase Blessings, we agree upon Blessings' request (i) to return to you all financial and other written Confidential Information provided to us by Blessings, its agents, or you relating to Blessings, and (ii) to destroy and certify that we have destroyed any memoranda, notes, or other writings prepared by us or our representatives based on such Confidential Information, together with all copies of such information in our possession or under our control to which we have access. We agree that neither Blessings nor Bowles Hollowell Conner & Co. shall be obligated to pay any fees on our behalf to any brokers, finders, or other parties claiming to represent us in this transaction. Without limiting the generality of the nondisclosure agreements contained herein above, it is further understood that we are strictly prohibited by this agreement from acting as a broker or an agent using any of the confidential information provided to us. We acknowledge that unauthorized disclosure of such information would cause substantial and irreparable damage to the business and competitive position of the Company, and we agree that the Company shall be entitled to injunctive relief in the event of any breach or threatened breach of terms of this letter agreement in addition to such other remedies as may be available at law or equity. The parties hereto acknowledge that any action or proceeding arising out of or relating to this letter agreement shall be determined by the United States District Court for the Eastern District of Virginia and this agreement shall be interpreted and construed in its entirety in accordance with the laws of the State of Delaware. Name: /s/ Richard P. Durham ----------------------- Richard P. Durham Title: President and Chief Executive Officer Company: Huntsman Packaging Corporation Date: January 22, 1998 EX-99.(C)(4) 8 EXHIBIT 99(C)(4) EXHIBIT 99(c)(4) [HUNTSMAN PACKAGING LETTERHEAD] March 20, 1998 Board of Directors Blessings Corporation Bowles Hollowell Conner & Co. 227 West Trade Street Charlotte, North Carolina 28202 Ladies and Gentlemen: Huntsman Packaging Corporation ("Huntsman Packaging") is pleased to submit the following proposal to acquire all of the outstanding common stock of Blessings Corporation ("Blessings"). Huntsman Packaging proposes to acquire Blessings for twenty-one dollars ($21.00) in cash (the "Offer Price") per share of Common Stock of Blessings (the "Shares") on the terms set forth in our mark-up of the Agreement and Plan of Merger. Our mark-up of the Agreement and Plan of Merger is enclosed (as marked up, the "Merger Agreement"). The Merger Agreement contemplates that Huntsman Packaging will commence a tender offer for the Shares at the Office Price as promptly as practicable after the execution of the Merger Agreement and will follow the tender offer with a merger in which holders of Shares other than Huntsman Packaging will receive the Offer Price in cash. The tender offer is conditioned upon the tender of a majority of the Shares on a fully-diluted basis, upon receipt of financing under the commitment letter that we have obtained from The Chase Manhattan Bank and Chase Securities Inc. (collectively, "Chase") (the "Commitment Letters") and upon other customary conditions as set forth in Annex I to the Merger Agreement. The Commitment Letters provide us with a fully underwritten commitment pursuant to which Chase has agreed to provide all financing necessary to consummate the proposed tender offer and merger. A copy of the Commitment letters is enclosed, and Chase is available to discuss the terms and nature of their fully underwritten commitment. Our proposal also requires that the Williamson Dickie Manufacturing Company and each officer or director owning in excess of 10,000 Shares enter into a stock option agreement pursuant to which such stockholders grant Huntsman Packaging an option to purchase their Shares, agree to tender the Shares held by them in the tender offer and agree to vote in favor of the merger and against any competing transaction. A draft of the stock option agreement is enclosed. Prior to executing the Merger Agreement, we also need to have a satisfactory meeting with Kimberly-Clark and to complete our due diligence review of Blessings. As you are aware, we have not been allowed to conduct our environmental due diligence. We need to be allowed to conduct such due diligence and be satisfied with the results. In addition we need to complete our review of employee benefit matters and be granted access to your Washington, Georgia facility. Finally we need to review Blessing audited financial statements for the year ended December 31, 1997, and related filings to be made with the Securities and Exchange Commission, and financial statements and tax returns for your Mexican operations. Our proposal shall remain in effect until 5:00 p.m. Eastern Standard Time on Friday March 27, 1998. Our Board of Directors has approved this proposal, and we hope to be able to complete the acquisition of Blessings on the terms set forth herein. This proposal is being made with the understanding that, except as required by law, neither Blessings nor its officers, advisors or other representatives will disclose the existence of this proposal or any of its terms without the prior consent of Huntsman Packaging. Further, Huntsman Packaging shall be under no legal obligation with respect to the proposed transaction until a definitive Merger Agreement and related documents have been executed and delivered. Please contact the undersigned at 801-584-5916 with any questions concerning our proposal. Questions on the Commitment Letter should be directed to Ruth Dreessen at Chase (713-216-8853). Legal questions should be directed to Ronald G. Moffitt (801-584-5947) and John MacCarthy at Winston & Strawn (312-558-5876). We look forward to your prompt response to our proposal. Sincerely, /s/ Richard P. Durham ------------------------------- Richard P. Durham EX-99.(C)(5) 9 EXHIBIT 99(C)(5) EXHIBIT 99(c)(5) [HUNTSMAN PACKAGING LETTERHEAD] March 29, 1998 Board of Directors Blessings Corporation Bowles Hollowell Conner & Co. 227 West Trade Street Charlotte, North Carolina 28202 Ladies and Gentlemen: In connection with the proposal (the "Original Proposal") by Huntsman Packaging Corporation ("Huntsman Packaging") to acquire all of the outstanding stock of Blessings Corporation ("Blessings"), pursuant to the terms and conditions set forth in that certain letter dated March 20, 1998 from Huntsman Packaging to you (the "Original Letter"), Huntsman Packaging does hereby agree that the Original Proposal shall remain in effect until 11:59 p.m., Eastern Daylight Time, April 5, 1998 (the "Expiration Time"), subject to the following conditions: (i) the Original Proposal, as extended hereby, is subject to the terms and conditions set forth in the Original Letter; (ii) prior the Expiration Time, neither Blessings nor any of its subsidiaries nor any of the officers, directors, employees, agents or representatives of Blessings or its subsidiaries shall, directly or indirectly, (A) initiate, solicit, encourage or otherwise facilitate any inquiries or the making of any proposal or offer with respect to a merger, liquidation, recapitalization, reorganization, share exchange, consolidation, purchase of equity securities or a substantial portion of its assets or similar transaction (collectively, "Acquisition Transactions") involving Blessings or any of its subsidiaries or (B) have any discussions or negotiations with, or provide any non-public information to, any person or entity relating to an Acquisition Transaction, other than with Huntsman Packaging or its officers, directors, employees, agents or representatives; and (iii) Blessings and its subsidiaries and the officers, directors, employees, agents and representatives thereof will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any person or entity (other than Huntsman Packaging) relating to an Acquisition Transaction. Our proposal contained in this letter shall remain in effect until 12:00 noon Mountain Standard Time Monday, March 30. Board of Directors Blessings Corporation March 29, 1998 Page 2 IN WITNESS WHEREOF, this letter is executed and delivered as of the date first set forth above. HUNTSMAN PACKAGING CORPORATION By: /s/ Ronald G. Moffitt --------------------------- Name: Ronald G. Moffitt Title: Senior Vice President and General Counsel Acknowledged, Accepted and Agreed to this 30th day of March, 1998 BLESSINGS CORPORATION By: /s/ Elwood M. Miller --------------------------- Name: Elwood M. Miller Title: President and Chief Executive Officer EX-99.(C)(6) 10 EXHIBIT 99(C)(6) EXHIBIT 99(c)(6) [HUNTSMAN PACKAGING LETTERHEAD] April 5, 1998 Board of Directors Blessings Corporation Bowles Hollowell Conner & Co. 227 West Trade Street Charlotte, North Carolina 28202 Ladies and Gentlemen: Reference is made to that certain letter dated March 29, 1998 (the "First Extension Letter"), extending the Original Proposal by Huntsman Packaging Corporation ("Huntsman Packaging") to acquire all of the outstanding stock of Blessings Corporation ("Blessings"), pursuant to the terms and conditions set forth in that certain letter dated March 20, 1998 from Huntsman Packaging to you (the "Original Letter"). As a result of the progress we have made toward the execution of a definitive merger agreement and associated documents, Huntsman Packaging does hereby agree that the Original Proposal shall remain in effect until 11:59 p.m., Eastern Daylight Time, April 11, 1998 (the "Expiration Date"). Such extension is subject to each of the conditions set forth in the First Extension Letter. Our proposal contained in this letter shall remain in effect until 10:00 a.m. Mountain Daylight Time Monday, April 6, 1998. IN WITNESS WHEREOF, this letter is executed and delivered as of the date first set forth above. HUNTSMAN PACKAGING CORPORATION By: /s/ Ronald G. Moffitt --------------------------- Name: Ronald G. Moffitt Title: Senior Vice President and General Counsel Acknowledged, Accepted and Agreed to this 6th day of April, 1998. BLESSINGS CORPORATION By: /s/ John W. McMackin --------------------------- Name: John W. McMackin Title: Chairman of the Board -----END PRIVACY-ENHANCED MESSAGE-----